Enel S.p.A.
Annual Report 2021

Plain-text annual report

Integrated Annual Report 2021 Integrated Annual Report 2021 This document has been prepared in PDF format in order to facilitate readers of the financial statements. This document is a supplementary variant of the official version compliant with the provisions of Commission Delegated Regulation (EU) 2019/815 (the ESEF Regulation - European Single Electronic Format) available on the Company's website (www.enel.com) and at the authorized storage mechanism “eMarket STORAGE” (www.emarketstorage.com). Enel is Open Power POSITIONING Open Power VISION Open Power to tackle some of the world’s biggest challenges. Integrated Annual Report 2021 MISSION • 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. PRINCIPLES OF CONDUCT • Make decisions in daily activities and take responsibility for them. • Share information, being willing to collaborate and open to the contribution of others. • Follow through with commitments, pursuing activities with determination and passion. • Change priorities rapidly if the situation evolves. • Get results by aiming for excellence. • Adopt and promote safe behavior and move pro- actively to improve conditions for health, safety and well-being. • Work for the integration of all, recognizing and leveraging individual diversity (culture, gender, age, disabilities, personality, etc.). • Work focusing 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 co-workers and give feedback that can improve their contribution. VALUES • Trust • Proactivity • Responsibility • Innovation Letter to shareholders and other stakeholders Michele Crisostomo Francesco Starace Chairman Chief Executive Officer and General Manager 6 Integrated Annual Report 2021 Dear shareholders and stakeholders, 2021 was the year in which the Enel Group sharply accelerated its energy-transition strategy towards a decarbonized, customer- centric business model. We are the largest private renewable energy operator in the world, with 53.4 GW of managed capacity, and the largest private-sector electricity distribution company globally, with more than 75 million end users connected to our grids, the world’s most advanced digitalized networks. We also manage the largest customer base in the world among private- sector companies, with more than 69 million customers. Our business model, which is entirely based on digital platforms, enables us to optimally seize the opportunities offered by the energy transition now under way around the globe. 75 million End users 53.4 GW Renewables capacity managed The solid economic and financial performance of the Enel Group in 2021 made it possible to achieve the objectives we announced to the market, including our targets for EBITDA and ordinary profit. The Group’s leadership in sustainability was once again recognized at the international level by our continuing presence in a number of important sustainability ratings, indices and rankings. In addition, Enel was again included in the main indices that monitor corporate gender diversity performance. In 2021 we were again the leading utility by market capitalization in Europe and the second in the world. The macroeconomic environment The global economy in 2021 experienced a generalized recovery on a global scale, with estimated world GDP growth of about 5.8% on an annual basis, sustained by government fiscal policies and strong monetary stimulus from central banks, as well as by the effective vaccination campaign implemented in many countries starting from the 2nd Quarter of the year. In the United States, GDP expanded by an annual 5.7% in 2021, although the decline in private consumption and industrial production, shortages of raw materials and sharply rising energy prices slowed the economy in the final months of the year. In the euro area, the real economy registered a substantial recovery in 2021, with GDP growing by 5.2% on an annual basis, driven by a strong recovery in the 2nd and 3rd Quarters, although growth slowed in the 4th Quarter due to a rapid increase in energy prices and the introduction of restrictions on economic activity and mobility in response to the spread of the Omicron variant. The pattern was similar in Latin America, where economic developments in 2021 were strongly influenced by the progress of national vaccination campaigns, with an average increase in GDP of almost 10% compared with the previous year in the main countries in which we operate. The broad-based recovery and the reopening of commercial activities at the beginning of 2021 generated large imbalances between supply and demand, creating severe distortions in supply chains and consequently triggering inflationary pressures that subsequently impacted the prices of intermediate and consumer goods. During 2021, the oil market experienced rapid growth in its indices, reflecting optimism about the recovery in economic activity, combined with the precautionary measures of OPEC regarding production cuts. Considerable volatility was registered in the European gas market, caused by both supply and demand factors, contributing to a sharp increase in prices in the 4th Quarter of 2021. CO2 prices also increased, responding to the strong commitment expressed by the European authorities, who expressed their intention to reduce CO2 emissions by at least 55% by 2030, causing the price of the commodity to rise above €80/ton at the end of December. The bullish performance of the commodity markets in 2021 led to a sharp increase in power prices across Europe, which exceeded 220% compared with 2020 in Italy and Spain. Letter to shareholders and other stakeholders 7 Ordinary net profit €5.6 billion +8% on 2020 The year 2021 was also characterized by large increases in the prices of the main industrial metals. The resumption of economic activity and the revival of investment have driven demand, while supply has been challenged by availability issues and logistical bottlenecks, generating scarcity on the market with a consequent sharp rise in prices. The world scenario, already characterized by high price volatility, was further shaken in February 2022 by the Russian military intervention in Ukraine. The conflict is dramatic in its impact on the civilian population and its profound Performance The Enel Group continued to grow in 2021, hitting all the objectives announced to the financial community despite the continuing instability associated with the COVID-19 pandemic and the uncertainty engendered by the volatility in commodity prices. In particular, the 2021 financial year closed with ordinary EBITDA of €19.2 billion, with an increase of 6.7% compared with 2020. Ordinary profit, on which the dividend is calculated, reached €5.6 billion, an increase Main developments As in previous years, Enel reached a new record for renewables generation capacity in 2021, adding 5,120 MW of new renewables capacity globally, which includes 220 MW of battery storage for the first time, while continuing to grow our project pipeline to 370 GW worldwide. Installed renewables capacity reached 53.4 GW, taking an important step towards the complete decarbonization of the generation mix and divesting 1,983 MW of installed coal-fired capacity.(1) For the second consecutive year, 2021 posted a record for renewables generation, with about 118 TWh of output, equal to 51% of the total Group production. effect on the world's geopolitical, economic and energy balance, with major repercussions for the energy security of the European Union countries in particular. In this constantly evolving environment, the Group is carefully monitoring international developments, promptly assessing the impacts on its business activities, financial situation and performance in the main euro-area countries in which it operates, with particular regard to the shortage of raw materials from the areas affected by the conflict and the generalized increase in commodity prices. of 8% compared with the previous year. The dividend for 2021 amounts to €0.38 per share, an increase of 6.1% compared with 2020. In terms of cash generation, FFO in 2021 were about 3% greater than the previous year despite the impact on working capital of the still unstable macroeconomic situation. Net debt is equal to €52.0 billion, lower than the forecasts previously provided to investors. As a result, the Group reduced specific CO2 emissions to 227 gCO2eq/kWh, a decrease of 45% compared with 2017, continuing progress along the path towards the SBTi certified target of 82 gCO2eq/kWh by 2030. Thanks to investments in grids and the simultaneous effort to digitalize systems and processes, we have reached 75 million customers connected to our grids, 60% of which are equipped with smart meters. At the same time, we have exceeded 1 million prosumers (customers who are both consumers and electricity producers) connected to the Group’s grids. Furthermore, the volume of electricity distributed over our grids around the world (1) 1,120 MW Litoral (Andalusia, Spain), 548 MW La Spezia (Liguria, Italy) and 315 MW units 1 and 2 of Fusina (Veneto, Italy). 8 Integrated Annual Report 2021 reached 510 TWh in 2021, surpassing the levels recorded in the pre-pandemic period. In order to meet the new demands on the grid and the new role of distribution system operators (DSOs), the Grid Futurability® project was launched in 2021 within the scope of COP26, with which the Global Infrastructure and Networks (GI&N) area has delineated a path to 2030 for the renovation, upgrading, digitalization and expansion of power grids. The year 2021 was also crucial for the progress of the Grid Blue Sky project, which seeks to redesign the operating model from a platform standpoint, making grid operations significantly more efficient and enabling new services for customers. Furthermore, 2021 saw the launch of Gridspertise, a company born from the Group’s successful experience in the field of technological and digital innovation of distribution grids, with the aim of making innovative solutions available to third-party distribution companies to accelerate the energy transition. The Group confirmed its leadership in managing the largest customer base in the world, with 16 retailers, 69 million commodity customers and 7 million beyond-commodity customers. In order to simplify the customer experience and maximize their satisfaction, in April the Global Customer Operations Service Function was created. It is responsible for managing and optimizing the activation, billing, credit and customer care processes, leveraging the platform operating model. Furthermore, in order to seize the incredible opportunities offered by the electrification process that will characterize the coming decade, a new global organizational unit named Enel X Global Retail was created with the job of creating a single commercial and marketing strategy directed at end users, integrating the commodity market with the beyond-commodity solutions offered by the Enel X businesses. Our leadership has grown stronger in the business-to- government segment, in active demand management services for our industrial customers and in energy storage solutions in the business-to-business segment. In order to further accelerate the electrification of transport, we have launched the new Enel X Way in order to lend even more energy to the development of electric mobility, a key business for the energy transition. Among extraordinary corporate transactions during the year, the sale of 50% of the share capital of Open Fiber, held by Enel, to Macquarie Infrastructure and Real Assets and CDP Equity (40% and 10% respectively) closed in December 2021. From a financial point of view, on March 4, 2021, an equity-accounted perpetual hybrid bond was issued in the amount of €2.25 billion. The transaction increased the Group’s hybrid bond portfolio, bringing it to about €5.6 billion, further strengthening and optimizing the Group’s financial structure. Between June and September 2021, Enel issued sustainability-linked bonds denominated in euros and US dollars in the total equivalent amount of about €10.1 billion. These issues are linked to the achievement of Enel’s sustainability target for the reduction of direct greenhouse gas emissions (Scope 1) and are consistent with the Group’s Sustainability-Linked Financing Framework, updated to January 2021. At the same time, Enel repurchased and cancelled outstanding bonds not linked to the pursuit of SDG objectives through two voluntary purchase offers and the exercise of repurchase options for a total amount of about €7.4 billion. The bond issue and repurchase programs made it possible to achieve a ratio between sustainable sources of financing and the Group’s total gross debt of about 55%, simultaneously reducing the cost of the Group’s debt to its current 3.5%. Furthermore, on March 5, 2021, Enel obtained a revolving 5-year credit line from a pool of banks in the amount of €10 billion. The credit line is linked to the key performance indicator (KPI) for direct greenhouse gas emissions. €10.1 billion Sustainability-linked bonds issued between June and September 2021 55 % Ratio between sustainable sources of financing and the Group’s total gross debt Letter to shareholders and other stakeholders 9 €210 billion Direct and third-party investments to 2030 Strategy and forecasts for 2022-2024 Over the past decade we have seen how the development of renewables has been the dominant trend in energy generation thanks to cost reductions, allowing decarbonization to proceed more rapidly. Similarly, we expect the electrification process to characterize the current decade, emerging as a crucial factor for avoiding the grave consequences of a temperature increase above 1.5 °C compared with pre- industrial levels. With electrification, customers will gradually convert their energy consumption to electricity, with gains in terms of cost, efficiency, emissions and price stability. With the new Strategic Plan, the Group has confirmed the path towards 2030 already under way, increasing investments envisaged in the previous Business Plan by 6% to around €210 billion in direct and third-party investments. The Group confirmed the use of two different business models (Ownership and Stewardship) to achieve the objectives we have set, which will be deployed depending on geographical area and operating conditions. The strategy and positioning of the Group envisaged for 2030 have made it possible to bring forward the “Net-Zero” commitment for both direct and indirect emissions by 10 years from 2050 to 2040. With regard to the generation of energy and the sale of electricity and natural gas to end users, Enel is committed to achieving zero emissions without resorting to CO2 capture techniques or nature-based solutions such as reforestation. The Plan underpinning the early achievement of this ambitious goal is based on the implementation of certain key strategic steps: (i) the plan to abandon coal and gas generation by 2027 and 2040 respectively, replacing the thermal generation portfolio with new renewables capacity and exploiting the hybridization of renewables with storage solutions; (ii) by 2040, 100% of the electricity sold by the Group will be generated from renewables and by the same year the Group will exit the retail gas sales business. In support of our long-term targets, in 2022-2024 the Group expects to directly invest around €45 billion, of which €43 billion through the Ownership model, mainly in expanding and upgrading grids and in developing renewables and about €2 billion through the Stewardship model, while mobilizing €8 billion in investment from third parties. About 94% of 2022-2024 consolidated investment is in line with the United Nations Sustainable Development Goals (SDGs) and it is estimated that more than 85% of this investment will be aligned with the criteria of the European taxonomy. The Group expects to increase the renewables capacity it manages to some 77 GW by the end of 2024, with zero-emission output reaching about 77% of the total, with a decrease in specific greenhouse gas emissions of more than 35% in the same period. In distribution grids, the acceleration of investment, thanks in part to the opportunities created with the National Recovery and Resilience Plans launched by the European Union, will expand the Group’s regulatory asset base (RAB) by 14% to about €49 billion in 2024, making it possible to reach a total of some 81 million customers served, 4 million of which through the Stewardship model. The central role of our customers in the Group’s business model makes the integrated margin a pillar of our Plan. 10 Integrated Annual Report 2021 This is the margin from the sale of power generated and purchased, the correct management of which requires the joint optimization of both sales and provisioning. Compared with 2021, we expect the integrated margin to grow 1.6 times by 2024. This will be accompanied by a decrease of about 15% in the total cost of electricity sold compared with 2021. On the performance front, the Group expects ordinary EBITDA to reach between €21.0 and 21.6 billion by 2024, an increase of about 11% compared with 2021. At the same time, ordinary profit is forecast to rise by about 20% from €5.6 billion in 2021 to between €6.7 and 6.9 billion in 2024. Enel’s dividend policy for the period remains simple, predictable and attractive. Shareholders should receive a fixed dividend per share (DPS) that is expected to increase by 13% between 2021 and 2024, reaching €0.43 per share. Letter to shareholders and other stakeholders 11 Contents LETTER TO SHAREHOLDERS AND OTHER STAKEHOLDERS 6 REPORT ON OPERATIONS BASIS OF PRESENTATION 14 1. 2. 3. ENEL GROUP 20 GOVERNANCE Highlights World Economic Forum (WEF) European Union taxonomy Value creation and the business model Enel around the world 22 26 28 31 36 Enel shareholders Corporate boards The Enel corporate governance system Enel organizational model Incentive system Values and pillars of corporate ethics 38 40 42 44 51 54 55 GROUP STRATEGY & RISK MANAGEMENT Group strategy 58 60 Reference scenario 74 - Macroeconomic environment 74 - The energy industry 76 - Climate change and long-term scenarios 79 - Assessment of the risks and opportunities connected with the Strategic Plan Risk management 96 98 Guide to navigating the report To facilitate navigation, hyperlinks have been integrated into the document Return to main menu Income Statement Go to... Search Print Statement of Financial Position Statement of Cash Flows Statement of Changes in Equity Back/forward Statement of Comprehensive Income 4. 5. GROUP PERFORMANCE 130 OUTLOOK Outlook for operations Other information Definition of performance indicators Performance of the Group Value generated and distributed for stakeholders Analysis of the Group’s financial position and structure Performance by Business Line Enel shares 132 134 162 163 170 205 Innovation and digitalization 208 People centricity Significant events in 2021 Regulatory and rate issues 212 223 231 CONSOLIDATED FINANCIAL STATEMENTS 6. 252 254 256 CONSOLIDATED FINANCIAL STATEMENTS Consolidated financial statements Notes to the consolidated financial statements Declaration of the Chief Executive Officer and the officer in charge REPORTS Report of the Board of Statutory Auditors Report of the Audit Firm ATTACHMENTS Subsidiaries, associates and other significant equity investments of the Enel Group at December 31, 2021 260 262 269 437 438 438 453 460 460 Basis of Presentation Enel’s approach to corporate reporting The Integrated Annual Report of the Enel Group, consisting of the Report on Operations inspired by integrated think- ing and the consolidated financial statements prepared in accordance with the IFRS/IAS international accounting standards, represents the “core” document of the Enel Group’s integrated corporate reporting system, based on the transparency and accountability of information. The objective of the Enel’s Integrated Annual Report is to describe its strategic-sustainable thinking and to present its results and the medium- and long-term outlook for a sustainable and integrated business model that in recent years has fostered the creation of value in the context of the energy transition. The Enel Group has drawn inspiration from the “Core&More” reporting approach, designing its own corporate reporting system at the service of all stakeholders in a connected, logical and structured manner and developing its own concept for presenting economic, social, environmental and governance information, in accordance with specif- ic regulations, recommendations and international best practices. This “Core Report” seeks to provide a holistic view of the Group, its sustainable and integrated business model and the related medium/long-term value creation process, including the qualitative and quantitative financial and non-financial information considered most relevant on the basis of a materiality assessment that also considers the expectations of all stakeholders. The “More Reports”, on the other hand, include more de- tailed and additional information, partly in compliance with specific regulations, than that provided in the Core Report while being cross referenced to the latter. 14 14 Integrated Annual Report 2021 Corporate Reporting Framework The Core&More approach of the Enel Group Report and financial statements of Enel SpA This is prepared in conformity with Article 9, paragraph 3, of Legislative Decree 38 of February 28, 2005 Sustainability Report This includes the Consolidated Non-Financial Statement pursuant to Legislative Decree 254/2016 and presents Enel’s sustainable business model for creating value for all stakeholders and contributing to achievement of the 17 Sustainable Development Goals of the United Nations Integrated Annual Report 2021 Report on Remuneration Policy This describes the Enel remuneration system, as provided for by Article 123-ter of the Consolidated Law on Financial Intermediation Report on Corporate Governance and the Ownership Structure This describes the Enel corporate governance system pursuant to Article 123-bis of the Consolidated Law on Financial Intermediation and Article 144-decies of the CONSOB Issuers Regulation Basis of Presentation 15 15 The Integrated Annual Report and materiality analysis As an expression of integrated thinking, the Integrated An- nual Report seeks to represent the capacity of the busi- ness model to create value for stakeholders in the short, medium and long term, ensuring the connectivity of the information it contains. The Group maintains ongoing relationships with all stake- holders in order to understand and meet their reporting needs, taking account of the importance of the impact of the Group’s business model for all interests involved, with a view to creating shared value. The financial and non-financial information presented within the various documents of the corporate reporting system are selected based on their materiality determined on the basis of specific frameworks, methodologies and assessments. The following represent the key principles underpinning the preparation of the Report on Operations, with the ba- sis of preparation of the consolidated financial statements being discussed in the section “Form and content of the consolidated financial statements”. The Report on Operations includes financial and sustain- ability information selected on the basis of a materiality analysis that takes account of stakeholder information requirements, including Enel’s contribution to achieving the United Nations Sustainable Development Goals (SDGs) included in the Group Strategic Plan (i.e., “Affordable and Clean Energy” (SDG 7), “Industry, Innovation and Infrastruc- ture” (SDG 9), “Sustainable Cities and Communities” (SDG 11) and “Climate Action” (SDG 13)) and on the activities im- plemented to contribute to their achievement in order to meet the expectations of the main stakeholders in the In- tegrated Annual Report. The Enel Group also performs a double materiality analysis, details on which are available in the methodological note of the Sustainability Report. In addition to the concept of materiality, the qualitative and quantitative financial and sustainability information reported in the Report on Operations have been prepared and presented in such a way as to ensure their complete- ness, accuracy, neutrality and comprehensibility. The information contained in the Report on Operations is also consistent with the previous year. Accordingly, the Group applies the same methodologies from year to year, unless otherwise specified, in compli- ance with international best practices for integrated re- porting and non-financial reporting. For the purposes of preparing sustainability information, especially quantitative information, the Group mainly ap- plies the provisions of the Global Reporting Initiative (GRI) Standard, in line with the Sustainability Report, and the “Aspects” of the GRI supplement dedicated to the Elec- tric Utilities sector (“Electric Utilities Sector Disclosures”). Consideration was also given to the indicators proposed in the white paper “Towards Common Metrics and Consist- ent Reporting of Sustainable Value Creation” of the World Economic Forum (WEF), the details of which are highlight- ed in the section below on the WEF and in the “Group Per- formance” chapter of this Report. 16 16 Integrated Annual Report 2021 The Report on Operations in organized into the following sections: Outlook The section discusses significant developments connected with the outlook for the operations of the Enel Group, providing forward-looking information in line with the Strategic Plan Group Performance In accordance with “IFRS 8 - Segment Reporting“, this section focuses on the business segments of the Enel Group and their financial and non-financial performance for the year, offering a holistic view consistent with Enel’s integrated and sustainable business model 4 3 Taking account of the results of the priority matrix and the significant climate impacts on the Group’s value cre- ation process, each chapter (entitled after the four pillars of the Task Force on Climate-Related Financial Disclosures - TCFD: Governance, Group Strategy & Risk Management, Group Performance and Outlook) includes information re- lating to climate change as proposed by the TCFD, which published specific recommendations in June 2017 that were adopted by the Group in its voluntary reporting on the financial impacts of climate risks. The Group also took account of the recommendations is- sued by the IASB in November 2019 “IFRS Standards and climate-related disclosures” and November 2020 “Effects of climate-related matters on financial statements“, which emphasize that this risk must be considered in the as- Connectivity matrix 1 Governance The section discusses the Group’s governance bodies, its organizational model and its involvement in sustainability and climate change policies 100% 2 Group Strategy and Risk Management Founded on a macroeconomic vision, the section provides an overview of the Group’s strategies and the main objectives of the Strategic Plan, examining the main risks to which the Group is exposed, including risks associated with climate change and specific mitigation actions. It also underscores the opportunities of the business model within the current energy transition scenario sumptions of management in the exercise of its judgment in measuring items in the financial statements. In order to ensure the connectivity of information and to communicate the way in which the progress achieved in sustainability contributes to enhancing current and future financial performance, clear and consistent relationships between key financial and sustainability information have been identified and presented in the Report on Operations for each of the four chapters indicated above. In addition, Enel’s Integrated Annual Report has been pub- lished in the “Investors” section of the Enel website (www. enel.com). In order to provide an integrated representation of the Group and represent the connectivity of information, since 2020 the Enel Group has prepared a matrix delineating the relationships between: • strategic objectives that also clearly represent Enel’s contribution to achieving the United Nations Sustaina- ble Development Goals (SDGs) and in particular the four key objectives of the Strategic Plan (i.e., SDG 7, SDG 9, SDG 11 and SDG 13); • the governance, Group strategy and risk management, Group performance and the outlook for each Business Line. Basis of Presentation 17 17 Enel business Value creation and business model Governance Group strategy SDGs Risk management Group performance Outlook GENERATION AND TRADING ENEL GREEN POWER AND THERMAL GENERATION & GLOBAL ENERGY AND COMMODITY MANAGEMENT • Enel shareholders • Corporate boards • The Enel corporate governance system • Enel organizational model • Incentive system “THE DECADE OF ELECTRIFICATION“ I. Allocate capital to support the supply of decarbonized electricity II. Enable the electrification of customer energy demand III. Leverage the creation of value throughout the value chain • Values and pillars of corporate ethics IV. Move forward achievement of sustainable Net-Zero objectives to 2040 CUSTOMERS RETAIL ENEL X DISTRIBUTION GLOBAL INFRASTRUCTURE AND NETWORKS 18 18 Integrated Annual Report 2021 Value generated and distributed for stakeholders (p. 162) Innovation and digitalization (p. 208) ENEL GREEN POWER (p. 180) Operations • Net electricity generation • Net efficient installed capacity Performance • Revenue • Ordinary gross operating profit • Ordinary operating profit • Capex THERMAL GENERATION AND TRADING (p. 174) Operations • Net electricity generation • Net efficient installed capacity • Revenue from thermal and nuclear generation Performance • Revenue • Ordinary gross operating profit • Ordinary operating profit • Capex Value generated and distributed for stakeholders (p. 162) Innovation and digitalization (p. 208) END-USER MARKETS (p. 194) Operations • Sales of electricity • Sales of natural gas Performance • Revenue • Ordinary gross operating profit • Ordinary operating profit • Capex Strategic (p. 102) • Legislative and regulatory developments • Macroeconomic and geopolitical trends • Risks and strategic opportunities associated with climate change • Competitive environment Financial (p. 121) • Interest rate • Commodity • Currency • Credit and counterparty • Liquidity Digital Technology (p. 124) • Cyber security • Digitalization, IT effectiveness and service continuity Value generated and distributed for stakeholders (p. 162) Innovation and digitalization (p. 208) ENEL X (p. 198) Operations • Demand response • Lighting points • Storage • Charging points Performance • Revenue • Procurement, logistics and supply chain • People and organization • Ordinary gross operating profit • Ordinary operating profit • Capex Operational (p. 125) • Health and safety • Environment Compliance (p. 128) • Data protection Value generated and distributed for stakeholders (p. 162) Innovation and digitalization (p. 208) INFRASTRUCTURE AND NETWORKS (p. 188) Operations • Distribution grids and electricity transmission • Average frequency interruptions per customer • Average duration of interruptions per customer • Grid losses Performance • Revenue • Ordinary gross operating profit • Ordinary operating profit • Capex • Allocate capital to support the supply of decarbonized electricity (p. 254) • Enable the electrification of customer energy demand (p. 254) • Leverage the creation of value throughout the value chain (p. 254) • Achieve sustainable Net-Zero objectives in advance (p. 254) 2020-2030 As a result of the above strategic lines of action, the Group’s ordinary EBITDA is expected to increase at a compound annual growth rate of 5-6%, with the ordinary profit of the Group expected to increase at a compound annual rate of 6-7%. 2022-2024 in 2021. in 2021. In 2024 the Group’s ordinary EBITDA is forecast to reach €21-21.6 billion, compared with €19.2 billion The Group’s ordinary profit is expected to rise to €6.7-6.9 billion in 2024, compared with €5.6 billion Enel’s dividend policy for the period remains simple, predictable and attractive. Shareholders should receive a fixed dividend per share (“DPS”) that is expected to increase by 13% between 2021 and 2024, reaching €0.43 per share. 2022 • An acceleration of investments in renewable energy, especially in Iberia and North America, to support industrial growth and as part of the Group’s decarbonization policies. • An increase in investments in distribution grids, especially in Italy, with the aim of further improving service quality and increasing the flexibility and resilience of the grid. • An increase in investments dedicated to the electrification of consumption, with the aim of leveraging the growth of the customer base, and to achieving continuous efficiency gains, supported by the development of global business platforms. • Ordinary EBITDA is forecast at €19-19.6 billion, with ordinary net profit of €5.6-5.8 billion. Enel business Governance Group strategy SDGs Risk management Group performance Outlook Value creation and business model GENERATION AND TRADING ENEL GREEN POWER AND THERMAL GENERATION & GLOBAL ENERGY AND COMMODITY MANAGEMENT • Enel shareholders (p. 40) • Corporate boards (p. 42) • The Enel corporate governance system (p. 44) • Enel organizational model (p. 51) • Incentive system (p. 54) “THE DECADE OF ELECTRIFICATION“ (p. 61) I. Allocate capital to support the supply of decarbonized electricity II. Enable the electrification of customer energy demand III. Leverage the creation of value throughout the value chain • Values and pillars of corporate ethics (p. 55) 2040 IV. Move forward achievement of sustainable Net-Zero objectives to CUSTOMERS RETAIL ENEL X DISTRIBUTION GLOBAL INFRASTRUCTURE AND NETWORKS Value generated and distributed for stakeholders Innovation and digitalization ENEL GREEN POWER Operations • Net electricity generation • Net efficient installed capacity Performance • Revenue • Ordinary gross operating profit • Ordinary operating profit • Capex THERMAL GENERATION AND TRADING Operations • Net electricity generation • Net efficient installed capacity Performance • Revenue from thermal and nuclear generation • Revenue • Ordinary gross operating profit • Ordinary operating profit • Capex Value generated and distributed for stakeholders Innovation and digitalization END-USER MARKETS Operations • Sales of electricity • Sales of natural gas Performance • Revenue • Ordinary gross operating profit • Ordinary operating profit • Capex Strategic • Legislative and regulatory developments • Macroeconomic and geopolitical trends • Risks and strategic opportunities associated with climate change • Competitive environment Financial • Interest rate • Commodity • Currency • Credit and counterparty • Liquidity Digital Technology • Cyber security • Digitalization, IT effectiveness and service continuity Value generated and distributed for stakeholders Innovation and digitalization Operational • Health and safety • Environment • Procurement, logistics and supply chain • People and organization Compliance • Data protection ENEL X Operations • Demand response • Lighting points • Storage • Charging points Performance • Revenue • Ordinary gross operating profit • Ordinary operating profit • Capex Value generated and distributed for stakeholders Innovation and digitalization INFRASTRUCTURE AND NETWORKS Operations • Distribution grids and electricity transmission • Average frequency interruptions per customer • Average duration of interruptions per customer • Grid losses Performance • Revenue • Ordinary gross operating profit • Ordinary operating profit • Capex • Allocate capital to support the supply of decarbonized electricity • Enable the electrification of customer energy demand • Leverage the creation of value throughout the value chain • Achieve sustainable Net-Zero objectives in advance 2020-2030 As a result of the above strategic lines of action, the Group’s ordinary EBITDA is expected to increase at a compound annual growth rate of 5-6%, with the ordinary profit of the Group expected to increase at a compound annual rate of 6-7%. 2022-2024 In 2024 the Group’s ordinary EBITDA is forecast to reach €21-21.6 billion, compared with €19.2 billion in 2021. The Group’s ordinary profit is expected to rise to €6.7-6.9 billion in 2024, compared with €5.6 billion in 2021. Enel’s dividend policy for the period remains simple, predictable and attractive. Shareholders should receive a fixed dividend per share (“DPS”) that is expected to increase by 13% between 2021 and 2024, reaching €0.43 per share. 2022 • An acceleration of investments in renewable energy, especially in Iberia and North America, to support industrial growth and as part of the Group’s decarbonization policies. • An increase in investments in distribution grids, especially in Italy, with the aim of further improving service quality and increasing the flexibility and resilience of the grid. • An increase in investments dedicated to the electrification of consumption, with the aim of leveraging the growth of the customer base, and to achieving continuous efficiency gains, supported by the development of global business platforms. • Ordinary EBITDA is forecast at €19-19.6 billion, with ordinary net profit of €5.6-5.8 billion. Basis of Presentation 19 19 REPORT ON OPERATIONS 1. Enel Group Value creation and the business model An integrated representation of how the Group transforms its resources into outcomes and value created for stakeholders, prioritizing the pursuit of Sustainable Development Goals (SDGs) 7, 9, 11 and 13. WEF metrics and the European taxonomy Clear, transparent and comparable disclosure through WEF metrics and the European taxonomy. Sustainable development on 5 continents The Enel Group is present in 47 countries with more than 1,000 companies. 20 Integrated Annual Report 2021 21 Highlights 22 22 Integrated Annual Report 2021 Revenue Group revenue(1) (2) +33.3% GROSS OPERATING PROFIT(2) ORDINARY GROSS OPERATING PROFIT(2) +3.9% +6.6% €88,006 million €66,004 million in 2020 €17,567 million €16,903 million in 2020 €19,210 million €18,027 million in 2020 Performance Group profit +22.2% €3,189 million €2,610 million in 2020 GROUP ORDINARY PROFIT +7.6% €5,593 million €5,197 million in 2020 NET FINANCIAL DEBT +14.4% €51,952 million €45,415 million in 2020 Capital expenditure Capital expenditure on property, plant and equipment and intangible assets(3) CASH FLOWS FROM OPERATING ACTIVITIES +27.5% -12.5% €12,997 million €10,197 million in 2020 €10,069 million €11,508 million in 2020 People Group employees -0.7% “LIFE CHANGING“ INCIDENTS AT ENEL(4) 66,279 employees 66,717 in 2020 1 employee - in 2020 (1) The figures for 2020 have been adjusted, for comparative purposes only, to take account of the effects associated with the change in classification connect- ed with the fair value measurement of outstanding contracts at the end of the period for the purchase and sale of commodities with physical settlement. The change in classification had no impact on operating profit. For more details, please see note 7 to these consolidated financial statements. (2) For comparative purposes only, €87 million in 2020 in respect of the component recognized through profit or loss deriving from the remeasurement at fair value of the financial assets connected with service concession arrangements involving distribution operations in Brazil falling within the scope of IFRIC 12 have been reclassified from financial income to revenue. The latter classification had an impact of the same amount on operating profit. For more details, please see note 7 to these consolidated financial statements. (3) Does not include €111 million regarding units classified as “held for sale” in 2021. (4) Injuries whose consequences caused permanent changes in the life of the individual. Highlights 2323 Business Line Highlights Global Power Generation TOTAL NET EFFICIENT INSTALLED CAPACITY +3.7% 87.1 GW 84.0 in 2020 NET ELECTRICITY GENERATION +7.5% 222.6 TWh 207.1 in 2020 NET EFFICIENT INSTALLED RENEWABLES CAPACITY NET EFFICIENT INSTALLED RENEWABLES CAPACITY AS % OF TOTAL ADDITIONAL EFFICIENT INSTALLED RENEWABLES CAPACITY +7.3% 57.5 % 53.6 in 2020 +78.0% 5.18 GW 2.91 in 2020 +11.3% 50.1 GW 45.0 in 2020 NET RENEWABLE ELECTRICITY GENERATION +3.2% 108.8 TWh 105.4 in 2020 DIRECT GREENHOUSE GAS EMISSIONS - SCOPE 1 – SPECIFIC(1) (2) +5.1% 227 gCO2eq/kWh 216 in 2020 (1) The figures for 2020 have been modified following the introduction of a new calculation method deriving from the implementation of the Net-Zero project. (2) Specific emissions are calculated by considering total direct (Scope 1) emissions from total renewable, nuclear and conventional thermal generation includ- ing the contribution of heat. 24 24 Integrated Annual Report 2021 Global Infrastructure and Networks END USERS +1.2% 75,178,777 no. 74,303,931 in 2020 ELECTRICITY DISTRIBUTION AND TRANSMISSION GRID ELECTRICITY TRANSPORTED ON ENEL’S DISTRIBUTION GRID END USERS WITH ACTIVE SMART METERS +0.1% +5.2% +1.5% 2,233,368 km(3) 510.3 TWh(3) 44,968,974 no.(3) (4) 2,232,023 in 2020 485.2 in 2020 44,293,483 in 2020 Retail ELECTRICITY SOLD BY ENEL RETAIL CUSTOMERS of which free market +3.8% -0.3% +8.3% 309.4 TWh 298.2 in 2020 69,342,818 no. 24,839,600 no.(3) 69,517,932 in 2020 22,931,809 in 2020 Enel X STORAGE +205% 375 MW 123 in 2020 CHARGING POINTS DEMAND RESPONSE +49.6% 157,209 no.(3) 105,079 in 2020 +27.7% 7,713 MW 6,038 in 2020 (3) The figure for 2020 reflects a more accurate calculation of the numbers. (4) Of which 23.5 million second-generation smart meters in 2021 and 18.2 million in 2020. Business Line Highlights 25 25 World Economic Forum (WEF) The International Business Council (IBC) of the World Eco- nomic Forum has produced a report entitled “Measuring Stakeholder Capitalism: Towards Common Metrics and Consistent Reporting of Sustainable Value Creation”, with the aim of defining shared common metrics to measure, report and compare levels of sustainability, i.e., the effec- tiveness of its actions in pursuing the Sustainable De- velopment Goals set by the United Nations (SDGs), in the business model adopted to create value for stakeholders. The metrics are based on existing standards and seek to increase convergence and comparability between the var- ious parameters used today in sustainability reports. The following table gives the 21 main indicators specified in the WEF report. Integrated Annual Report 2021 Pillar Theme 21 CORE KPIs KPIs representing the 21 CORE KPIs of the WEF 2021 2020 Change Governing purpose Setting purpose Quality of governing body Governance body composition Stakeholder engagement Material issues impacting stakeholder No. of women on Board 4 4 - Principles of Governance Ethical behavior Employees with training in anti-corruption policies and procedures (%) 30.3 40.0 (9.7) Confirmed violations for conflict of interest/corruption (no.) 7 2 Reports received for violations of Code of Ethics 153 151 5 2 Anti-corruption Protected ethics advice and reporting mechanisms Risk and opportunity oversight Integrating risk and opportunity into business process Greenhouse gas (GHG) emissions Climate change Direct greenhouse gas emissions - Scope 1 (million/teq) 51.6 45.7 5.9 Indirect greenhouse gas emissions - Scope 2 - Purchase of electricity from the grid (location based) (million/teq) Indirect greenhouse gas emissions - Scope 2 - Purchase of electricity from the grid (market based) (million/teq) Indirect greenhouse gas emissions - Scope 3 (million/teq) 4.3 4.1 0.2 7.1 6.9 0.2 69.1 64.9 4.2 Planet Nature loss TCFD implementation Land use and ecological sensitivity Freshwater availability Water consumption and withdrawal in water-stressed areas 26 26 Integrated Annual Report 2021 Habitat recovery (hectares) 9,092 4,356 4,736 Water withdrawals (millions of m3) 55.6 51.5 4.1 Water withdrawals in water- stressed areas (%) 27.4 23.3 4.1 Total water consumption (millions of m3) 26.3 20.4 5.9 Water consumption in water- stressed areas (%) 33.8 31.6 2.2 Chapter/Section reporting all KPIs and disclosure on the 21 CORE KPIs of the WEF Enel is Open Power “Corporate boards” section in “Governance” chapter “Basis of Presentation” chapter “Values and pillars of corporate ethics” section in “Governance” chapter “Values and pillars of corporate ethics” section in “Governance” chapter “Risk management” section in “Group Strategy & Risk Management” chapter “Fighting climate change and ensuring environmental sustainability” section in “Group Performance” chapter “Governance”, “Group Strategy & Risk Management”, “Group Performance” and “Outlook” chapters “Fighting climate change and ensuring environmental sustainability” section in “Group Performance” chapter “Fighting climate change and ensuring environmental sustainability” section in “Group Performance” chapter Integrated Annual Report 2021 Pillar Theme 21 CORE KPIs KPIs representing the 21 CORE KPIs of the WEF 2021 2020 Change Diversity and inclusion Women as proportion of total employees (%) 22.5 21.5 1.0 Pay equality Equal Remuneration Ratio (%) 81.1 83.3 (2.2) Dignity and equality Wage level CEO Pay Ratio (%)(1) 91.0 145.0 (54.0) Risk for incidents of child, forced or compulsory labor Assessment of protection of child labor and compliance with ban on forced labor in the supply chain People Health and well- being Health and safety Skills for the future Training provided Fatal accidents - Enel (no.) 3 1 2 Frequency of fatal accidents - Enel (i.) Life changing accidents - Enel (no.) Frequency of life changing accidents - Enel (i.) Average hours of training per employee (hrs/person) Employee training costs (millions of euro) 0.024 0.008 0.016 1 - 1 0.008 - 0.008 44.6 40.9 3.7 23 19 4 Absolute number and rate of employment People hired (no.) 5,401 3,131 2,270 Hiring rate (%) 8.1 4.7 3.4 Terminations (no.) 5,862 3,696 2,166 Turnover (%) 8.8 6.0 2.8 Chapter/Section reporting all KPIs and disclosure on the 21 CORE KPIs of the WEF “People centricity” section in “Group Performance” chapter “People centricity” section in “Group Performance” chapter “Values and pillars of corporate ethics” section in “Governance” chapter “People centricity” section in “Group Performance” chapter “People centricity” section in “Group Performance” chapter “People centricity” section in “Group Performance” chapter “Value generated and distributed for stakeholders” section in “Group Performance” chapter “Analysis of the Group’s financial position and structure” section in “Group Performance” chapter Employment and wealth generation Economic contribution Prosperity Financial investment contribution Total investment (millions of euro) 12,997 10,197 2,800 Purchase of treasury shares and dividends and interim dividends paid to holders of hybrid bonds 5,054 4,755 299 Consolidated financial statements Innovation in better products and services Total R&D expenses Investment in R&D (millions of euro) 130 111 19 Community and social vitality Total tax paid Total tax paid (millions of euro)(2) 4,127 4,260 (133) “Innovation and digitalization” section in “Group Performance” chapter “Value generated and distributed for stakeholders” section in “Group Performance” chapter (1) Ratio between the total remuneration of the CEO/General Manager of Enel and the average gross annual remuneration of Group employees. The figure for 2020 has been adjusted to take account of 2021 exchange rates. (2) The amount represents “total tax borne”, which is costs for taxes borne by the Group. For more information, see the 2021 Sustainability Report and the Consolidated Non-Financial Statement. The 2020 figure has been calculated more accurately. World Economic Forum (WEF) 27 27 European Union taxonomy The European taxonomy was adopted by the European Union with Regulation 2020/852, published in the Official Journal of the European Union on June 22, 2020 and en- tered into force on July 12, 2020. The European taxonomy establishes six environmental ob- jectives to identify environmentally sustainable economic activities: climate change mitigation; climate change ad- aptation; the sustainable use and protection of water and marine resources; the transition to a circular economy; pollution prevention and control; and the protection and restoration of biodiversity and ecosystems. Accordingly, an economic activity is defined as environmentally sustaina- ble if: • it makes a substantive contribution to at least one of the six environmental objectives; • it does no significant harm (DNSH) to the other five en- vironmental objectives; • it meets minimum safeguards. The European taxonomy provides a standardized, sci- ence-based classification system to identify environmen- tally sustainable economic activities and thus acts as an important enabler to promote sustainable investment and accelerate the decarbonization of the European economy, while at the same time creating security and transparen- cy for investors and supporting businesses in planning the Net Zero transition. Although the taxonomy regulation establishes an obliga- tion for undertakings to declare compliance with the tax- onomy from January 2022, Enel has positioned itself as leader and elected to announce implementation in the previous 2020 Sustainability Report and the Integrated Annual Report 2020 as well as during the 2020 and 2021 Capital Markets Days. EU taxonomy reporting pursuant to the regulation and the delegated act is provided in full in the 2021 Sustainability Report - Non-Financial Statement pursuant to Regulation (EU) 2020/852. The European taxonomy implementation process at Enel 1 2 Identification of eligible economic activities Analysis of substantial contribution 3 Assessment of the principle of Do No Significant Harm (DNSH) to other environmental objectives 4 Verification of minimum social safeguards 5 Calculation of financial metrics Through a process overseen by the CEO and top manage- ment, involving the competent functions at the company and country level as well as all Business Lines, five steps have been identified to analyze the applicability of the Eu- ropean taxonomy along the entire value chain in all coun- tries in which the Group operates. 1. Identification of eligible economic activities: all the ac- tivities within the Group’s portfolio included in the Cli- mate Delegated Act have been identified. The process only considered the climate change mitigation objec- tive as it is the most material objective in consideration of the Enel Group’s business model and the sector in which we operate. 2. Analysis of substantial contribution: the eligible activi- ties identified in the previous phase were carefully ana- lyzed to verify their compliance with the specific tech- 28 28 Integrated Annual Report 2021 nical criteria established to measure their substantial contribution to climate change mitigation. The analysis was conducted following the criteria contained in the Climate Delegated Act, namely: – technology screening for electricity generation. The threshold of 100 gCO2eq/kWh measured on a life-cy- cle basis was complied with as follows: • coal and liquid fossil fuels: technology non included in the European taxonomy; • gas and nuclear: on February 2, 2022, the European Commission approved in principle a Complementa- ry Delegated Act on climate which includes, under strict conditions, activities related to nuclear energy and gas in the list of economic activities covered by the European taxonomy. At the time of publica- tion of this Report, the Complementary Delegated Act is going through the approval process with the European Parliament and the Council. In these cir- cumstances, the legislation is not yet finalized and therefore the production of electricity from gas and nuclear activities has been considered as “non-eli- gible”; • wind, solar and energy storage: these activities are exempt from the verification of the carbon intensi- ty threshold due to their substantial contribution to climate change mitigation; • hydroelectric energy: the carbon intensity thresh- old was verified only for those plants whose power density is less than 5 W/m2. All plants with power densities greater than 5W/m2 as well as run-of-the- river plants and pumping facilities are exempt from verification of the threshold; • geothermal: the threshold was verified by carrying out life-cycle emissions assessments certified by independent third parties; – geographical and system level screening for electric- ity transmission and distribution. For the purposes of classifying activities as eligible, compliance with one of the following technical screening criteria was ver- ified in all eight countries wherein which Enel distrib- utes electricity: • the distribution system operator (DSO) is the Euro- pean interconnected system; • the non-European DSO operates a system in which more than 67% of newly enabled generation capac- ity is below the threshold value of 100 gCO2eq/kWh measured on a life-cycle basis in the 2016-2020 period; • the average emissions factor of the non-European DSO network is below the threshold value of 100 gCO2eq/kWh measured on a life-cycle basis in ac- cordance with electricity generation criteria in the 2016-2020 period. Infrastructure constructed in 2021 and dedicated to the creation of a direct connection or expanding an existing direct connection between a substation or network and a power production plant that is more greenhouse gas intensive than 100 gCO2eq/kWh measured on a life-cycle basis has been identified and excluded from the aligned activities of the DSOs; – product cluster screening for the Enel X Business Line. A complete analysis of the Enel X portfolio was con- ducted, classifying the eligible activities in the sectors identified in the Climate Delegated Act, such as con- struction and real estate, transport or professional, scientific and technical activities; – provisioning screening for retail electricity activities. The amount of power sold by electricity sales com- panies in Italy and Spain supported by Certificates of Origin was calculated and considered to be aligned with the European taxonomy due to its compliance with the technical screening criteria established in the Climate Delegated Act for electricity generation. 3. Analysis of compliance with the principle of not caus- ing significant harm to other objectives (Do No Sig- nificant Harm - DNSH): an analysis of existing environ- mental procedures was performed to verify compliance with the DNSH quality criteria for each technology (for power generation activities), region (for transmission and distribution activities) and product cluster (for the activities of the Enel X Business Line), adapted to the specific requirements envisaged for each environmen- tal objective. 4. Due diligence assessment of compliance with min- imum social guarantees: we verified that the due dili- gence process for the Group’s human rights assessments includes the entire Enel Group. 5. Calculation of financial metrics: the corresponding fi- nancial metrics were associated with each economic activity in accordance with the classification performed in steps 1-4, as described in the “Statement on the alignment of Enel’s business with the European taxono- my” section of the “Group Performance” chapter. Using this process, Enel has classified all the economic ac- tivities along its value chain in the following three catego- ries: eligible-aligned, eligible-not aligned, non-eligible. Eligible-aligned: this refers to an economic activity that si- multaneously meets the following three conditions: • it is explicitly included in the European taxonomy regu- lation for its substantial contribution to climate change mitigation; • it meets the specific criteria in the European taxonomy regulation for this specific environmental objective; • it meets all DNSH criteria and minimum protection guar- antees. European Union taxonomy 29 29 Eligible-not aligned: this refers to an economic activity that: • is explicitly included in the European taxonomy regula- tion for its substantial contribution to climate change mitigation or adaptation; but • it does not meet the specific criteria in the European taxonomy regulation for these specific environmental objectives; or • it does not meet at least one of the DNSH conditions and/or the minimum protection guarantees. Not eligible: this refers to an economic activity that has not been identified by the European taxonomy as a substantial contributor to climate change mitigation and, therefore, no criteria have been developed. The rationale of the Euro- pean Commission is that these activities may: • not have a significant impact on climate change mitiga- tion or may be integrated into the European taxonomy regulation at a later stage; • have a very significant impact on climate change miti- gation, so they may not be eligible in any case; • be awaiting a definitive resolution of the European au- thorities regarding their classification (nuclear and gas). Eligibility of Enel activities In 2021, Enel’s eligibility analysis was updated in accord- ance with the process delineated above and the new definition for the three categories described above and pursuant to the final version of the Climate Delegated Act published in the Official Journal of the European Union in December 2021. European taxonomy Eligible Aligned Non-aligned Not eligible Mapping in accordance with Climate Delegated Act • Solar and wind • Hydro (99.5%) • Geothermal • RES Storage Distribution in Europe, Brazil, Chile, Peru and Colombia without new connections to generation plant over threshold of 100 gCO2eq/kWh Smart Lighting, e-Bus, Energy Efficiency, Home, Vivi Meglio Unifamiliare, Condominium, Customer Insight, Distributed Energy, e-Mobility, Battery Energy Storage Retail sale of power in Italy and Spain with Certificates of Origin Hydro (0.5%) Trading • New connections between subscriber or grid and a generation plant with greenhouse gas intensity over threshold of 100 gCO2eq/kWh • Distribution in Argentina Retail sale of power without Certificates of Origin Sale of gas to end users Finanical services, hardware and software, insurance and other general services Coal and liquid fossil fuels • Nuclear • Gas TBD TBD Pending approval of Complementary Delegated Act. To be considered not eligible until approval. 30 30 Integrated Annual Report 2021 Value creation and the business model The value creation process The integrated presentation of financial and non-financial information makes it possible to effectively communicate the business model and the value creation process both in terms of results and the short- and medium/long-term outlook. Environmental, social and economic aspects are increasingly significant in terms of assessing the ability to create value for all categories of stakeholders. The following graphical representation summarizes the value chain of the Enel Group with the main inputs used and how they are transformed into outcomes and value created for stakeholders by the Group’s organization and the business model in the short term. For more on the me- dium/long-term impacts, please see the Sustainability Re- port. The Group is characterized by sound and transparent governance and a sustainable strategy that prioritizes the pursuit of Sustainable Development Goals (SDGs) 7, 9, 11 and 13. These SDGs are thus the objectives of the Group’s strategic action and are translated into the creation of val- ue for the Group itself and for its stakeholders. Value creation and the business model 31 31 Value creation and the business model Our resources Our business model ||GOVERNANCE GOVERNANCE| | Planet 55.6 million m3 Total water withdrawals 27.4% Water withdrawals in water-stressed areas 26.3 Total direct consumption of fuel in mtoe People 66,279 Enel employees 22.5% Women as proportion of total employees 4,163 Women in management positions 170,421 Contractor personnel (FTE) Prosperity €51,952 million Net financial debt €42,342 million Equity €12,997 million Capital expenditure(1) €18,070 million Intangible assets €11,636 million Concessions €84,572 million Property, plant and equipment 87.1 GW Total net efficient installed capacity 50.1 GW Net efficient installed renewables capacity 2.2 million km Electricity distribution grid 45.0 million End users with active smart meters 75.2 million End users 69.3 million Retail customers 157.2 thousand Total charging points T || T N N E E M M N N Purpose OPEN POWER FOR A BRIGHTER FUTURE WE EMPOWER SUSTAINABLE PROGRESS TERNAL EN VIR O TERNAL EN VIR O X X ||||E E Values ENEL’S VALUES TRUST PROACTIVITY Strategic pillars Value chain G E N E R A T I O N •• S S E E I I T T I I N N U U T T R R O O P P P P O O D D N N A A S S K K S S I I R R •• D I S T RIBUTION || G G R R O O U U P P P P E E R R F F O O R R M M A A N N C C E E | | G G R R O O U U P P S S T T R R A A T T E E G G Y Y A A N N D D R R I I S S K K M M A A N N A A G G E E M M E E N N T T || K K O O ||O UTLO O UTLO S R E M O T S U C G T R A D I N Principles of Governance 44% Women on Board of Directors 153 Reported Code of Ethics incidents (of which 41 found to be violations) (1) Does not include €111 million regarding units classified as “held for sale”. 32 32 Integrated Annual Report 2021 Value created for Enel and our stakeholders Outcomes Impacts ||GOVERNANCE GOVERNANCE | | IS OPEN POWER Vision Open Power to tackle some of the world’s biggest challenges. | | G G Mission • Open access to electricity R R O O U U P P 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. S S T T R R T || T N N E E M M N N EN VIR O EN VIR O TERNAL TERNAL X X E ||||E •• S S E E I I T T I I N N U U T T R R O O P P P P O O D D N N A A S S K K S S I I R R •• || G G R R O O U U P P P P E E R R F F O O R R M M A A N N C C E E RESPONSIBILITY INNOVATION 1. Allocate capital to support the supply of decarbonized electricity 2. Enable the electrification of customer energy demand 3. Leverage the creation of value throughout the value chain G E N E R A T I O N S R E M O T S U C D I S T RIBUTION G T R A D I N A A T T E E G G Y Y A A N N D D R R I I S S K K 4. Move forward achievement of sustainable Net- Zero objectives to 2040 M M A A N N A A G G E E M M E E N N T T | | K K O O O UTLO ||O UTLO 6 12 13 14 15 2 4 8 1 3 5 10 7 9 11 Planet 227 gCO2eq/kWh Direct greenhouse gas emissions - Scope 1 125 million tCO2eq Scopes 1, 2, 3(2) 26.3 million m3 Total water consumption 33.8% Water consumption in water-stressed areas 9,092 Hectares of habitat recovered People 44.6 hours of training (average hours per employee) 8.8% Turnover 1.264 i. Injury frequency rate - Enel 3.521 i. Injury frequency rate - Contractors 19.9 million beneficiaries (SDG 4, 7 and 8 projects) Prosperity €88,006 million Revenue €19,210 million Ordinary EBITDA 68.7% Ordinary EBITDA of business activities aligned with European taxonomy as % of Group total €4,127 million Total tax borne €5,054 million Purchase of treasury shares and dividends distributed 3.5% Cost of debt 0.38 (€/sh) Fixed DPS 510.3 TWh Electricity transported 309.4 TWh Electricity sold 5.18 GW Additional efficient installed renewables capacity 48.9% Renewables generation as % of Group total 52.1 thousand Public and private charging points installed in 2021 243.3 min. SAIDI 892 Patent applications filed, of which 749 granted 41 Partnership agreements for innovation 16 17 (2) Only location-based Scope 2 was considered for Scope 2. Value creation and the business model 33 33 Business model Enel’s business model has been structured so as to Group’s strategic objectives, including the commitments made by the Group in the fight against climate change. The business model delineates how the organizational units of the Company, linked to our three main businesses (gen- eration, distribution and sales), must work to reap all the possible benefits from the main trends in the sector, possi- bly accelerating their implementation as well. The role defined for all the major organizational units is also intended to enable them to effectively address all the risks posed by developments in the rapidly changing energy in- dustry. In order to fully benefit from all the opportunities emerging in the market environment in which it operates, the Group has identified two different business models (Ownership and Stewardship) that it can use to achieve the ambitions we have defined. The most appropriate and effective busi- ness model is selected depending on the geographical area and operating environment involved: • the Ownership business model, in which the Group makes direct investments in renewables, grids and cus- tomers. This model is employed in countries where the entire value chain can already be leveraged, from gen- eration to integration with end user. These are defined as “Tier 1” countries, such as Italy, Spain and Romania in Europe and the United States, Brazil, Chile, Colombia and Peru in the Americas. The central role of our customers in the Group’s business model makes the integrated margin a pillar of our Plan. This is the margin from the sale of power generated and purchased, the correct manage- ment of which requires the joint optimization of both sales of power, considering the different options availa- ble in the countries in which we operate, and provision- ing, which is linked to our generation rather than to the different sourcing options; • the Stewardship business model, in which the Group in- vests capital in existing or new joint ventures or acquires minority stakes, with a view to maximizing the value of the know-how developed in the various businesses in which it operates. This is achieved through the delivery of spe- cific contractual services to partners or the subsequent monetization of these investments on the market. This model focuses mainly, but not exclusively, on “non-Tier 1” countries, where the Group’s presence is not integrated and it seeks to build partnerships with third parties to ex- plore new geographical areas or to leverage the Group’s operational experience in alternative environments. In this design, each country organization acts within its ter- ritory in a matrix relationship with the broader and more global Business Lines, managing activities such as relations with local communities, regulation, the retail market and lo- cal communication. The current mission of each business can be summarized as follows: • Enel Green Power and Thermal Generation: the Group operates through this Business Line to accelerate the energy transition, continuing to increase investments in new renewable energy capacity, and manages the decarbonization of its generation mix and the countries in which it operates, always aiming to ensure the safety and capacity of electrical systems. Generation • Global Energy and Commodity Management: this Business Line manages our integrated margin as a single portfolio in which Generation and Retail operations are always balanced effectively. In addition, the Line manages all trading operations on international desks. Trading 34 34 Integrated Annual Report 2021 Distribution • Global Infrastructure and Networks: in developing and operating infrastructure that enables the energy transition, the Group ensures the reliability in the supply of energy and the quality of service to communities through resilient and flexible networks, leveraging efficiency, technology and digital innovation, and ensuring appropriate returns on investment and cash generation. Customers • Global Retail: through its sales relationships with end users, the Group interacts locally with millions of families and companies. Thanks to our technology, the platform model enables us to improve customer satisfaction and the customer experience, while at the same time achieving ever higher levels of efficiency. The business units optimize the supply of power to their customer base, maximizing the value generated by that resource and fostering long- term relationships with customers. • Enel X: this Business Line is enabling the energy transition by acting as an accelerator for the electrification and decarbonization of customers, helping them to use energy more efficiently, driving circularity and leveraging the assets of the Enel Group through the delivery of innova- tive beyond-commodity services. In 2021, the Enel X Global Retail and Global e-Mobility Busi- ness Lines were formed but will only begin operations from 2022. Enel X Global Retail is involved in managing energy and be- yond-commodity services, as well as expanding the cus- tomer base while maximizing value for customers, innovat- ing and developing the services offered and managing the entire life cycle. Global e-Mobility is responsible for managing the portfo- lio of e-Mobility solutions in both existing and new coun- tries, maximizing value for customers and leveraging Enel X Global Retail for sales activities. It is also involved in inno- vating and developing e-Mobility solutions, managing the entire life cycle. By exploiting the synergies between the different busi- ness areas, implementing actions through the lever of innovation and deploying Open Power approaches, the Enel Group seeks to develop solutions to reduce environ- mental impact, meet the needs of customers and the local communities in which it operates and ensure high safety standards for employees and suppliers. Value creation and the business model 3535 Enel around the world The Enel Group has a presence in 47 countries on multiple continents around the world, with more than 1,000 sub- sidiaries. The following map shows the distribution of the Enel Group across the globe. Presence 47 countries more than 1,000 subsidiaries 36 36 Integrated Annual Report 2021 Enel around the world 37 37 REPORT ON OPERATIONS 2. Governance Corporate governance system focused on achieving sustainable success. Governance model compliant with international best practice. Transparency and integrity its fundamental values. 38 Integrated Annual Report 2021 39 Enel shareholders At December 31, 2021, the fully subscribed and paid-up share capital of Enel SpA totaled €10,166,679,946, repre- sented by the same number of ordinary shares with a par value of €1.00 each. Share capital is unchanged compared with that registered at December 31, 2020. In 2021 the Company purchased a total of 1,620,000 treasury shares to support the 2021 Long-Term Incentive Plan (LTI Plan) for the management of Enel and/or its subsidiaries pursuant to Article 2359 of the Italian Civil Code. Considering the number of treasury shares already owned, Enel SpA holds a total of 4,889,152 treasury shares, all supporting the 2019, 2020 and 2021 LTI Plans. Significant shareholders At December 31, 2021, based on the shareholders register and the notices submitted to CONSOB and received by the Company pursuant to Article 120 of Legislative Decree 58 of February 24, 1998, as well as other available informa- tion, shareholders with an interest of greater than 3% in the Company’s share capital included the Ministry for the Economy and Finance (with a 23.585% stake), BlackRock Inc. (with a stake of 5.000% held for asset management purposes) and Capital Research and Management Com- pany (with a 5.000% stake held for asset management pur- poses). Composition of shareholder base Since 1999, Enel has been listed on the Euronext Milan market (formerly the Mercato Telematico Azionario) organ- ized and operated by Borsa Italiana SpA. Enel’s sharehold- ers include leading international investment funds, insur- ance companies, pension funds and ethical funds. 40 40 Integrated Annual Report 2021 Composition of shareholder base at December 2021 23.6% Ministry for the Economy and Finance 17.0% Retail investors 100% 59.4% Institutional investors With regard to Environmental, Social and Governance (ESG) investors in Enel, at December 31, 2021, socially re- sponsible investors (SRIs) held around 14.6% of the share capital (in line with December 31, 2020), while investors who have signed the Principles for Responsible Investment represent 46.6% of the share capital (compared with 47.8% at December 31, 2020). Enel shareholders 41 41 Corporate boards Board of Directors CHAIRMAN Michele Crisostomo CHIEF EXECUTIVE OFFICER AND GENERAL MANAGER Francesco Starace SECRETARY Silvia Alessandra Fappani DIRECTORS Cesare Calari Costanza Esclapon de Villeneuve Samuel Leupold Alberto Marchi Mariana Mazzucato Mirella Pellegrini Anna Chiara Svelto Board of Statutory Auditors CHAIRMAN Barbara Tadolini AUDITORS Romina Guglielmetti Claudio Sottoriva ALTERNATE AUDITORS Maurizio De Filippo Francesca Di Donato Piera Vitali Audit Firm KPMG SpA 42 42 Integrated Annual Report 2021 Composition of the Board of Directors 1 executive director 1 in 2020 8 non-executive directors 8 in 2020 of which 8 independent(1) 7 in 2020 >50 89 % AGE 30-50 11% <30 0% 2021 EXPERTISE Energy industry 3 1 Legal and corporate governance 3 1 Strategic vision 4 1 Communication and marketing 1 1 GENDER 55.6% 44.4% 55.6% in 2020 44.4% in 2020 5 Men 5 in 2020 4 Women 4 in 2020 9 9 9 9 Accounting, finance and risk management 1 International experience 1 5 6 9 9 (1) The figures for 2020 refer to directors qualifying as independent pursuant to the Corporate Governance Code for Italian listed companies (2018 edition). The figures for 2021 refer to directors qualifying as independent pursuant to the Italian Corporate Governance Code (2020 edition). Corporate boards 43 43 The Enel corporate governance system The corporate governance system of Enel SpA is compli- ant with the principles set forth in the January 2020 edi- tion of the Italian Corporate Governance Code,(2) adopted by the Company, and with international best practice. The corporate governance system adopted by Enel and its Group is essentially aimed at achieving sustainable suc- cess, as it is aimed at creating value for the shareholders over the long term, taking into account the environmental and social importance of the Group’s business operations and the consequent need, in conducting such operations, to adequately consider all the interests involved. In compliance with Italian legislation governing listed com- panies, the Group’s organization comprises the following bodies: Shareholders’ Meeting Audit Firm KPMG SpA Board of Directors Board of Statutory Auditors Control and Risk Committee Nomination and Compensation Committee Corporate Governance and Sustainability Committee Related Parties Committee (2) Available from the website of Borsa Italiana (at https://www.borsaitaliana.it/comitato-corporate-governance/codice/2020.pdf). 44 44 Integrated Annual Report 2021 Shareholders’ Meeting It is charged with deciding, among other things, in either ordinary or extraordinary session: • the appointment and removal of the members of the Board of Directors and the Board of Stat- utory Auditors and their compensation and undertaking any stockholder actions; • the approval of the financial statements and the allocation of profit; • the purchase and sale of treasury shares; • remuneration policy and its implementation; • share ownership plans; • amendments to the bylaws; • mergers and demergers; • the issue of convertible bonds. Board of Directors 16 meetings held by the Board in 2021, in 8 of which it addressed issues connected with climate and their impact on strategies and the associated approaches to implementation • It is vested by the bylaws with the broadest powers for the ordinary and extraordinary manage- ment of the Company and has the power to carry out all the actions it deems advisable to imple- ment and achieve the corporate purpose. • It plays a central role in corporate governance, hold powers for strategic and organizational guid- ance and control of the Company and the Group, whose sustainable success it pursues. In this context, it examines and approves corporate strategy, including the annual budget and Business Plan (which incorporate the main objectives and planned actions, including with regard to sustain- ability,(3) to lead the energy transition and tackle climate change), taking account of the analysis of key issues for the generation of long-term value and therefore promoting a sustainable business model. • It performs a policy-setting role and provides an assessment of the adequacy of the internal con- trol and risk management system (the ICRMS). More specifically, it determines the nature and level of risk compatible with the strategic objectives of the Company and the Group, incorporat- ing in its assessments all factors that could be relevant to achieving the sustainable success of the Company. The ICRMS consists of the set of rules, procedures and organizational structures designed to enable the identification, measurement, management and monitoring of the main business risks to which the Group is exposed. These include the risks associated with climate change and, more generally, the risks that the Group’s activities may engender in the areas of the environment, society, personnel and respect for human rights. • It determines the remuneration policy for directors, statutory auditors and key management per- sonnel with a view to pursuing the Company’s sustainable success, taking due account of the need to have, retain and motivate people with the skills and expertise required by the positions they hold, submitting this policy for approval by the Shareholders’ Meeting. • Activities performed in 2021 included addressing climate-related issues on the occasion of: (i) the examination and approval of the Business Plan of the Company and the Group; (ii) the updating of the Code of Ethics and the Human Rights Policy; (iii) the determination of Enel’s remuneration policy for 2021; (iv) the examination of the 2020 Sustainability Report, which incorporates the Con- solidated Non-Financial Statement pursuant to Legislative Decree 254/2016 for the same year. In addition, it discussed climate-related issues as part of the analysis of proposed legislation and in its engagement with investors. • With regard to enhancing gender diversity, it agreed on the introduction of a new performance objective in the 2021 Long-Term Incentive Plan, represented by the percentage of women in man- agement succession plans at the end of 2023. • Finally, the Board of Directors receives regular updates on the impact of the COVID-19 pandemic and safety-related issues in the countries in which the Group operates, as well as information on developments in and the substance of the various forms of investor engagement. (3) Sustainability comprises issues connected with climate change, atmospheric emissions, managing water resources, biodiversity, the circular economy, health and safety, diversity, management and development of employees, relations with communities and customers, the supply chain, ethical conduct and human rights. The Enel corporate governance system 45 45 In compliance with the provisions of the Italian Civil Code, the Board of Directors has delegated part of its manage- ment duties to the Chief Executive Officer and, in accord- ance with the recommendations of the Corporate Gov- ernance Code and the provisions of the applicable CON- SOB regulations, has appointed the following committees from among its members to provide recommendations and advice. Corporate Governance and Sustainability Committee 5 meetings held by the Committee in 2021, in 4 of which it addressed issues connected with climate and their impact on strategies and the associated approaches to implementation Control and Risk Committee 17 meetings held by the Committee in 2021, in 5 of which it addressed issues connected with climate and their impact on strategies and the associated approaches to implementation • A majority of its members are independent directors and in 2021 it was composed of the Chairman of the Board of Directors and two other directors, all of whom met independence requirements. • It assists the Board of Directors in assessment and decision-making activities concerning the corporate governance of the Company and the Group and sustainability, including climate change issues and the interaction of the Group with all stakeholders. • With regard to sustainability issues, it examines: – the guidelines of the Sustainability Plan, including the climate objectives set out in the Plan, and the materiality matrix, which specifies the priority themes for stakeholders in the light of the Group’s business strategies; – the approach to implementing the sustainability policy; – the general approach and the structure of the content of the Non-Financial Statement and the Sustainability Report – which may be presented in a single document – and the com- prehensiveness and transparency of the disclosures they provide, including with regard to climate change, and their consistency with the principles envisaged in the reporting standard adopted, issuing a prior opinion to the Board of Directors, which is called upon to approve those documents. • Activities performed in 2021 included addressing climate-related issues on the occasion of the examination of: (i) the 2020 Sustainability Report, which incorporates the Consolidated Non-Fi- nancial Statement pursuant to Legislative Decree 254/2016 for the same year; (ii) the materiality analysis and the guidelines of the 2022-2024 Sustainability Plan; (iii) the proposed update of the Human Rights Policy; (iv) updates on the main sustainability activities performed by the Enel Group in 2021, on the state of implementation of the 2021-2023 Sustainability Plan and on the inclusion of Enel in the main sustainability indices. • It is composed of non-executive directors, the majority of whom (including its Chairman) are independent. In 2021 it was made up of four independent directors. • It has the task of supporting the assessments and decisions of the Board of Directors relating to the internal control and risk management system (the ICRMS), as well as those relating to the approval of periodic financial and non-financial reports. In particular, it issues its prior opinion to the Board of Directors, inter alia: (i) on the guidelines of the ICRMS, so that the main risks concerning Enel and its subsidiaries – including the various risks that may be relevant from the perspective of sustainable success – are correctly identified and adequately meas- ured, managed and monitored; (ii) on the degree of compatibility of the risks referred to in point (i) above with company operations consistent with the strategic objectives identified; and (iii) on the adequacy of the ICRMS with respect to the characteristics of the Company and the risk profile assumed, as well as the effectiveness of the system itself. • It evaluates whether periodic financial and non-financial reporting correctly represents the business model, the strategies of the Company and the Group it heads and the impact of company activities and the performance achieved, coordinating with the Corporate Govern- ance and Sustainability Committee with regard to periodic non-financial reporting. • It examines the issues relevant to the ICRMS addressed in the Non-Financial Statement and the Sustainability Report, which may be presented in a single document and contains corpo- rate disclosures on climate issues, issuing a prior opinion on these aspects to the Board of Directors, which is called upon to approve these documents. • Activities performed in 2021 included addressing climate-related issues on the occasion of the examination of: (i) issues concerning the ICRMS dealt with in the 2020 Sustainability Re- 46 46 Integrated Annual Report 2021 Nomination and Compensation Committee 12 meetings held in 2021 port, which incorporates the Consolidated Non-Financial Statement pursuant to Legislative Decree 254/2016 for the same year; (ii) the analysis of the risks associated with macroeco- nomic and environmental developments and climate risks; (iii) the proposed update of the Human Rights Policy; and (iv) the analysis of the compatibility of the main risks associated with the strategic objectives of the Business Plan. • It is composed of non-executive directors, the majority of whom (including its Chairman) are independent. In 2021 it was made up of four independent directors. • It supports the Board of Directors in, inter alia, evaluations and decisions relating to the size and optimal composition of the Board and its committees, as well as the remuneration of directors and key management personnel. In this regard, the remuneration policy for 2021 provides that a significant portion of the short- and long-term variable remuneration of the Chief Executive Officer/General Manager and key management personnel shall be linked to sustainability-related performance objectives. In particular, with regard to the long-term vari- able component of the remuneration of the Chief Executive Officer/General Manager and key management personnel, in the 2021 Long-Term Incentive Plan, an additional ESG target was introduced, represented by the percentage of women in management succession plans at the end of 2023. With specific regard to the fight against climate change, the Plan retains the objective for the ratio between consolidated net installed renewables capacity and the total consolidated net installed capacity, albeit with a slightly smaller weighting compared with the 2020 Long-Term Incentive Plan as a result of the addition of the objective indicated above. Furthermore, the 2021 Long-Term Incentive Plan also retains the reduction of specific green- house gas emissions among the performance objectives, in line with the Group’s decarbon- ization strategy, which provides for the progressive reduction of such emissions in line with the Paris Agreement. As regards the short-term variable component of the remuneration of the Chief Executive Officer/General Manager, the ESG target concerning the further improve- ment of safety parameters in the workplace was retained in the remuneration policy for 2021. Furthermore, in light of the central role played by distribution grids in the pursuit of decar- bonization and the electrification of energy consumption by the Group, a new performance target was introduced that measures the average annual duration of service interruptions for low-voltage customers (System Average Interruption Duration Index - SAIDI). Related Parties Committee 7 meetings held in 2021 • It is composed of independent non-executive directors. In 2021 it was made up of four inde- pendent directors. • It performs the functions provided for in the relevant CONSOB regulations and in the specific Enel procedure for transactions with related parties, essentially issuing in particular reasoned opinions on the interest of Enel – and any direct or indirect subsidiary that may be involved – in carrying out transactions with related parties, expressing its assessment of the benefits and substantive appropriateness of the associated conditions, subject to receiving timely and comprehensive information on the transaction. The Enel corporate governance system 47 47 Board of Statutory Auditors 28 meetings held in 2021 It is charged with overseeing: • compliance with the law and the bylaws, as well as compliance with the principles of sound administration in carrying out corporate activities; • the financial reporting process and the appropriateness of the organizational structure, the internal control system and the administrative-accounting system of the Company; • the statutory audit of the annual accounts and the consolidated accounts, as well as the in- dependence of the Audit Firm; • the approach adopted in implementing the corporate governance rules envisaged by the Corporate Governance Code. Chairman of the Board of Directors Chief Executive Officer • The Chairman is vested by the bylaws with the powers to represent the Company and to sign on its behalf. • The Chairman presides over Shareholders’ Meetings. • The Chairman convenes the meetings of the Board of Directors, establishes the agenda and presides over its proceedings. • The Chairman acts as a liaison between the executive directors and the non-executive di- rectors and, with the support of the Secretary of the Board of Directors, is responsible for the effective operation of the Board. More specifically, the Chairman, with the support of the Board Secretary, is responsible, among other things, for ensuring: – that information provided before Board meetings and supplementary information provid- ed during meetings enable the directors to act in an informed manner in the performance of their duties; and – that the activity of the Board committees is coordinated with that of the Board of Directors. • The Chairman ensures that the Board of Directors is informed in a timely manner on develop- ments in and the substance of engagement activities with all shareholders. • The Chairman ascertains that the Board’s resolutions are carried out. • Pursuant to a Board resolution of May 15, 2020, the Chairman has been vested with a number of additional non-executive powers. • In the exercise of the function of stimulating and coordinating the activities of the Board of Directors, the Chairman plays a proactive role in the process of approving and monitoring of corporate and sustainability strategies, which are sharply focused on the decarbonization and electrification of energy consumption. • In addition, during 2021 the Chairman also chaired the Corporate Governance and Sustaina- bility Committee. • Like the Chairman of the Board of Directors, the CEO is 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 reso- lution of May 15, 2020 with all powers for managing the Company, with the exception of those that are otherwise assigned by law, regulation or the bylaws or that the aforesaid resolution reserves for the Board of Directors (making the Chief Executive Officer the officer with prima- ry responsibility for managing the Company). • In the exercise of these powers, the CEO has defined a sustainable business model, deline- ating a strategy to lead the energy transition towards a low-carbon model. The CEO is also responsible for managing the business activities connected with Enel’s efforts in combatting climate change. • The CEO reports to the Board of Directors on the activities performed in the exercise of the powers granted to him, including business activities to maintain Enel’s commitment to ad- dress climate change. • The CEO represents Enel in various initiatives that deal with sustainability, holding positions of leadership in international institutions such as Sustainable Energy for All (SEforALL) of the United Nations and the Global Investors for Sustainable Development (GISD) Alliance launched by the United Nations in 2019. 48 48 Integrated Annual Report 2021 • As the officer with primary responsibility for managing the Company, the CEO has primary authority for engaging with institutional investors, providing them with any appropriate clar- ification concerning matters that fall within the scope of the CEO's management powers, in line with the policy for engaging with institutional investors and with Enel’s shareholders and bondholders as a whole. • The CEO has also been designated as the director responsible for establishing and maintain- ing the ICRMS. Statutory audit of the accounts • The statutory audit is performed by a specialized firm entered in the appropriate register of auditors, which is appointed by the Shareholders’ Meeting on the basis of a reasoned propos- al from the Board of Statutory Auditors. Good corporate governance practices • Following up on the comprehensive induction program organized in 2020 in order to provide the directors with an understanding of the sectors in which the Group operates (including issues related to sustainability), in 2021 this program continued with specific examination of corporate governance and climate change issues. • At the end of 2021 and during the first two months of 2022, the Board of Directors carried out, with the assistance of a specialized independent advisor, an assessment of the size, composition and functioning of the Board and its committees (the “board review”), in line with the most advanced corporate governance practices accepted at the international level and incorporated within the Corporate Governance Code. The board review was also carried out using a “peer review” approach, i.e., evaluating not only the operation of the body as a whole, but also the style and substance of the contribution made by each of its members, and it was extended to include the Board of Statutory Auditors. The board review also specifically sought to verify the directors’ perception of: (i) training activities performed in 2021 within the induction program concerning climate change issues; and (ii) the Board’s involvement with sustainability issues and the integration of sustainability into corporate strategy. The findings of the board review are reported in Enel’s Report on Corporate Governance and Ownership Structure. • The Board of Directors and the Board of Statutory Auditors have approved, each within their own sphere of competence, specific diversity policies that set out the characteristics con- sidered optimal for the members of these bodies, so that each can exercise their duties most effectively, taking decisions that can effectively draw on the contribution of a plurality of qual- ified points of view, able to examine the issues under discussion from different perspectives. The policy approved by the Board of Directors establishes that with regard to the types of diversity and the associated objectives: – the optimal composition of Board members should provide for a majority of independent directors; – even when the regulatory provisions on gender balance expire, it is important to continue to ensure that at least one-third of the Board of Directors, both at the time of appointment and during its term of office, shall be made up of directors of the least represented gender; – the international scope of the Group’s activities should be taken into consideration, ensur- ing that at least one-third of directors should have adequate experience in the internation- al arena, which is also considered useful for preventing the standardization of opinions and the emergence of “group thought”; – in order to achieve a balance between the need for continuity and renewal in management, it would be necessary to ensure a balanced combination of people of differing seniority – and age – within the Board of Directors; – non-executive directors should have a management and/or professional and/or academic and/or institutional background such as to create a diverse and complementary set of skills and experience; The Enel corporate governance system 49 49 – in view of the differences in their roles, the Chairman and the CEO should have the ap- propriate skills (specifically indicated in the policy) for the effective performance of their respective duties. • In July 2015 the Board of Directors also approved (and subsequently amended in February 2019) a number of recommendations aimed at strengthening the corporate governance of Enel subsidiaries with shares listed on regulated markets and at the same time ensuring the implementation of local best practices in this area by those companies. Among other issues, these recommendations concern the composition of the management body, with regard to which it is also suggested to integrate a diversity of professional and management experience and skills, combined, where possible, with a diversity of gender, age and seniority, without prejudice to the provisions of applicable local legislation. • In order to regulate the procedures for the Company’s engagement with institutional in- vestors and with its shareholders and bondholders as a whole, in March 2021 the Board of Directors adopted, acting on a proposal from the Chairman formulated in agreement with the Chief Executive Officer, a specific policy in this area (the “Engagement Policy”). It largely incorporates the practices already followed by Enel to ensure that this dialogue is based on principles of fairness and transparency and takes place in compliance with EU and nation- al regulations concerning market abuse, as well as in line with international best practices. In drawing up the Engagement Policy, which was consistently applied during 2021, the best practices adopted in this field by institutional investors and reflected in “stewardship” codes were taken into account. For more detailed information on the corporate govern- ance system, please see the Report on Corporate Gov- ernance and Ownership Structure of Enel, which has been published on the Company’s website (http://www.enel.com, in the “Governance” section). 50 50 Integrated Annual Report 2021 Enel organizational model Enel Group Chairman Enel Group CEO M. Crisostomo F. Starace Holding Function ADMINISTRATION, FINANCE AND CONTROL A. De Paoli PEOPLE AND ORGANIZATION G. Stratta COMMUNICATIONS R. Deambrogio INNOVABILITY E. Ciorra LEGAL AND CORPORATE AFFAIRS G. Fazio AUDIT S. Fiori GLOBAL PROCUREMENT F. Di Carlo GLOBAL CUSTOMER OPERATIONS N. Melchiotti GLOBAL DIGITAL SOLUTIONS C. Bozzoli Global Business Line Global lnfrastructure and Networks Global Energy and Commodity Management Enel Green Power and Thermal Generation Enel X Global Retail Global e-Mobility A. Cammisecra C. Machetti S. Bernabei F. Venturini E. Ripa Country and Region ITALY N. Lanzetta IBERIA J. Bogas Galvez EUROPE S. Mori AFRICA, ASIA AND OCEANIA S. Bernabei NORTH AMERICA E. Viale LATIN AMERICA M. Bezzeccheri Enel organizational model 51 51 The Enel Group structure is organized into a matrix that comprises: Global Business Lines The Global Business Lines 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. In addition, in compliance with safety, protection and environmen- tal policies and regulations, they are tasked with maximizing the efficiency of the processes they manage and applying best international practices, sharing responsibility for EBITDA, cash flows and revenue with the countries. The Group, which also draws on the work of an Investment Committee,(4) benefits from a cen- tralized industrial vision of projects in the various Business Lines. Each project is assessed not only on the basis of its financial return but also in relation to the best technologies available at the Group level, which reflect the new strategic line adopted, explicitly integrating the SDGs within our financial strategy and promoting a low-carbon business model. Furthermore, each Business Line contributes to guiding Enel’s leadership in the energy transition and in the fight against climate change, managing the associated risks and opportunities in its area of compe- tence. In 2021 the Global Power Generation Business Line, created from the merger of Enel Green Power and Global Thermal Generation, was renamed Enel Green Power and Thermal Genera- tion. This Business Line is responsible for the integrated management of the growth of renew- ables generation capacity, the decarbonization process and managing storage assets, thus confirming the Enel Group’s leadership role in the energy transition. In 2021, the Enel X Global Retail Business Line was formed. It is specifically involved in manag- ing energy and beyond-commodity services, as well as expanding the customer base while maximizing value for customers. Furthermore, it has the task of innovating and developing the services offered, managing the entire life cycle from conception to technological develop- ment, testing, marketing, sales, operations and after-sales activities. The Global e-Mobility Business Line was also established in 2021. It is responsible for manag- ing the portfolio of e-Mobility solutions in both existing and new countries, maximizing value for customers, also leveraging Enel X Global Retail for sales activities. It is also involved in inno- vating and developing e-Mobility solutions, managing the entire life cycle, from conception to technological development, testing and marketing in step with the rest of the retail product line. In addition, the Grid Blue Sky project is being implemented. Its objective is to innovate and digitalize infrastructures and networks in order to make them an enabling factor for the achievement of the “Climate Action” objectives, thanks to the progressive transformation of Enel into a platform-based Group. Regions and countries Regions and countries are responsible for managing relationships 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 Business Lines. They are also charged with promoting decarbonization and guiding the energy transi- tion towards a low-carbon business model within their areas of responsibility. (4) The Group Investment Committee is made up of the heads of Administration, Finance and Control, Innovability, Legal and Corporate Affairs, Global Procure- ment, and the heads of the Regions and the Business Lines. 52 52 Integrated Annual Report 2021 The following functions provide support to Enel’s business operations: Global Service Functions The Global Service Functions are responsible for managing information and communication tech- nology activities and procurement at the Group level. During the 1st Half of 2021, a new Service Function called Global Customer Operations was intro- duced. Its activities are focused on managing customer activation, invoicing, credit management, customer assistance and the related support processes at the Group level. It is also responsible for: • defining and implementing the strategy of global actions regarding customers, increasing customer satisfaction and value and at the same time optimizing service costs and related cash flows; • managing customer operational processes, maximizing operational excellence and customer focus and exploiting technology; • developing and innovating operating models and solutions for managing the customer’s life cycle, maximizing adaptability to internal and external change through market leadership that innovates on the basis of specific data analyses. The Global Service Functions are also focused on the responsible adoption of measures that al- low the achievement of sustainable development objectives, in particular in managing the supply chain and developing digital solutions to support the development of enabling technologies for the energy transition and the fight against climate change. Holding Company Functions The Holding Company Functions are responsible for managing governance processes at the Group level. The Administration, Finance and Control Function is also responsible for consol- idating scenario analysis and managing the strategic and financial planning process aimed at promoting the decarbonization of the energy mix and the electrification of energy demand, key actions in the fight against climate change. Enel organizational model 53 53 in specific long-term incentive plans. In particular, for 2021 this component is linked to participation in the 2021 Long-Term Incentive Plan for the management of Enel SpA and/or its subsidiaries pursuant to Article 2359 of the Italian Civil Code (2021 LTI Plan), which establishes three-year performance targets for the following: – Enel’s average TSR (Total Shareholder Return) com- pared with the average TSR for the EURO STOXX Util- ities - EMU index for the 2021-2023 period; – ROACE (Return on Average Capital Employed), cu- mulative for 2021-2023; – consolidated net installed renewables capacity/con- solidated net installed total capacity at the end of 2023; – grams of Scope 1 GHG emissions per equivalent kWh generated by the Group in 2023; – percentage of women in management succession plans at the end of 2023. The 2021 LTI Plan establishes that any bonus accrued is represented by an equity component, which can be sup- plemented – depending on the level of achievement of the various targets – by a cash component. More specifical- ly, the Plan envisages that 100% of the basic bonus of the Chief Executive Officer/General Manager (compared with a maximum of 280% of the basic bonus) and 50% of the ba- sic bonus of key management personnel (compared with a maximum of 180% of the basic bonus) will be paid in Enel shares previously acquired by the Company. In addition, the disbursement of a significant portion of long-term variable remuneration (70% of the total) is deferred to the second year following the three-year performance period covered by the 2021 LTI Plan. For more information on the remuneration policy for 2021, please see Enel’s “Report on the remuneration policy for 2021 and compensation paid in 2020”, which is available on the Company’s website (www.enel.com). Incentive system Enel’s remuneration policy for 2021, which was adopted by the Board of Directors acting on a proposal of the Nomina- tion and Compensation Committee and approved by the Shareholders’ Meeting of May 20, 2021, was formulated on the basis of: (i) the recommendations of the Italian Corpo- rate Governance Code published on January 31, 2020; (ii) national and international best practice; (iii) the guidance provided by the favorable vote of the Shareholders’ Meet- ing of May 14, 2020 on the remuneration policy for 2020; (iv) the results of the engagement activity on corporate gov- ernance issues pursued by the Company between January and March 2021 with the leading proxy advisors and Enel’s institutional investors; and (v) the findings of the benchmark analysis of the remuneration of the Chairman of the Board of Directors, the Chief Executive Officer/General Manager and the non-executive directors of Enel for 2020, which was performed by the independent consultant Mercer. This policy is intended to: (i) foster Enel’s sustainable suc- cess, which takes the form of creating long-term value for the benefit of shareholders, taking due consideration of the interests of other key stakeholders, so as to incentivize the achievement of strategic objectives; (ii) attract, retain and motivate personnel with the professional skills and experi- ence required by the sensitive managerial duties entrusted to them, taking into account the remuneration and working conditions of the employees of the Company and the Enel Group; and (iii) promote the corporate mission and values. The 2021 remuneration policy adopted for the Chief Exec- utive Officer/General Manager and key management per- sonnel envisages: • a fixed component; • a short-term variable component (MBO) that will be paid out on the basis of achievement of specific perfor- mance objectives. Namely: – for the CEO/General Manager, annual objectives have been set for the following components: • consolidated net ordinary profit; • Group opex; • funds from operations/consolidated net financial debt; • System Average Interruption Duration Index (SAIDI); • workplace safety; – for key management personnel, objective annual goals connected with their business area have been set in their MBO mechanism, differentiated by the functions and responsibilities assigned to them; • a long-term variable component linked to participation 54 54 Integrated Annual Report 2021 Values and pillars of corporate ethics A robust system of ethics underlies all activities of the Enel Group. This system is embodied in a dynamic set of rules constantly oriented towards incorporating national and in- ternational best practices that everyone who works for and with Enel must respect and apply in their daily activities. The system is based on specific compliance programs, including: the Code of Ethics, the Compliance Model un- der Legislative Decree 231/2001, the Enel Global Compli- ance Program, the Zero-Tolerance-of-Corruption Plan, the Human Rights Policy, and any other national compliance models adopted by Group companies in accordance with local laws and regulations. Code of Ethics In 2002, Enel adopted a Code of Ethics, which expresses the Company’s ethical responsibilities and commitments in conducting business, governing and standardizing cor- porate conduct on the basis of standards aimed to ensure the maximum transparency and fairness with all stakehold- ers. The Code of Ethics is valid in Italy and abroad, taking due account of the cultural, social and economic diversity of the various countries in which the Group operates. Enel also requires that all associates and other investees and its main suppliers and partners adopt conduct that is in line with the general principles set out in the Code. Any violations or suspected violations of Enel Compliance Programs can be reported, including in anonymous form, through a single Group-level platform (the “Ethics Point”). In February 2021, the Board of Directors approved a further update of the Code of Ethics in order to align its content with the current context, including the current corporate mission and the United Nations Sustainable Development Goals, the current organizational structure and the system of procedures, as well as national and international best practices in the areas of diversity and privacy. With regard to the Code of Ethics, the following table re- ports the average number of training hours per person, to- tal reports of violations received and violations confirmed. Total reported violations of the Code of Ethics received Confirmed violations of the Code of Ethics - of which violations involving conflicts of interest/bribery no. no. no. 2021 153 41 7 2020 151 26 2 Change 2 15 5 1.3% 57.7% - Compliance Model under Legislative Decree 231/2001 Legislative Decree 231 of June 8, 2001 introduced into Italian law a system of administrative (and de facto crim- inal) liability for companies for certain types of offenses committed by their directors, managers or employees on behalf of or to the benefit of the company. Enel was the first organization in Italy to adopt, back in 2002, this sort of compliance model that met the requirements of Legis- lative Decree 231/2001 (also known as “Model 231”). It has been constantly updated to reflect developments in the applicable regulatory framework and current organiza- tional arrangements. Values and pillars of corporate ethics 55 55 Enel Global Compliance Program (EGCP) The Enel Global Compliance Program for the Group’s for- eign companies was approved by Enel in September 2016. It is a governance mechanism aimed at strengthening the Group’s ethical and professional commitment to prevent- ing the commission of crimes abroad that could result in criminal liability for the company and do harm to our rep- utation. Identification of the types of crime covered by the Enel Global Compliance Program – which encompasses standards of conduct and areas to be monitored for pre- ventive purposes – is based on illicit conduct that is gener- ally considered such in most countries, such as corruption, crimes against the government, false accounting, money laundering, violations of regulations governing safety in the workplace, environmental crimes, etc. Zero-Tolerance-of-Corruption Plan and the anti-bribery management system In compliance with the tenth principle of the Global Com- pact, according to which “businesses should work against corruption in all its forms, including extortion and bribery”, Enel is committed to combating corruption. For this rea- son, in 2006 we adopted the “Zero-Tolerance-of-Corrup- tion Plan” (ZTC Plan), confirming the Group’s commitment, as described in both the Code of Ethics and the Model 231, to ensure propriety and transparency in conducting com- pany business and operations and to safeguard our image and positioning, the work of our employees, the expecta- tions of shareholders and all of the Group’s stakeholders. Following receipt of the ISO 37001 anti-corruption certifi- cation by Enel SpA in 2017, the 37001 certification plan has gradually been extended to the main Italian and interna- tional subsidiaries of the Group. Training in anti-corruption policies and procedures Training in anti-corruption policies and procedures by geographical area Italy Iberia Latin America Europe Africa, Asia and Oceania North America 2021 20,074 30.3 34.5 37.4 17.8 21.0 27.7 75.9 no. % % % % % % % 2020 Change 26,660 (6,586) 40.0 (9.7) 47.7 20.2 26.8 80.7 28.4 56.7 (13.2) 17.2 (9.0) (59.7) (0.7) 19.2 -24.7% -24.3% -27.7% 85.1% -33.6% -74.0% -2.5% 33.9% Human Rights Policy The Company adopted a human rights policy in 2013, which was subsequently approved by all the subsidiaries of the Group. In implementing the “Guiding Principles on Business and Human Rights” set out by the United Nations, it defines the principles that all associates of Enel SpA and its subsidiaries undertake to respect on the basis of their relevance in the context of their activities and business re- lationships in each country in which they operate, taking due consideration of local cultural, social and economic diversity and requiring that all its stakeholders adopt a line of conduct that complies with these principles. Stakeholders are all those who have a direct or indirect in- terest in the activities of the Enel Group, such as custom- ers, employees of any type or level, suppliers, contractors, partners, other companies and trade associations, the financial community, civil society, local communities and indigenous and tribal peoples, national and international institutions, the media, as well as the organizations and in- stitutions that represent them. In consideration of the evolution of external conditions and operational, organizational and management devel- opments at Enel, including compliance with the Code of Ethics updated at the beginning of the year, a review of the Human Rights Policy was begun in 2021. The update, similar to the 2013 version, involved a process of consultation with stakeholders relevant to the Compa- 56 56 Integrated Annual Report 2021 ny (internal, other companies, suppliers, human rights ex- perts, think tanks, NGOs) conducted in accordance with the criteria contained in the ‘‘UN Global Compact Guide for Business: How to Develop a Human Rights Policy’’. The new code, which was approved by the Board of Direc- tors of Enel SpA on November 4, 2021, identifies twelve principles (compared with the previous eight), again divid- ed into two macro-themes: work practices and community relations. The Human Rights Policy is a commitment to: • proactively consider the needs and priorities of people and society in general because this makes it possible to innovate processes and products, a key factor in an increasingly competitive, inclusive and sustainable business model, including through the adoption of the principles of circularity, the protection of natural capital and biodiversity; • promote the engagement of our main external and in- ternal stakeholders in order to enhance their awareness and develop a constructive dialogue that can provide a valuable contribution to the design of solutions to miti- gate climate change. In addition to the commitment to the contribution to achieving the United Nations Sustainable Development Goals, the updates include: (i) a reminder of how envi- ronmental degradation and climate change are intercon- nected with human rights, in that the implementation of measures to mitigate the effects of human activities on the environment cannot take place without taking ac- count of their social impact; (ii) the strengthening of the principles of “respect for diversity and non-discrimination” and “health and safety” in the part relating to psycholog- ical and physical well-being and work-life integration; (iii) an increase in the granularity of our commitment in our relations with communities, with particular regard to local communities, indigenous and tribal populations, privacy and communication. Enel has undertaken to monitor application of the Human Rights Policy (i) by employing a specific due diligence pro- cess in the various countries in which we operate; (ii) by promoting conduct consistent with a just and inclusive transition; and (iii) by enhancing communication with re- gard to the action plans developed to prevent and remedy situations in which critical issues could arise. More specifically, the due diligence process for the man- agement system, which is structured into three-year cy- cles and has been developed in accordance with the main international standards such as the United Nations Guid- ing Principles on Business and Human Rights, the OECD guidelines and international best practices, enables us to identify opportunities for improvement and develop specific action plans for each country in which we have a presence, accompanied by a plan for improvement at the central level in order to harmonize and integrate processes and policies defined at the global level and applied at the local level. All of these improvement plans are also inte- grated into the Sustainability Plan. In the 2020-2022 cycle, some 170 actions have been iden- tified, covering 100% of operations and sites. As more specifically regards the sustainability of the sup- ply chain, human rights performance is evaluated for all potential suppliers through a dedicated questionnaire in which the characteristics of potential suppliers are ana- lyzed with regard to inclusion and diversity, protection of workers’ privacy, verification of their supply chain, forced or child labor, freedom of association and collective bar- gaining, and application of fair working conditions (includ- ing adequate wages and working hours). As enshrined in the Human Rights Policy, in addition to guaranteeing the necessary quality standards, supplier performance must go hand in hand with the commitment to adopt best prac- tices in terms of human rights and working conditions (including appropriate working hours, no forced or child labor, respect for personal dignity, non-discrimination and inclusion of diversity, freedom of association and collec- tive bargaining), workplace health and safety, environmen- tal responsibility and respect for privacy by design and by default. Furthermore, general contractual terms and conditions expressly provide for suppliers to undertake to adopt and implement, among other things, the principles contained in the Human Rights Policy and in the Group’s Code of Ethics and to comply with International Labor Or- ganization conventions or legislation in force in the coun- try in which activities are to be performed, if more restric- tive, and in accordance with the principles of the Global Compact that Enel has adopted, ensuring that such prin- ciples are met in the performance of all activities both by a supplier’s employees and its subcontractors. Values and pillars of corporate ethics 57 57 REPORT ON OPERATIONS 3. Group Strategy & Risk Management Long-term planning This decade will be the decade of electrification: a key step, along with the development of renewables, in accelerating decarbonization and achieving our ambitious climate goals. The new 2022-2024 Business Plan Within the broader ambitions for the positioning of the Group by 2030, the 2022-2024 Business Plan is ideally positioned as the start of a journey of growth that spans the entire decade. Reference scenarios Assessing the impacts of climate change and the energy transition is crucial for long-term planning. To this end, the Group has created a comprehensive framework and a process that can translate data into useful information to maximize opportunities and mitigate risks. 58 Integrated Annual Report 2021 59 Group strategy Determination of the Group’s long-term strategy is based on an assessment of options that will enable the sustain- able generation of value for all stakeholders. Fundamental to this is the assessment of the external environment and its evolution. To determine the frame- work in which we operate, we conduct in-depth scenario planning in order to be prepared to seize opportunities and manage future risks and uncertainties in the most robust manner possible. This analysis of what could hap- pen in the external landscape, together with the Group’s purpose and our Open Power mission, is key to defining the Group’s positioning within that landscape. We then define our long-term ambitions and design the strategic options that characterize our long-term planning. In recent years, the increasing complexity of the rapidly changing context in which we operate has made it so that the process of defining the Group’s strategies has also evolved in order to capture as much of this dynamism as possible, so as to make it an enabling factor in the defi- nition of goals. Today, this process is organized into the following main activities: • strategic dialogue: a continuous process of active dialogue throughout the year and across all Group functions, through which the strategic topics for the evolution and growth of the Group are identified, ana- lyzed, discussed and addressed. This dialogue is part of a strategic design phase, where communication between executives makes a valuable contribution to developing new strategic options, with an emphasis on the need for cultural or organizational change and synergies between businesses. This process, which is coordinated at the Group level, first involves the iden- tification of topics through consensus among senior management and approval by the CEO. The next phase of the strategic dialogue process involves the struc- turing of agile working groups with all the profession- al expertise necessary for the proper analysis of each topic, aimed at the preparation of dedicated work- shops or strategic options to be discussed. The process is centrally governed and includes mile- stones and deadlines that are defined based, in part, on the relative priority of the decisions to be made. In 2021, the working groups created for the various topics were organized around strategic priorities (e.g., Electrifica- tion, Value for the entire System, Decarbonization, Plat- forms and the Digital Transition, etc.). This process ena- bles us to properly define opportunities related to each strategic topic (including any financial or operational impacts) and a roadmap for the implementation of any actions to be taken. The outputs are then discussed by top management in dedicated meetings. These meet- ings include one special event, the Top Team Offsite meeting, at which all senior management discusses the priority topics. The most significant conclusions are then included in the Group’s long-term planning. This is then followed by the Strategic Summit, usually organ- ized in October in order to discuss the annual update of the Strategic Plan with the Board of Directors. This framework enables governance of the treatment of strategic issues, while at the same time ensuring swift identification of emerging trends and the necessary cross-business involvement for a complete analysis of complex and interdependent issues in the presence of an organizational structure based on the country/Busi- ness Line/Service Functions matrix; 60 60 Integrated Annual Report 2021 Discover new topics12Go in-depth of hot topics andraise flagsKEEP ROLLING ANDDON’T MISS OUTStrategic dialogue3Discuss optionsand crossroads4Evaluate being on-track with long-term plan and vision2021• strategic planning: this process, which is driven on an ongoing basis by feedback from the strategic dia- logue, transforms the information to be processed into quantitative models in order to establish an overview of the industrial, economic and financial evolution of the Group, supplemented by possible active portfolio management. The evaluation of strategic options over a time horizon extends beyond that used in industrial planning, with (i) the definition and the quantitative and qualitative development of alternative macroeconom- ic, energy and climate scenarios against which overall strategy can be assessed; and (ii) analysis based on stress testing for various factors, including the evolu- tion of the industrial sector, technology, competitive structure and policies; • long-term positioning: the analyses and decisions de- scribed in the previous points generate information for long-term positioning on multiple topics and the as- sessment of ambitions and targets for the Group; • analysis of ESG factors and assessment of materiality in the field of sustainability: the method Enel uses to perform ESG and materiality analysis was developed on the basis of the guidelines set out in numerous in- ternational standards (for example, the Global Report- ing Initiative - GRI, UN Global Compact, SDG Compass, etc.), with the aim of identifying and evaluating priori- ties for stakeholders and integrating them into Group strategy. The strategy of the Enel Group has proven its ability to create sustainable long-term value, fully integrating the themes of sustainability and close attention to climate change issues while simultaneously ensuring increased profitability. The Group is among the leaders guiding the energy tran- sition through the decarbonization of electricity genera- tion and other activities and the electrification of energy consumption, which represent opportunities both to in- crease value creation for all and to contribute positively to more rapid achievement of the Sustainable Develop- ment Goals set by the United National (SDGs) in the 2030 Agenda. Strategic Plan The decade of electrification - The quest for net zero is under way throughout the world, and decarbonization and the electrification of the global economy are cru- cial to avoiding the grave consequences of an increase in temperatures of 1.5 °C above pre-industrial levels. The most recent scenarios all indicate that we will need to ac- celerate the electrification of energy consumption and decarbonize electricity generation in order to achieve our ambitious climate goals. Our customers will play an active role and be the primary beneficiaries of this process. Over the last 10 years, renewable energy has become the dominant trend in power generation thanks to declining costs, thereby enabling decarbonization to move at a more rapid pace. It has been a decade of radical change in the power generation mix, and this is destined to con- tinue accelerating. The coming decade will be crucial in achieving the goals set by the 2015 Paris Agreement. At the same time, it will also be a period characterized by in- creasing efforts in electrification, whereby customers will gradually convert their energy consumption to the elec- trical grid, which will improve spending levels, efficiency, emissions, and price stability. In order to respond more effectively to the expected ac- celeration in investment and contribute to more rapidly achieving the primary goals that are needed to combat climate change, the Enel Group intends to leverage the progress we have made in digitalization, as well as our position as: • the world’s leading private-sector player in renewable energy, with a total global capacity of about 53.4 GW; • the world’s primary private-sector network operator, with more than 75 million network customers; • the private-sector player with the world’s largest base of retail customers, with more than 69 million retail customers worldwide. Our business model - In order to take full advantage of all the opportunities emerging in the marketplace in which we operate, the Group has established the Ownership and Stewardship business models. The most appropriate and effective business model is selected based on the geographical area and context of operations: • the Ownership business model, by which the Group in- vests directly in renewable energy, grids and custom- ers. This model is used when operating in countries in which we can leverage the entire value chain, from power generation to integration with the end user. Ac- cordingly, we refer to these countries as “Tier 1”, and they include Italy, Spain and Romania in Europe, and the United States, Brazil, Chile, Colombia and Peru in the Americas; • the Stewardship business model, by which the Group invests in new joint ventures (JVs), existing JVs or ac- quires minority interests in order to maximize the val- ue of the know-how we have developed in the various businesses in which we have a presence. This is done Group strategy 61 61 by activating specific contract services with partners or by the subsequent development of assets. This model focuses primarily, although not exclusively, on the “non-Tier 1” countries where the Group does not have an integrated presence and where we seek to build partnerships with others in order to explore new geographical areas or to contribute the Group’s oper- ating experience in alternative contexts. Strategic action - Within this landscape, the Group has set the following strategy guidelines: I. Allocating capital to support the provision of decar- bonized electricity The Group expects to mobilize €210 billion between 2021 and 2030. Of this total, the Group expects to invest di- rectly some €170 billion (up 6% from the previous Plan) by way of the Ownership and Stewardship business mod- els, with an additional €40 billion being catalyzed through third parties under the Stewardship model. We expect this allocation of capital to accelerate achieve- ment of the Group’s electrification and decarbonization goals. Total investments(1) (€bn) Capex by Business Line and customers’ needs +6% 190 10 150 210 10 160 44% Reliable and safe delivery 10% High tech and high quality service 43% Affordable and clean energy 2021-2030 170 €bn 3% 2021-2030 Old Plan 2021-2030 New Plan Ownership Stewardship Third parties (1) 2021-2030 Old Plan included Enel X consolidated capex in stewardship. By 2030, the Enel Group expects to manage a total renew- ables capacity of about 154 GW, triple our 2020 portfo- lio, as well as to grow our grid customer base by 12 million and promote the electrification of energy consumption, while increasing the volume of electricity sold by nearly 30% and focusing, at the same time, on the development of beyond-commodity services, such as strengthening the electric-vehicle charging grid or for behind-the-me- ter storage and electric buses, in collaboration with other partners. 62 62 Integrated Annual Report 2021 Ownership Stewardship 2020 2030 2020 2030 2020 2030 RES capacity (GW) Grid customers (mln) Electricity sold(2) (TWh) 45 129(1) 74 81 ~430 ~550 +84 GW +7 mln +28% Storage (MW) ~4 25 0 5 6 >600 +21 GW +5 mln Electric buses (k) 0.4 >20 ~49 154 74 86 Total +105 GW +12 mln It includes RES capacity and BESS. (1) (2) Power free + regulated + wholesales + PPAs. II. Enabling the electrification of energy demand among customers The Group’s strategic action will seek to increase value for customers in the business-to-consumer (B2C), busi- ness-to-business (B2B), and business-to-government (B2G) segments by increasing the level of electrification of these customers while improving the services provided. In the “Tier 1“ countries, we expect this targeted strate- gy, paired with investment in our asset base, to increase the Group’s integrated margin by 2.6 times between 2021 and 2030 with the support of a unified platform that is able to manage the world’s largest customer base of any pri- vate-sector player. The Group will be taking advantage of our integrated posi- tioning in the “Tier 1“ countries, where we forecast: • an 80% increase in revenue compared with 2021; • a 40% decrease in the total cost of energy sold to cus- tomers from all sources as compared with 2021. 2030 ~40% Reduction of household energy spending(1) >85% Sales covered by RES production(2) (%) ~80% GHG emissions household reduction(1) (1) Vs. 2020, based on Enel’s portfolio of clients in Italy and Spain. (2) Based on “Tier 1“ countries; free market. Group strategy 63 63 The increase in the volume of electricity sold and the growth in beyond-commodity services will be accompa- nied by a generalized reduction in costs. More specifical- ly, we expect total production costs to decrease by about 50% as a result of greater use of our own output in elec- tricity sales and an increase in the share of renewable en- ergy in the Group’s generation mix, which is expected to increase from around 60% in 2021 to more than 85% by 2030 in the “Tier 1“ countries. We also estimate that value created for customers by the Group could lead to a reduction of up to 40% in their to- tal energy costs, together with a decrease of up to 80% in their carbon footprint by 2030. III. Focusing on the creation of value throughout the value chain To reinforce our strategy of focusing on the customer by making use of platforms, the Group has created the Global Customer Operations Business Line, which is responsible for defining commercial strategies and guiding the alloca- tion of capital towards customer needs by leveraging elec- trification and continuing to improve service quality. This renewed focus of the Group will accompany the bal- ancing and streamlining of our portfolio by way of: (i) a focus on “Tier 1“ countries; (ii) resources made available by selling off assets that no longer serve Group strategies; and (iii) ex- traordinary operations aimed at improving positioning, ac- quiring skills or generating synergies. T I E R 1 C O U N T R I E S Enel Green Power Global Energy and Commodity Management Global Infrastructure and Networks Enel X Global Retail Migration to cloud 2016 2019 2021 2014 Launch of matrix organization 2017 Set up of 2020 Customer Operations platform GRID BLUE SKY 64 64 Integrated Annual Report 2021 IV. Moving sustainable Net Zero goals up to 2040 The Group’s strategy and positioning planned for 2030 enable us to affirm our intention to move up achievement of Paris Agreement’s Net Zero commitment by 10 years, from 2050 to 2040, for both direct and indirect emissions. Enel is committed to achieving zero emissions, without the use of any carbon-removal technologies or nature-based solutions, related to power generation and the sale of electricity and natural gas to end users. The plan by which the Group expects to reach this ambi- tious goal ahead of our original schedule is based on the implementation of certain key strategic steps: (i) the ex- pectation to accelerate the decarbonization of genera- tion, progressively replacing our thermal portfolio with new renewables capacity while also taking advantage of the hybridization of renewables with storage solutions; (ii) by 2040, the electricity sold by the Group will be 100% renew- able and we will exit the retail sale of natural gas. Development of new RES capacity to have a 100%-sustainable fleet Exit from coal and exit from gas Exit from gas and 100% sales from RES Enel capex plan fully aligned with 2040 Net-Zero targets RES capacity on total(1) 59% 2021 ~80% 2030 ~100% 2040 Gas sold (bsmc) 9.9 2021 ~6 2030 0 2040 (1) Including 3.3 GW of managed renewable capacity. Investment plan The Group’s investment plan is fully aligned with its goal of achieving net zero by 2040 (in line with the Paris Agree- ment’s goal of limiting global warming to 1.5 °C). Conse- quently, investments in carbon-intensive assets or prod- ucts will gradually decline to zero by 2040. In line with this vision, over the next decade the Group ex- pects to directly invest some €160 billion under the Own- ership business model, mainly in “Tier 1“ countries. More specifically: • nearly half (€70 billion approximately) will be dedicat- ed to our Renewables business, where we expect an increase of about 84 GW in capacity compared with 2020, 9 GW of which in storage, to bring our consoli- dated renewable energy installed capacity to 129 GW by 2030. We expect this outcome to be achieved by developing a growing pipeline, equal to about 370 GW and more than doubling since last year, along with three global platforms for the activities of Business Develop- ment, Engineering and Construction, and Operations and Maintenance; • an additional investment of about €70 billion is planned for the Infrastructure and Networks business, up €10 billion from the previous plan and concentrated in Eu- rope, with the goal of strengthening the Group’s posi- tion as a global player in terms of size, quality, efficien- cy, and resilience. We forecast that this investment will produce a regulatory asset base (RAB) of €65 billion by 2030, along with the full digitalization of our entire net- work customer base with smart meters. Development Group strategy 65 65 of Group activities in this space will benefit from imple- mentation of Grid Blue Sky, a digital platform to manage the grid assets within the framework of a unified, global model that places the customer at the heart of the value chain. Capex Capex deployed in “Tier 1“ countries 44% 44% 9% 3% 2021-2030 160 €bn 98% 2021-2030 160 €bn “Tier 1“ countries Other countries Within the scope of the Stewardship business model, the Group plans to invest about €10 billion, while also catalyz- ing €40 billion in additional investment by third parties. Net Zero by 2040 In 2019, Enel, responding to the call for action from the United Nations, signed a commitment to act to limit the increase in global temperatures to 1.5 °C and be net zero across its entire value chain by 2050, including both direct (Scope 1) and indirect (Scopes 2 and 3) emissions. In 2021, Enel announced that we have moved up our Net Zero target to 2040. This commitment calls for: (i) the 100% reduction of direct emissions (Scope 1) and of in- direct emissions related to gas sales (Scope 3 Gas); (ii) a reduction of at least 90% in all other indirect emissions (Scopes 2 and 3). This objective requires not only a sharp acceleration in renewables and energy efficiency, but also a complete rethinking of the economic model and invest- ment planning. Over the next 10 years, the Strategic Plan presented by Enel in November 2021 describes how the massive investments envisaged through the Ownership business model are consistent with the objective of reduc- ing direct emissions (Scope 1) to 82 gCO2eq/kWh by 2030, an objective that has been certified by the Science Based Targets initiative (SBTi) as in line with the 1.5 °C scenario set out in the Paris Agreement. In particular, investments in new renewables capacity will enable the achievement of certain key performance indicators (KPIs): renewable sources will account for more than 80% of total capacity and about 80% of electricity generation in 2030. This will allow the share of “emission-free” generation to grow from 65% in 2020 to over 85% in 2030 and, consequently, to cut direct emissions from 211 gCO2eq/kWh in 2020 to 82 gCO2eq/kWh in 2030. The goal of achieving total decarbonization by 2040 re- quires a complete rethinking of the economic model in terms of circularity. Accordingly, Enel is acting on the main lever of direct emis- sions and at the same time rethinking its business model in a broader sense to act on all other dimensions. The Group has increased both awareness of and transpar- ency around all categories of indirect emissions. Despite the fact that reporting on indirect emissions is voluntary, Enel has prepared a more in-depth report of emissions from fuel extraction and transport, grid losses, self-con- sumption, and supplier relations. 66 66 Integrated Annual Report 2021 Net-Zero commitment As a signatory of the “Business Ambition for 1.5 °C” campaign promoted by the United Nations and other institutions, Enel is committed to setting a long-term goal to achieve net-zero emissions across the entire value chain by 2040 (up from the previous target of 2050), including both direct emissions (Scope 1) and indirect emissions (Scopes 2 and 3), together with science- based targets in all relevant areas and in line with the criteria and recommendations of the Science Based Targets initiative (SBTi). GHG target Scope Climate scenario Main drivers and actions to achieve target 140 gCO2eq/kWh by 2024 100% of Scope 1 GHG emissions(1) 1.5 °C(2) • Gradual phase out of coal-fired capacity in the 2022-2024 period (percentage of coal capacity out of total consolidated capacity reduced from 7% in 2021 to about 4% in 2024) • Invest €17.3 billion to accelerate the development of renewable energy by installing 17 GW of new renewables capacity in the 2022-2024 period, reaching 67 GW of consolidated renewables capacity by 2024 Short term (2024) 21.3 million tCO2eq by 2024 ≤130 gCO2eq/kWh by 2024 82 gCO2eq/kWh by 2030 (80% reduction compared with 2017) 11.4 million tCO2eq by 2030 (55% reduction compared with 2017) ≤73 gCO2eq/kWh by 2030 (80% reduction compared with 2017) Medium term (2030) 100% of Scope 3 emissions connected with the sale of natural gas on end-user market 100% of of Scope 1 and Scope 3 emissions connected with the sale of electricity on end-user market 1.5 °C(2) • Promote the switch of customers from gas to electricity • Optimize the gas portfolio of customers (especially industrial (especially residential customers) customers) 1.5 °C(2) • Increase the percentage of renewable energy sold to customers, while increasing Group’s renewables production 100% of Scope 1 GHG emissions(1) 1.5 °C, SBTi certified capacity) • Exit from coal-fired generation (phasing out 16 GW of coal • Invest €65 billion to accelerate the development of renewable energy by installing 75 GW of renewables capacity in the 2021- 2030 period, reaching 120 GW of consolidated renewables capacity by 2030 (3 times installed renewables capacity in the 2017 base year) 100% of Scope 3 emissions connected with the sale of natural gas on end-user market 100% of Scope 1 and Scope 3 emissions connected with the sale of electricity on end-user market 1.5 °C(3) with the previous 2030 target • Update to previous target, equal to a 46% reduction compared • Promote the switch of customers from gas to electricity • Optimization of the gas portfolio of customers (especially (especially residential customers) industrial customers) 1.5 °C(3) • Increase the percentage of renewable energy sold to customers, while increasing Group’s renewables production Group strategy 67 67 GHG target Scope Climate scenario Main drivers and actions to achieve target ~0 gCO2eq/kWh by 2040 100% of Scope 1 GHG emissions(1) 1.5 °C(3) • Gradual phase out of thermal capacity and achieve a 100% • No use of carbon-removal technologies renewable energy mix Long term (2040)(4) ~0 million tCO2eq by 2040 ~0 gCO2eq/kWh by 2040 Net-zero emissions by 2040 100% of Scope 3 emissions connected with the sale of natural gas on end-user market 100% of Scope 1 and Scope 3 emissions connected with the sale of electricity on end-user market All remaining emissions (Scopes 1, 2 and 3) 1.5 °C(3) • Exit from the sale of gas to end users by promoting the electrification of energy consumption • No use of carbon-removal technologies 1.5 °C(3) • Aim to achieve sale of 100% renewable energy to end users by • No use of carbon-removal technologies 2040 1.5 °C(3) • Potential use of carbon-removal technologies (1) Although Enel constantly monitors Scope 2 emissions and is actively committed to reducing them, the Group has not set a specific reduction target, as they represented less than 4% of total Scope 1 and Scope 2 emissions in 2017 (base year of the target certified by SBTi). Therefore, they are considered marginal and fall within the exclusion criteria under the SBTi methodology, which sets a margin of 5% on total Scope 1 and Scope 2 emissions. (2) The target could not be officially validated by SBTi because the targets must cover a minimum of 5 years and a maximum of 15 years from the date the target is presented to SBTi for official validation. However, they meet the 1.5 °C path established by the SBTi for the electricity services sector (sectoral decarbon- ization approach, SDA). (3) We expect to request SBTi certification of the target in June 2022 and, in any event, based on a schedule agreed upon with SBTi. (4) In compliance with the Group’s Net-Zero commitment, which comprises both direct and indirect emissions, targets also will be set for additional compo- nents of Scope 2 and Scope 3 emissions in accordance with the Net-Zero Standard that SBTi published in October 2021. 68 68 Integrated Annual Report 2021 The Enel Group’s strategy with regard to the IEA NZE scenario The Net Zero Emissions (NZE) scenario of the International Energy Agency (IEA) sets out one of the possible paths to achieving global net-zero emissions by 2050. It is the most ambitious of the scenarios defined by the IEA and was de- veloped with the goal of reducing emissions by the energy system in line with the goal of containing the average in- crease in global temperatures to within +1.5 °C. Compared with the IEA’s other scenarios, there is a gap to be closed in emission reductions by way of a sharp acceleration in terms of policies and in terms of the rate of electrification and the development of renewables capacity. Like all IEA scenarios, this scenario, too, is based on currently known industrial processes and consumption models and on ex- isting technologies and does not include any disruptive technologies that could emerge in the coming years. The IEA NZE scenario is particularly useful to help busi- nesses assess the sustainability of their strategies in re- lation to a scenario of net-zero emissions by 2050. The roadmap to net-zero emissions set out in this scenario provides helpful, global and regional signposts in terms The Sustainability Plan People centricity is one of the pillars of Enel’s sustainability strategy. The Group is committed to providing the best conditions and opportunities for the people who work for us, with the goal of facing the challenges of the energy transition in line with the United Nations’ just-transition commitment signed in 2019. Upskilling, reskilling and specific training in digital skills are being paired with action plans for employ- ee development and valuing diversity aimed at creating an inclusive workplace by way of detailed objectives, including in terms of listening to employees and evaluating their per- formance. Within this context, the Group has raised tar- gets, compared with the previous year, related to the per- centages of female senior managers and middle managers to 26.8% and 33.4%, respectively, by 2024. At the same time, one of the pillars of our sustainability strategy centers on the importance of the relationship with the local communities in which the Group operates, with the commitment, for the period 2015-2030, to reach: 5 million beneficiaries of a quality education (SDG 4); 20 mil- lion beneficiaries of clean, accessible energy (SDG 7); and 8 million beneficiaries of decent work and lasting, inclusive and sustainable economic growth (SDG 8). To support the Group’s sustainability strategy, a focus on health and safety throughout the value chain continues to of the evolution and penetration of technologies deemed necessary to reach this goal. Nonetheless, local details are not always available in order to test more granular business assumptions and hypotheses. As for Enel’s strategy, the main points of note are as fol- lows: • exit from gas-fired generation by 2040, with a roadmap that does not call for any carbon-removal technologies or solutions, which are not compatible with the Group’s strategic or technological positioning. Therefore, this is a target of zero, not “net” zero, direct emissions charac- terized by power generation that is entirely renewable; • forecasts of end-use electrification that, in accordance with the IEA NZE roadmap, call for milestones that would leave room for additional business opportunities due, in particular, to the segments of transportation (e.g., 60% of global car sales must be electric vehicles, no new combustion-engine cars by 2035, etc.) and heating and air conditioning. be of central importance, made possible by way of con- stant, increasing monitoring. The Group is committed to promoting issues of sustainability and quality in supplier relations throughout the supply chain. Also crucial is envi- ronmental management aimed at reducing emissions, the consumption of water and other natural resources, and the preservation of biodiversity, and a strong governance structure continues to be a cornerstone of Group strategy. Finally, the energy transition must include enabling factors such as digitalization and cyber security, by way of which the Group is committed to promoting the most advanced solutions and actions to verify them (e.g., ethical hacking, vulnerability assessments, and cyber exercises involving industrial plant and facilities). The adoption of a fully sustainable business model re- quires us to completely rethink the concept of circulari- ty. The circular economy is fundamental for two reasons in particular: on the one hand, it is an indispensable lever in achieving the goals of decarbonization throughout the value chain,(5) as well as making a positive contribution to resolving a series of other critical environmental issues in terms of the use of soil, water consumption, the creation of waste, etc.; on the other, the large-scale adoption of technologies such as photovoltaic power, batteries, and electrical mobility requires, right from the start, a circular (5) It is estimated that about 45% of emissions at the Planet level are currently associated with the extraction and production of materials, manufacturing and disposal. Group strategy 69 69 approach to raw materials – and critical raw materials es- pecially – throughout the value chain. For years now, based on this awareness, Enel has included the circular economy among our strategic drivers by way of: • increasing engagement with suppliers in order to meas- ure the circularity of all that we purchase (e.g., the EPD project, which covers the Group’s strategic categories and accounts for about 55% of all products purchased globally), the implementation of a system of tracking the raw materials procured, and co-innovation with suppliers with an emphasis on solutions to close loops together by way of specific projects; • focusing on new models for the use of assets, extend- ing the useful lives of the assets in use, and increasing focus by way of remanufacturing and recycling projects for assets that have reached the end of their useful lives; • in terms of customers, both increasing the circularity of the solutions offered by Enel X for end users and sup- porting customers in terms of metering and improving The 2022-2024 Business Plan Within the broader ambitions for the positioning of the Group by 2030, the 2022-2024 Business Plan is ideally placed as the starting point for a growth path spanning the entire decade. Over the next three years, the Group will be operating within the framework of the objectives set for 2030. More specifically, the mid- and long-term strategies are fully in line with the following strategic actions. I. Allocating capital to support the delivery of decarbon- ized electricity The Group plans to directly invest a total of around €45 bil- lion over the period 2022-2024, an increase of 12% above the previous Plan, while also mobilizing an additional €8 billion from third parties within the scope of the Steward- ship business model. For the period 2022-2024, the Group plans to invest some €43 billion within the Ownership business model, align- ing 94% with the United Nations Sustainable Develop- circularity by way of reporting and consulting services. A transition of this sort requires a change both in technolo- gy and business models, methods of interaction within the value chain and the functioning of the economic model writ large. To this end, Enel is collaborating with business- es, organizations and stakeholders in all countries in which we have a presence. All of this will also require a profound transformation in skills and professionalism, for which we are placing a great deal of emphasis on training and on new approaches to collaboration between the various ar- eas of the Group. We have also seen growing interest in this issue in recent years from the financial services industry, and Enel has, for some time now, been supplementing our efforts with a view to financing in order to ensure that new initiatives are designed from the start to be financially competitive (and so scalable) and to contribute to the profitability and derisking of Group performance overall. ment Goals (SDGs). Specifically, these funds will be aimed at achieving the targets of SDG 7 (“Affordable and Clean Energy”), SDG 9 (“Industry, Innovation and Infrastructure”), and SDG 11 (“Sustainable Cities and Communities”), there- by helping to combat climate change (SDG 13 - “Climate Action”). The alignment of the investments envisaged in the Group’s Strategic Plan with decarbonization and greenhouse gas reduction objectives is defined on the basis of a specific methodology in which investments in renewables and retail power by their very nature fall under SDG 7, investments in the distribution grid fall under SDG 9 and investments in Enel X concern SDG 11. The 94% mentioned above there- fore excludes investments in conventional generation and retail gas. Furthermore, it is estimated that between 80% and 90% of planned investments will be aligned with the criteria of the European taxonomy, given the substantial contribution to climate change mitigation. 70 70 Integrated Annual Report 2021 Total investments(1) (€bn) Enel’s capex (€bn) ~48 ~2 38 ~52 ~2 42.6 44.6 +11% 1.9 40 2 ~94% SDG aligned(2) 38 42.6 >85% EU taxonomy aligned(2) 2021-2023 Old Plan 2022-2024 New Plan 2021-2023 Old Plan 2022-2024 New Plan Ownership Stewardship Third parties (1) 2021-2023 Old Plan included Enel X consolidated capex in stewardship. (2) Referred only to capex under the ownership model. Over the same period, the Group also plans to invest some €2 billion (of which 27% in renewables, 17% in the distribution grid and the remaining 56% to enable customer electrifica- tion) within the scope of the Stewardship business model by way of capital contributions and acquisitions of minority in- terests, while also mobilizing an additional €8 billion in invest- ment by third parties. Investment in conventional generation will decline progressively over the period covered by the Plan. Of the Group’s total investment planned under the Owner- ship and Stewardship models for 2022-2024: • about €19 billion is expected to go to Renewables, par- ticularly in countries in which the Group benefits from business integrated with the end user. The Group’s total renewables capacity is expected to increase to 77 GW, up from an estimated 53 GW installed at the end of 2021. As a result, it is estimated that zero-emission production will reach 77% by 2024 and that, over the same period, carbon emissions per kWh will decline by more than 35% com- pared with 2021, moving the Group closer to achieving our net-zero goals on schedule; • about €18 billion is expected to go to the Infrastructure and Networks business, up 12% from the previous Plan, as a result of increased investment in Europe, which is expected to take advantage of opportunities created by the national plans under the EU’s Recovery and Resilience Facility. With these investments, the goal of which is to further increase grid quality and resilience, it is estimated that the Group’s RAB will reach €49 billion, an increase of nearly 14% over 2021. Gross capex Capex deployed in “Tier 1“ countries 43% 44% 8% 5% 2022-2024 42.6 €bn 98% 2022-2024 42.6 €bn “Tier 1“ countries Other countries Group strategy 71 71 II. Enabling the electrification of energy demand among customers With the Group’s new customer-centric model, the inte- grated margin is expected to grow 1.6 times by 2024 as compared with 2021. Over the next three years, revenue from customers are expected to increase by 26%, while electricity sales are expected to rise by 25%. This will be accompanied by about a 15% decrease in the total cost of energy sold compared with 2021, thanks, in part, to a reduction of about 23% in average production costs. III. Focusing on the creation of value throughout the value chain Active management of assets will complete the process of streamlining the Enel Group and providing the resources to be used to take advantage of additional opportunities for growth. These actions are expected to generate a €300 mil- lion increase in profits once fully operational. Integrated margin in “Tier 1“ countries (€bn) ~2.6x 1.6x ~6 2021 2024 2030 At the Group level, ordinary EBITDA is expected to grow by 11%, from €19.2 billion in 2021 to between €21.0-21.6 bil- lion by 2024. Cumulated EBITDA by GBL EBITDA evolution over 2021-2024 (€bn) 42% 2022-2024 60-62 €bn 36% 19.2 2.9 +11% 1.3 1.2 21-21.6 (1.8)-(1.2) (1.8) 5.4 €bn Business growth 22% EBITDA 2021 Open Fiber Generation Customers Networks Active portfolio management & other EBITDA 2024 The following factors are expected to contribute to this growth in the Group’s ordinary EBITDA: • growth in Renewables will be the main driver for the pe- riod, with an expected contribution of about €2.0 billion out of a total contribution of the power generation busi- ness of €2.9 billion. The evolution of the generation port- folio is expected to translate into a 45% increase in the EBITDA of Enel Green Power(6) over the period of the Plan, from the €6.0 billion of 2021 to €8.7 billion by 2024; • EBITDA for the Customers business is expected grow by about 40% over the period of the Plan to reach €4.9 bil- lion by 2024, up from the €3.4 billion of 2021. This growth will be driven by Group actions to implement an integrat- ed strategy in terms of commercial strategy and genera- tion capacity, as well as by the contribution of electricity volumes on the free market and by incremental needs for additional services; • EBITDA for the Infrastructure and Networks business is expected to increase by 16% to €8.7 billion by 2024, up from the €7.7 billion of 2021. The primary factors in this growth are the increase in RAB, driven by increased capi- tal expenditure, programs to increase efficiency, increas- es in inflation-indexed rates, particularly in Latin America, and increased volumes in energy distribution. (6) Including conventional generation activities. 72 72 Integrated Annual Report 2021 Enel’s dividend policy for the period will remain simple, pre- dictable and attractive. Shareholders are expected to receive a fixed dividend per share (DPS) that will grow by 13% from 2021 to 2024 to reach €0.43/share. We estimate that the ex- pected growth in profits, added to the underlying dividend yield, will translate into a total yield of around 13%. Ordinary profit is expected to increase by about 20%, from €5.6 billion in 2021 to between €6.7-6.9 billion by 2024, as a result of the operating trends described above and the ongoing optimization of the Group’s financial management. This optimization will be achieved primarily by way of increas- es in sustainable sources of financing, which are expected to account for about 65% of total gross debt by 2024, decreas- ing the cost of gross debt to an estimated 2.9% by 2024, down from 3.5% in 2021. We expect the use of debt to remain stable at a ratio of net debt to EBITDA for the Group of 2.9 times over the period of the Plan, with net debt for the Group expected to be €61-62 billion by 2024, up from €52 billion in 2021. 2021 2022 2023 2024 Total return 19.2 19-19.6 20-20.6 21-21.6 5.6 5.6-5.8 6.1-6.3 6.7-6.9 0.38 0.40 0.43 0.43 5.4% 5.7% 6.1% 6.1% Earnings CAGR >13% Average dividend yield Earnings growth Value creation Ordinary EBITDA (€bn) Net ordinary income (€bn) Fixed DPS (€/sh) Implied dividend yield(1) (1) Enel Share Price: 7 €/sh. Group strategy 73 73 Reference scenario Macroeconomic environment The world economic environment in 2021 was character- ized by a broad-based economic recovery, with world GDP growth of about 5.8% on an annual basis in 2021, following a sharp drop of about 3.5% the previous year. This recovery was made possible – especially in more developed countries – with significant fiscal support from governments and rapid and effective vaccination, which prevented the introduction of significant restrictions on economic activity and mobility, especially in the 2nd Half of the year. However, the differenc- es in the pace of vaccination between developed and devel- oping countries was also substantially reflected in the GDP growth rates, engendering clear disparities in the recovery of the different economies. The generalized reopening of countries at the beginning of 2021 in concomitance with the initial roll out of vaccines generated sharp imbalances between supply and demand on a global scale, creating large distortions in supply chains and, consequently, pushing up the prices of raw materials. These inflationary pressures also spilled over into the prices of intermediate and consumer goods, creating a surge in in- flation spiral that, accompanied by severe bottlenecks due to logistical hurdles, is expected to continue in 2022. In the advanced countries, the 2nd Half of the year was marked by an unexpected economic slowdown, reflecting interrelated factors such as an upturn in COVID-19 cases driven by the spread of new variants on a global scale and bottlenecks associated with logistical challenges. With re- surgent demand buoyed by the reopening of economies, limits on production accompanied by the already rising pric- es of commodities have generated severe inflationary pres- sures, boosting inflation to record levels. US GDP grew by 5.7% on an annual basis in 2021, but in the 2nd Half expanded more slowly than expected at the begin- ning of the year due to general slowdowns in private con- sumption and industrial production in connection with the various waves of COVID-19, the reduction of the government support for private individuals that marked the first months of the pandemic, shortages of raw materials and sharply higher energy prices. For 2022, projections confirm a slow- down in the economy as the support provided by excess private saving, which helped fuel the recovery in early 2021, will dissipate. Another factor will be the shift in the monetary policy stance to a less accommodative posture with the Fed- eral Reserve’s announcement that it would begin tapering its purchases of securities and could increase its main official rates as early as this year. Furthermore, significant risks linked to the pandemic, inflation pressures at least until the end of 74 74 Integrated Annual Report 2021 the year, and political uncertainty connected with the mid- term elections in November 2022 persist. In the euro area, the real economy posted a strong recovery in both the 2nd and 3rd Quarters of 2021, with annual GDP growing by 5.2%. However, the economic recovery slowed in the 4th Quarter due to steep increases in energy prices and the resurgence of COVID-19 with the Omicron variant, which prompted many countries to reintroduce business closures and restrictions on mobility. The price increases in the energy sector represent a crucial risk factor, especially for industrial production, which is more sensitive than pri- vate consumption, and therefore for the outlook for growth in 2022. However, inflationary pressures associated with the high prices of electricity and natural gas will have heteroge- neous impacts within the euro area, and investment will re- ceive significant support from the Next Generation EU recov- ery plan. Finally, the monetary policy stance of the European Central Bank will remain accommodative in 2022, although it has been announced that the massive pandemic emergency purchase program (PEPP) will be gradually tapered, but not before March. In Latin America, the progress of national vaccination cam- paigns led to a steep drop in COVID-19 cases in the 2nd Half of 2021. The associated reopening of national economies coincided with a global increase in food and energy prices, weak local currencies and periods of severe drought in sev- eral large areas of the continent. These factors produced a general increase in the price level, with inflation well above the targets of many local central banks. The Argentine econ- omy has shown signs of recovery, with GDP growing by 9.8% on an annual basis in 2021. Structural problems per- sist, mainly concerning inflation and the public finances, but negotiations with the International Monetary Fund continue on a debt restructuring to avoid default in 2022. In Brazil, most sectors of the economy recovered to pre-pandemic levels, with GDP growth estimated at an annual 4.7% in 2021. High levels of inflation prompted a restrictive monetary pol- icy stance, which, combined with the limited contribution of reopening to growth as a result of the vaccination process, is moving the country towards a 2022 of stagflation. Further downside risks are represented by political uncertainty, with the previous President Lula favored for the upcoming elec- tions. In 2021, the Chilean economy was driven by an upturn in private consumption and investment, which produced GDP growth of 12% on annual basis. Current risks are mainly represented by the uncertainties associated with the choic- es that the newly elected leftist candidate Gabriel Boric will make. With inflation above the national target and a growing current account deficit, he could pursue excessively radical programs, with consequences for Chilean assets, including the local currency, which had adverse repercussions at the beginning of 2022. In Colombia, currency and inflationary pressures led to a generalized increase in prices, with an- nual inflation standing at 3.5% in 2021. For 2022, downside risks are represented by a slowdown in oil prices and global demand despite the estimated annual GDP growth of 9.6% in 2021. In Peru, the reopening of the economy and an ac- commodative monetary policy stance fueled annual GDP growth of 12.9% in 2021. For 2022, the risks of low or moder- ate growth are mainly attributable to the removal of current fiscal and monetary stimuli and considerable political uncer- tainty, with President Castillo surviving an impeachment at- tempt just four months after taking office. . GDP growth and inflation(1) % Italy Spain Portugal Greece Argentina Romania Russia Brazil Chile Colombia Mexico Peru Canada United States South Africa India GDP 2021 6.5 5.0 4.9 8.8 9.8 6.3 4.4 4.7 12.0 9.6 5.2 12.9 4.7 5.7 4.7 - 2020 -9.0 -10.8 -8.4 -8.8 -9.9 -3.7 -3.0 -4.2 -6.0 -6.8 -8.4 -11.0 -5.2 -3.4 -6.4 - Inflation 2021 2.0 3.0 - - 48.1 4.1 6.7 8.3 4.5 3.5 5.7 4.0 3.4 4.7 4.5 5.1 2020 -0.1 -0.3 - - 42.0 2.6 3.4 3.3 3.0 2.5 3.4 1.8 0.8 1.2 3.3 6.8 Change 2.1 3.3 - - 6.1 1.5 3.3 5.0 1.5 1.0 2.3 2.2 2.6 3.5 1.2 -1.7 (1) The GDP and inflation figures are the best estimate available at the publication date and are subject to revision by national statistical institutes in the coming months. Source: national statistical institutes and Enel based on data from ISTAT, INE, EUROSTAT, IMF, OECD and Global Insight. Exchange rates Euro/US dollar Euro/British pound Euro/Swiss franc US dollar/Japanese yen US dollar/Canadian dollar US dollar/Australian dollar US dollar/Russian ruble US dollar/Argentine peso US dollar/Brazilian real US dollar/Chilean peso US dollar/Colombian peso US dollar/Peruvian sol US dollar/Mexican peso US dollar/Turkish lira US dollar/Indian rupee US dollar/South African rand 2021 1.18 0.86 1.08 110 1.25 1.33 73.71 95.16 5.40 760.72 3,747.97 3.88 20.29 8.90 73.93 14.79 2020 Change 1.14 0.89 1.07 107 1.34 1.45 72.29 70.68 5.16 791.61 3,692.87 3.50 21.48 7.02 74.08 16.46 3.39% -3.49% 0.93% 2.80% -7.20% -9.02% 1.93% 25.73% 4.44% -4.06% 1.47% 9.79% -5.86% 21.12% -0.20% -11.29% Reference scenario 75 75 The energy industry Energy - Commodity conditions in 2021 During 2021, the oil market experienced sharp growth in its indices, reflecting the optimism for the recovery of eco- nomic activity, combined with the precautionary measures of OPEC+ regarding production cuts, which produced ten- sions in price indices in the 2nd and 3rd Quarters. After peaking in October, with the spread of new COVID-19 var- iants, prices began to ease, falling below $75/barrel in De- cember. In 2021, the European gas market experienced considerable volatility, caused by both supply and demand factors. In the 1st Half of the year, lower than average temperatures and a heating season that lasted until May led to a progressive depletion of gas inventories in Europe, with a consequent increase in demand during the summer months. On the supply side, however, LNG exports from the United States have been attracted to the Asian market, further ex- acerbating the commodity’s scarcity. The rise in gas prices, combined with strong Chinese de- mand, in turn led to an increase in coal prices, which peaked at $231 per metric ton in October, before falling below $150 per metric ton in November following the reopening of a number of mines in China, which eased supply-side strains. Brent API2 TTF CO2 Copper Aluminum Nickel $/barrel $/ton €/MWh €/ton $/ton $/ton $/ton 2021 71 120 46 53 9,310 2,472 18,461 2020 43 50 9 25 6,177 1,704 13,787 Change 65.1% - - - 50.7% 45.1% 33.9% The prices of CO2 in the ETS are also increasing, following the strong commitment expressed by the European au- thorities, culminating in the approval in July of the “Fit for 55” package, an expression of the desire to reduce CO2 emissions by at least 55% by 2030. Expectations of rising prices, combined with strains in the gas market and the in- crease in speculative positions in this market, produced an increase in the price of the commodity, which at the end of December stood above €80/ton. Similarly to developments in energy commodities, 2021 was a very volatile year, characterized by sharp increases in the prices of the main industrial metals as well. The re- sumption of post-COVID-19 economic activities and the launch of investment and recovery plans focused on the energy transition around the world have driven the de- mand for metals up sharply. At the same time, metal supply, which is intrinsically inelas- tic and affected by availability problems and logistical and transport bottlenecks, has not managed to keep pace with the growth in demand, generating scarcity on the market with a consequently large increase in prices. For copper and aluminum, after the highs reached during the year (over $10,000/ton in May for copper and around $3,000/ton in October for aluminum), prices appear to have stabilized during the last quarter, albeit at a high level, with less strained market fundamentals looking forward. Similarly, after the peaks recorded in the 3rd Quarter of 2021, demand for steel has declined, reflecting both the slowdown in the Chinese economy and the environmental and energy limitations that have slowed down production at foundries in the Far East. All these factors paved the way for a substantial stabilization of prices in the final months of the year. Finally, as regards metals used in batteries, in particular nick- el, lithium and cobalt, prices rose steadily throughout the year, driven by strained market fundamentals, in particular demand from the electric vehicle and general energy sec- tors, which has not shown any signs of slowing down. Please see the section “Fighting climate change and ensur- ing environmental sustainability” for an analysis of the circular management of commodities linked to the energy transition. 76 76 Integrated Annual Report 2021 Electricity and natural gas markets Electricity demand Developments in electricity demand(1) TWh Italy Spain(2) Romania Russia(3) Argentina Brazil Chile Colombia 2021 319.3 256.4 62.2 820.1 138.7 609.0 81.5 74.1 2020 302.8 250.1 59.3 778.6 131.7 586.6 77.7 70.4 Change 5.4% 2.5% 4.9% 5.3% 5.3% 3.8% 4.9% 5.3% (1) Gross of grid losses. (2) National data. (3) Europe/Urals. Source: Enel based on TSO figures. The figures are the best estimate available at the publication date and could be revised by TSOs in the coming months. The year 2021 was characterized by a broad recovery in electricity consumption, which returned to pre-pandemic levels in most of the countries in which we operate. In Italy, electricity demand grew by 5.4%, thanks to the gradual reopening of various sectors of the economy. Spain also recovered, registering a rise of 2.5% compared with 2020, although demand remains below pre-pandemic levels (-2.9% compared with 2019). This difference is due to the slower recovery to normal economic activity, which dampened demand in the services sector, combined with summer temperatures that were below the seasonal av- erage. The high prices of electricity recorded in Europe in the 4th Quarter nevertheless had an impact on industrial con- sumption, and demand destruction is also expected in the 1st Quarter of 2022 given the current tensions in the Eu- ropean markets. Consumption also increased in Russia and Romania, by 5.3% and 4.9% respectively. Similar developments were recorded in Latin America, where electricity demand grew by an average of 4.8%. Growth was particularly rapid in Argentina (+5.3%), Colom- bia (+5.3%) and Chile (+4.9%); in the latter country, demand had also grown in 2020, albeit only very slightly (+0.8%). Electricity prices Electricity prices Italy Spain Average baseload price 2021 (€/MWh) Change in average baseload price 2021-2020 Average peakload price 2021 (€/MWh) Change in average peakload price 2021-2020 125.0 111.5 86.1 77.5 139.8 120.8 95.2 84.8 Electricity prices in Italy and Spain rose sharply compared with 2020, reflecting the rise in prices on commodity markets in 2021. More specifically, the sharp increase in the price of gas, together with a decline in output from renewable sourc- es and maintenance at a number of nuclear power plants in Europe, caused power prices in Italy and Spain to in- crease by more than 220% compared with 2020, reaching record highs in the 4th Quarter of 2021. The strains on electricity prices recorded at the end of 2021 are expect- Reference scenario 77 77 ed to continue in 2022. The following table provides an overview of prices in end-user markets by main consumption segment. Price developments in the main markets Eurocents/kWh End-user market (residential)(1) Italy Romania Spain End-user market (industrial)(2) Italy Romania Spain (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. Natural gas markets Natural gas demand Billions of m3 Italy Spain 2021 2020 Change 0.1432 0.1115 0.1358 0.0939 0.0824 0.0931 0.1357 0.1043 0.1219 0.0867 0.0869 0.0834 5.5% 6.9% 11.4% 8.3% -5.2% 11.6% 2021 75.0 32.5 2020 70.0 31.0 Change 5.0 1.5 7.1% 4.8% The resumption of activity in various sectors of the econ- omy, combined with a particularly long and severe winter in the Northern hemisphere, drove global demand for gas in 2021. In Italy and Spain, demand grew by 7.1% and 4.8% respec- tively. Natural gas demand in Italy Billions of m3 Distribution grids Industry Thermal generation Other(1) Total 2021 33.4 14.0 25.9 1.7 75.0 2020 Change 31.0 13.0 25.0 1.0 70.0 2.4 1.0 0.9 0.7 5.0 7.7% 7.7% 3.6% 70.0% 7.1% Includes other consumption and losses. (1) Source: Enel based on data from the Ministry for Economic Development and Snam Rete Gas. In Italy, demand increased by 7.1% compared with 2020, with a particularly strong rise in the distribution grid (+7.7%) and industrial (+7.7%) sectors, attributable to the greater demand for gas for heating and industrial production. The recovery in thermal generation (+3.6%) was less marked, but still significant. 78 78 Integrated Annual Report 2021 Climate change and long-term scenarios Enel promotes transparency in its climate-change disclo- sures and works to demonstrate to its stakeholders that it is tackling climate change with diligence and determi- nation. Enel has publicly committed to adopting the rec- ommendations of the Task Force on Climate-Related Fi- nancial Disclosures (TCFD) of the Financial Stability Board and to following all published updates. The Group is also taking on board the “Guidelines on reporting climate-re- lated information” published by the European Commission in June 2019, which, together with the TCFD recommenda- tions and the GRI standard, constituted the main frame- Scenario analysis Analysis of the evolving external conditions is a funda- mental component of Enel’s strategy. In today’s complex world and faced with uncertainty about the future, defin- ing a solid and resilient strategy is crucial to the creation of value for all stakeholders. Therefore, Enel’s strategic planning process begins with an analysis of the evolving external landscape, with a particular emphasis on climate change and the energy transition. To this end, the Group adopts a structured approach to scenario analysis in or- der to maximize opportunities and mitigate risks. Scenario-based planning involves defining “alternative futures” based on a number of key uncertainty variables, such as achieving the goals of the Paris Agreement or the development of technology. Compared with forecasting, scenario analysis provides greater flexibility and enables us to prepare for handling risks and seizing opportuni- ties. Forecasting, on the other hand, seeks to understand the future based on past trends, so it cannot anticipate changes, risks or significant uncertainties. At Enel, scenario analysis is used in planning, the alloca- tion of capital, strategic positioning, and the assessment of risks and of strategy resilience. The preparation of sce- narios helps companies to make strategic decisions un- der complex, uncertain conditions by exploring plausible work for the Group’s reporting on climate change issues in 2021. Enel has been involved in a working group to develop specific recommendations to support the implementation of the TCFD guidelines concerning scenario analysis. The TCFD Advisory Council worked on the scenarios in 2020 and, since then, Enel has been involved in various initia- tives of scenario analysis, sharing our experience in order to support the increasingly widespread and transparent implementation of this practice among a growing number of organizations. alternative futures, designing various paths forward with different timing and options for mitigation, and conduct- ing risk-based analyses in order to challenge our strate- gic thinking. In 2021, the scenario framework was defined by way of a specific workstream to support the decision-making process (“strategic dialogue”). The topic was analyzed in dedicated workshops with senior management that fo- cused on identifying the primary trends, disruptions, fu- ture uncertainties and potential scenario narratives. Within the scope of defining Enel’s long-term scenarios, the mid- and long-term trends identified were then ana- lyzed in depth, and the results of this analysis were sum- marized in an Industry View document for internal use. Designed to support the decision-making process, this document provides an overview of the structural forces, macro-trends, potential disruptions, and technologies that have an impact on the development of the industry and the economy and describes the potential impact on the Company’s business. As a result, it provides a framework for the definition of actions aimed at guiding, preventing, and adapting to changes in our various businesses, as well as at seizing related opportunities and developing a great- er awareness of the risks involved. Reference scenario 79 79 Structural forces 3 macro-level structural factors People Planet Prosperity Emerging trends and disruption Scenario narratives 10 key factors that delineate the long-term outlook for our industry. They may be affected by greater or lesser uncertainty but their common feature is high expected impact. 3 narratives to capture the evolution of trends and uncertainty. They are the foundation of our long-term planning and the assessment of risks and opportunities in alternative scenarios. They are a starting point for ”what-if” analysis. Technologies 10 areas Ideas for the future 5 suggestions for further analysis Benchmarking and analyses were also conducted on the external energy-transition scenarios, which, together with an analysis of relevant reports on trends in the economy, in commodities, and in climate, have fed the internal model in order to define the assumptions for the long-term sce- narios. Analysis of trends and uncertainties Analysis of external scenarios and benchmarking Macroeconomic, financial and climate analysis and forecasting Analysis of key trends and distruptions that drive the scenarios, creating a “library” of trends that fuel our strategic dialogue and scenario planning. Collection and analysis of key available scenarios, comparing their main features. Processing data for use in scenario planning based on internal models and analysis of performance data and indicators from key reports. Internal Enel scenarios Full vision of macroeconomic, financial, energy and climate variants. 80 80 Integrated Annual Report 2021 Within this framework, each scenario narrative has been prepared so as to ensure consistency between the ener- gy-transition scenarios and the climate scenarios, based on which the acute and chronic physical phenomena are analyzed. This benchmarking of external scenarios is a key starting point in order to build robust internal scenarios. There are many global energy-transition scenarios published by var- ious providers and designed for a wide range of purposes, from government planning to the support of enterprise decision-making processes. Benchmarking entails analyz- ing the scenarios produced by the external organizations in order to compare results in terms of the energy mixes, trends in emissions, and technology decisions and to iden- tify the main drivers of the energy transition for each. Global energy scenarios are typically grouped by family based on the degree of climate ambition, as follows: • Business-as-usual/Stated-policies scenarios: these provide a fairly conservative benchmark for the future and represent how the energy system would evolve in the absence of additional climate and energy policies. These scenarios do not manage to achieve the goals of the Paris Agreement. • Paris-Aligned scenarios: these include a goal of limiting the increase in average global temperatures ”well below 2 °C” above pre-industrial levels. In order to achieve this goal, this family of scenarios consider new, more ambi- tious policies for the electrification of end uses and for the development of renewables. • Paris-Ambitious scenarios: global energy scenarios that take a path towards net-zero greenhouse gas emissions by 2050, in line with the most ambitious of the Paris Agreement goals, i.e., to stabilize the average increase in global temperatures within 1.5 °C. All scenarios in this family are in agreement that the primary drivers of the energy transition to net zero by 2050 are the electri- fication of end uses and increasing the generation of renewable energy over the medium and long term. How they differ is in the additional solutions needed over the long term to close the gap towards the goal of net-ze- ro emissions, in that they assign different relevance to the contributions of the various technologies and to the changes in consumer behavior. GtCO2 35 30 25 20 15 10 5 0 2010 Scenarios considered: Consensus: High Low Range Consensus 25-27% ≥50% of sales 10-12 TW 2020 2030 2040 2050 Source: IEA (2021) Net-Zero by 2050; BNEF (2021), New Energy Outlook; IRENA (2021); 1.5 Scenario. Consensus Range ~50% ~100% sales EV 25-46 TW Hydrogen demand 500-1,000 MtH2 Behavioral changes and circularity CCS/CCUS, DAC Nuclear None - High impact 0-7 GtCO2/year 0.4-7 TW Reference scenario 81 81 In general, a systematic analysis of the various scenarios found that the response to the most challenging scenari- os for climate change mitigation efforts involves a greater penetration of electrification and renewable energy. ) % ( e t a r n o i t a c fi i r t c e E l 50 45 40 35 30 25 20 15 20 Red NZE 1.5C Green Energreen SDS Enerblue PES Enerbase 2019 level STEPS Base 30 40 50 60 70 80 90 100 Renewable generation (%) Temperature increase NZ@2050/~1.5 °C ≤2 °C >2 °C To 2050 | Graphic source: internal processing based on IEA (2021), World Energy Outlook 2021 | BNEF (2021), New Energy Outlook | IRENA (2020), Global Renew- ables Outlook | IRENA (2021), World Energy Transition Outlook. One climate scenario, multiple energy-transition scenarios An energy-transition scenario represents how the contri- bution of the various energy sources might evolve within a specific economic, social, regulatory and policy context and based on the technology options available. Social and macroeconomic assumptions determine the service de- mand, while the regulatory, policy and cost restrictions define the optimal mix of technologies needed to meet that demand. Each scenario is associated with a trend in greenhouse gas emissions. A given long-term result in terms of temperature increase may be associated with various trends in greenhouse gas emissions and, therefore, to more than one transition sce- nario. Each energy scenario is associated, more or less strictly, to a specific climate trajectory defined by the Inter- governmental Panel on Climate Change (IPCC) and, conse- quently, to a range of temperature increases estimated to 82 82 Integrated Annual Report 2021 a certain degree of likelihood over a given period of time.(7) In turn, various increases in global temperatures by 2100 (and, therefore, various future scenarios of global warming) also change the trends in the other climate variables (e.g., rainfall, wind, etc.), causing changes in the intensity and frequency of the physical manifestations (e.g., heat waves, extreme rainfall, etc.). It should be underscored that these changes affect the entire globe, but the physical manifes- tations vary at the regional and local level. That said, a global energy scenario is said to be Par- is Aligned when the overall result, in terms of trends in greenhouse gas emissions, may be associated with an av- erage increase in global temperatures that is in line with the Paris Agreement objective of “holding the increase in the global average temperature to well below 2 °C above pre-industrial levels and pursuing efforts to limit the tem- perature increase to 1.5 °C”.(8) Enel’s long-term scenarios The issues associated with the industrial and economic transition towards solutions to reduce atmospheric con- centrations of CO2 are the characteristic elements of the “energy-transition scenario”, while the issues connected with future trends in climate variables (in terms of acute and chronic manifestations) define the “physical scenario”. The scenarios are constructed within an overall framework that ensures consistency between transition assumptions and climate projections. Granularity & extended geographical coverage Forward-looking metrics & KPIs Automation and advanced analytical techniques Integration of interdependencies Open databases available to stakeholders Macro-Finance More than 150 countries monitored for analysis of country risk and macroeconomic- financial scenarios Monitoring of market expectations and sensitivity analysis of new social and technology paradigms General equilibrium models and machine- learning techniques to manage big data Incorporation of social- environmental effects in analysis to quantify effects of actions taken (e.g., TSI) Periodic updating on interactive platforms with optimization for graphical analysis Energy Climate Integrated System Models Broad coverage of market and geographical indicators and starting-point focus areas Monitoring of trends in electricity demand and price volatility. With analysis of regulatory and transition impacts Climate scenario data available with worldwide high- resolution coverage Standard and/or ad hoc metrics to assess developments in future scenarios Main countries of interest for Enel. Developed to manage integrated business models Development of scenarios by economic sector to identify trends in electrification and efficiency Econometric models and neural networks to produce forecasts Impact analysis with exogenous variables (macroeconomic and climate) Development of integrated database updated automatically Analytics and machine learning to manage georeferenced big data in downloadable cloud environments Use of system models to optimize the use of technologies to minimize emissions and costs Integration of exposure data (e.g., demographic density, asset location/ value) Platforms for sharing, visualizing and downloading results Integrated management of both energy supply and demand Technology database for each service: types of electric vehicles, heat pumps, etc. The acquisition and processing of the large volume of data and information needed to define the scenarios, and the identification of the methodologies and metrics necessary to interpret phenomena that are complex and – in the case of climate scenarios – at very high resolution, require a con- tinuous dialogue with both external and internal sources. In order to evaluate the effects of physical and transitional phenomena on the energy system, for example, the Group makes use of models that, for each country analyzed, de- scribe the energy system in terms of specific technological, socio-economic, policy and regulatory aspects. (7) For example, the scenario SSP1-1.9 (which includes the assumptions of the scenario SSP1 and the RCP 1.9 climate forecasts), which predicts an immediate decline in climate-altering emissions to reach net-zero emissions by around 2050, followed by net negative emissions, leads to an estimated average in- crease in global temperatures of 1.4 °C by 2081-2100, with a “very likely” (i.e., with a probability of 90 to 100%) range of average temperature increase of 1.0 to 1.8 °C. The SSP1-2.6 scenario considers a slower reduction in emissions, reaching net-zero emissions in the second half of the century, and is associated with a best-estimate average increase in global temperatures of 1.8 °C by 2018-2100, with a very likely range of 1.3 °C - 2.4 °C. (8) Paris Agreement, published in the Official Journal of the European Union. https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:22016A1019(01)&from=EN. Reference scenario 83 83 The adoption of these scenarios and their integration into corporate processes take account of the guidelines of the TCFD and enable the assessment of the risks and opportu- nities connected with climate change. The process that translates scenario phenomena into use- ful information for industrial and strategic decisions can be summarized in five steps: Impact assessment FIV E S T E P S 5 1 4 2 3 Identification of trends and factors relevant to the business (e.g., electrification of consumption, heat waves, etc.) Development of link functions connecting climate/transition scenarios and operating variables Identification of risks and opportunities Calculation of impacts on business (e.g., change in performance, losses, capex) Strategic actions: definition and implementation (e.g., capital allocation, resilience plans) 1 2 3 4 5 Enel’s energy-transition scenarios A transition scenario describes how energy generation and consumption evolve in the various sectors in a specific eco- nomic, social, policy and regulatory context, and this corre- sponds to a trend in greenhouse gas (GHG) emission. The main assumptions considered in developing the ener- gy-transition scenarios concern: • the local policies and regulatory measures to combat climate change, such as measures to reduce carbon dioxide emissions and the consumption of fossil fuels, to increase energy efficiency, and to decarbonize the electricity sector; • the global macroeconomic and energy context (for ex- ample, gross domestic product, population and com- modity prices), considering international benchmarks including those produced by the International Energy Agency (IEA), Bloomberg New Energy Finance (BNEF), the International Institute for Applied Systems Analysis (IIASA)(9) and others; • the evolution of energy production, conversion and consumption technologies, in terms of both technical operating parameters and costs. In 2021, Enel revised the framework of medium- and long- term energy-transition scenarios and defined three alterna- tive scenario narratives. • Paris scenario - Calls for achieving the objectives of the Paris Agreement, so it is a level of climate ambition that is significantly higher than business as usual. The greater ambition is supported by greater electrification of energy consumption and a growing development of renewables. • Slow Transition scenario - Characterized by a slower en- ergy transition that does not achieve the objectives of the Paris Agreement. This scenario involves a slower increase in renewables and in the electrification process than that of the Paris scenario, particularly over the short term (i.e., delays in implementation of the energy transition). • Best Place scenario - Designed to test assumptions that improve upon the Paris scenario. Here, too, the objec- tives of the Paris Agreement are achieved, but the sce- nario considers a wider range of technology options, such as a greater penetration of green hydrogen (i.e., produced using renewable energy) used more widely in hard-to-abate sectors, thereby facilitating the decar- bonization process towards net-zero emissions. At Enel, we have selected the Paris scenario, which calls for achieving the Paris Agreement objectives, as the bench- (9) As regards the IIASA, for example, we have considered the fundamentals of commodity demand and the population underlying the Shared Socioeconomic Pathways (SSPs), which project different scenarios describing socioeconomic developments and policies consistent with climate scenarios. The information from the SSPs is used, together with the internal modeling, to support long-term forecasts, such as those for commodity prices and electricity demand. 84 84 Integrated Annual Report 2021 mark for long-term planning, unlike last year when the benchmark was the Stated-policies scenario. We did this on the belief that the world’s governments, businesses, organizations, and people will work together effectively to mitigate greenhouse gas emissions. The increased com- mitment to net-zero emissions in 2021 among nations that currently account for 88% of global emissions(10) and the success of COP26 support the decision to select a sce- nario that achieves the Paris objectives as Enel’s long-term benchmark. As for the possibility of assuming achievement of the more challenging Paris Agreement objective, i.e., to stabilize average global temperatures to within +1.5 °C, as a benchmark for long-term planning, there remain evident uncertainties that a number of countries could remain on business-as-usual trajectories, thereby slowing the decar- bonization process towards net-zero emissions by 2050. Given this external environment, the Enel Group imple- ments a business model that is in line with the highest am- bition of the Paris Agreement and so is consistent with an increase in average global temperatures of 1.5 °C by 2100. Enel has set a long-term objective of reaching zero direct emissions (Scope 1) with fully renewable power generation and zero emissions connected with the retail sale of ener- gy (Scope 3). The assumptions for trends in commodities prices feeding the Paris scenario are consistent with the external scenari- os that achieve the objectives of the Paris Agreement. More specifically, we assume sustained growth in the price of CO2 through 2030, caused by a gradual reduction in the supply of permits as demand increases, as well as stabilization in the price of coal due to declining demand. As for gas, we expect pricing pressures to lessen in the coming years as we see a realignment between global supply and demand. Finally, we are forecasting a gradual stabilization in oil prices, with demand expected to peak by around 2030. In the following tables, the values for “Enel scenario” repre- sent the assumptions in the Group’s baseline scenario used for various applications, including planning activities and determining impairment. Brent ($/barrel) API2 ($/t) ~68 ~70 ~62 ~72 ~73 ~67 ~65 43.2 ~45 50.3 Enel scenario Average benchmark(1) Max benchmark Min benchmark 2020(2) 2030 2020(2) 2030 CO2 EU - ETS (€/t) ~127 TTF (€/MWh) ~42 ~95 ~87 24.7 9.3 ~53 ~21 ~20 ~13 2020(2) 2030 2020(2) 2030 (1) Sources: IEA, Sustainable Development Scenario and Net-Zero Scenario; BNEF; IHS green case scenario; Enerdata green scenario. N.B. The scenarios used as benchmarks have been published at various points throughout the year and may not be up to date with the latest market trends. (2) Actuals. (10) At December 28, 2021. Reference scenario 85 85 The two alternative scenarios, i.e., Slow Transition and Best Place, are used for strategic stress testing, risk assess- ment, and the identification of business opportunities. Analysis of the main components of the transition scenarios The Group analyzes energy-transition scenarios and de- fines assumptions regarding trends in policy, technology, commodities, and other macroeconomic variables. Enel’s benchmark scenario, the Paris scenario, is based on a decarbonization ambition that is in line with the ob- jectives of the Paris Agreement, supported by a growing electrification of energy consumption and the develop- ment of renewable capacity. Definition of the Paris scenario at the local level has been set up based on two different approaches that vary based on the availability of models fundamental to simulating the long-term equilibrium of the entire energy system. More specifically, in the primary countries in which we have a presence and for which these models are avail- able (i.e., Italy, Spain and Brazil at present), we have tak- en a bottom-up approach, imposing an explicit limit on the trend in CO2 emissions for the country. The values of the scenario variables of relevance to the activities of the Group (including electricity demand, electrification rates, renewable and distributed-generation capacity, the number of electric vehicles, and the production of green hydrogen) have been calculated by the model over a time horizon to 2050, in line with the limit on emissions and with a view to minimizing costs for the system. For the rest of the world, we have taken a top-down approach, such that the variables of interest have been calculated by way of analyses of consensus in relation to external scenarios aligned with the objectives of the Paris Agree- ment as provided by international accredited bodies. These two different approaches have also been used to define the alternative Slow Transition and Best Place sce- narios at the local level. Under the Paris scenario, European countries show a downward trend in emissions consistent with the Euro- pean “Fit for 55” package thanks to a greater electrifica- tion of energy consumption supported by an increasing contribution of renewables in the energy mix. More spe- cifically, the Paris scenario for Italy, which is more ambi- tious than the national plan currently in place, calls for an increase in electrification to 28% by 2030 (vs. 22% in 2021) and a level of renewable energy generation that can meet 70% of electricity demand (vs. about 55% under the Italian national plan at the same date). Romania, too, sees an in- crease in the electrification of energy consumption and in 86 86 Integrated Annual Report 2021 the role of renewables in pursuing a more aggressive re- duction in emissions compared with the current national plan. For Spain, the ambition level defined under the na- tional plan is in line with achievement of the Paris Agree- ment objectives. As such, the Paris scenario calls for an electrification rate of 29% by 2030 and development of renewables capacity that would bring the percentage of electricity demand met by renewable energy to over 80%. For Brazil, the Paris scenario has been defined based on the assumption of reaching the target of net-zero emis- sions by 2050. For the remaining countries of interest to the Group, the Paris scenario and the alternative scenar- ios have been defined based on a consensus analysis of the external scenarios available. The Slow Transition scenario shows a lower ambition in combating climate change, which translates into a slow- er development of renewables and slower growth in electrification at all levels. This scenario has been con- structed based on the assumption that countries will re- main essentially tied to the current national plans, where these plans do not feature a climate ambition in line with achieving the Paris Agreement objectives, or that the am- bition, if high, is not supported by adequate implement- ing policies. This latter case, for example, applies to Spain, which, under the Slow Transition scenario, fails to meet the ambition of the national plan due to delays in imple- menting policies that would enable a greater penetration of renewables and of other electricity technologies. The Best Place scenario assumes a faster reduction in the cost of technologies to produce green hydrogen. This, then, translates into greater penetration of green hydro- gen in the hard-to-abate sectors, at the expense of blue and gray hydrogen (i.e., gas-fueled hydrogen production with or without, respectively, the use of CCS technolo- gies), resulting in an increase in electricity demand and in the installation of renewables capacity in the countries analyzed as compared with the Paris scenario. With the help of fundamental system models, we have also been able to estimate the impact of energy efficien- cy measures on both energy consumption and trends in electricity demand. We have also quantified the benefit of electrification of the average household’s energy con- sumption and transportation in terms of lower energy bills and lower emissions. This analysis was done in relation to an average Enel customer, which showed a higher degree of electrification than the national average for the coun- try in question as a result of Enel’s electrification strategy. Finally, we have analyzed the impact of each scenario in terms of the reduction in overall consumption of fossil fu- els and energy dependency. Within the scope of defining the scenario, we also devel- oped a specific analysis of electric mobility in Latin Amer- ica in order to determine the primary drivers of electrifi- cation in end-user consumption. A number of countries are working to promote electric mobility in the region: Chile and Colombia, for example, have set specific tar- gets for electric mobility and their governments are im- plementing clear policies to promote growth in this mar- ket. Most of the scenarios expect private-sector electric mobility to take off in the region between 2025 and 2030, when costs will become more competitive. The physical climate scenario Under the scenarios, the role of climate change is always the most important and generates effects both in terms of transitioning the economy towards net-zero emissions and in terms of physical impacts, which may be: • acute phenomena (heat waves, flooding, hurricanes, etc.) and their potential impact on industrial assets; • chronic phenomena related to structural changes in the climate, such as the rising trend in temperatures, rising sea levels, etc. which can bring about constant changes, for example, in the output of generation plants and in electricity consumption profiles in the residential and commercial sectors. The Group has selected three of the global climate path- ways developed by the Intergovernmental Panel on Climate Change (IPCC), which are in line with those of the IPCC’s sixth assessment report (AR6). These scenarios are asso- ciated with emission patterns linked to a level of the Rep- resentative Concentration Pathway, each of which is con- nected to one of the five scenarios defined by the scientif- ic community as Shared Socioeconomic Pathways (SSPs). The SSP scenarios include general assumptions concern- ing population, urbanization, etc. The three physical sce- narios analyzed by the Group are as follows: • SSP1-RCP 2.6: compatible with a range of global warm- ing below 2 °C from pre-industrial levels (1850-1900) by 2100 (the IPCC forecasts an average of about +1.8 °C from 1850-1900 with a 44% likelihood of staying below 1.5 °C and 78% of staying below +2 °C (11)); in the analyses that consider both physical and transition variables, the Group associates the SSP1-RCP 2.6 scenario with the Paris and Best Place scenarios. • SSP2-RCP 4.5: compatible with an intermediate sce- nario that calls for an average temperature increase of about 2.7 °C by 2100 from pre-industrial levels. The RCP 4.5 scenario is the one that is most representative of the world’s current climate and political landscape and correlated transition assumptions. This scenar- io forecasts global warming in line with the estimates of temperature increases that consider current policy around the world;(12) in the analyses that consider both physical and transition variables, the Group associates the SSP2-RCP 4.5 scenario with the Slow Transition scenario. • SSP5-RCP 8.5: compatible with a scenario where no particular measures to combat climate change are im- plemented. This scenario forecasts an increase in global temperatures of about +4.4 °C from pre-industrial levels by 2100 (definitely above 3 °C and with a 62% likelihood of being above 4 °C according to IPCC estimates). The Group considers the RCP 8.5 scenario to a worst- case climate scenario used to assess the effects of phys- ical phenomena in a context of particularly significant cli- mate change, but it is currently deemed not to be very likely. The RCP 2.6 scenario is used both to assess phys- ical phenomena and perform analyses that consider an energy transition consistent with most ambitious mitiga- tion objectives. The analyses carried out for the physical scenarios con- sidered both chronic and acute phenomena. For the de- scription of specific, complex events, the Group consid- ers data and analyses of public bodies, universities, and private-sector entities. The climate scenarios are global and must be analyzed at the local level in order to determine their impact in the areas of relevance to the Group. Among active partner- ships, collaboration is under way with the Earth Sciences Department of the International Centre for Theoretical Physics (ICTP) in Trieste. As part of this collaboration, the ICTP provides projections for the major climate variables with a grid resolution of varying from about 12 km to 100 km and a forecast horizon running from 2020 to 2050. The main variables are temperature, rain and snowfall, and solar radiation. Compared with past analyses, current studies are based on the use of multiple regional climate models: the one of the ICTP along with five other simu- lations, which have been selected as being representa- tive of the set of climate models currently available in the literature. The output of this set is representative of the average of the various climate models. This technique is usually used in the scientific community to obtain a more robust and bias-free analysis, mediating the different as- sumptions that could characterize the single model. IPCC Fifth Assessment Report, Working Group 1, “Long-term Climate Change: Projections, Commitments and Irreversibility”. (11) (12) Climate Action Tracker Thermometer, estimates of global heating at 2100 considering existing policies and action, and 2030 targets only (November 2021 update). Reference scenario 87 87 In this phase of the study, future projections have been analyzed for Italy, Spain and all countries of interest to the Group in South America, obtaining – thanks to the use of the set of models – a more highly defined representa- tion of the physical scenario. In the same way, the Group is also analyzing data related to climate projections for North America. The ICTP is also providing science support to interpret all other climate data we gather. We are using climate sce- narios for the countries of interest to the Group to allow for a homogeneous assessment of climate risk. Some of these phenomena entail high levels of complex- ity, as they depend not only on climate trends but also on the specific characteristics of the territory and re- quire further modeling to obtain a high-resolution rep- resentation. For this reason, in addition to the climate scenarios provided by ICTP, the Group also uses natural hazard maps. This tool makes it possible to obtain, with a high spatial resolution, recurrence intervals for a series of events, such as storms, hurricanes and floods. As de- scribed in the section “Risks and strategic opportunities associated with climate change”, these maps are widely used within the Group, which already uses historical data to optimize insurance strategies. In addition, work is un- der way to be able to take advantage of this information developed in accordance with climate scenario projec- tions. Finally, the Group has acquired the tools and capabilities needed to autonomously gather and analyze the raw out- put published by the scientific community, so as to have a global, high-level view of the long-term trends in the climate variables of interest to us. These sources include the output from the climate and regional models CMIP6(13) and CORDEX(14). CMIP6 is the sixth assessment of the Coupled Model Intercomparison Project (CMIP), which is a project of the World Climate Research Programme (WCRP) and of the Working Group of Coupled Modelling (WGCM), which provides raw climate data from global cli- mate models. These are used to assess standard global measurements at a resolution of about 100x100 km. The Coordinated Regional Climate Downscaling Experiment (CORDEX) also falls within the scope of the WCRP and generates regional climate forecasts at a higher resolu- tion. Physical scenario analysis - Integration of climate scenarios within the Open Country Risk model In addition to using high-resolution data to analyze the impact of physical phenomena, the Group has also de- signed a higher-level analysis framework that enables us to obtain a country-level assessment of trends in cer- tain global climate hazards in a manner that is consist- ent across all regions. More specifically, we have adopted a modular approach that will enable us to progressively upgrade our analyses by including new physical phenom- ena and refining both the data and our methodologies. At present, four climate phenomena are included: two related to extreme temperatures; one related to intense rainfall; and one related to drought. The phenomena are assigned a numerical index based on the global distribu- tion to a resolution of about 100x100 km and are sum- marized in a composite index. This has enabled us to in- clude a dimension related to climate change in the Open Country Risk model. This enables the tool to include both the aspects considered by the Country Risk models and those aspects related to the physical risks considered in the model as a cause of environmental and economic stress in a given country. The Open Country Risk model is described in greater detail in the section “Macroeconom- ic and geopolitical trends”. Physical scenario analysis - Italy Acute phenomena: for Italy, we first analyzed the phe- nomenon of acute rainfall to study the change in daily rainfall above the ninety-fifth percentile, calculated as average millimeters per year for the periods of analysis. As shown in the left-hand figure below, comparing 2030- 2050 with the historical period 1990-2020, under the RCP 2.6 scenario, intense rainfall is forecast to increase, above all, in the northeast and significantly along the Tyrrhenian coastline. It is interesting to note that, under the RCP 2.6 scenario, this general increase in extreme rainfall is ac- companied by a slight decrease in the annual total of daily rainfall excluding the acute phenomena (see right-hand figure). Under the other scenarios (RCP 4.5 and 8.5), too, we see the same dichotomy between intense and aver- age rainfall. (13) https://www.wcrp-climate.org/wgcm-cmip/wgcm-cmip6. (14) https://cordex.org/. 88 88 Integrated Annual Report 2021 Acute rainfall and average rainfall (i.e., total rainfall net of acute rainfall): difference between RCP 2.6 (2030-2050) and historical values (2000-2020) Acute rainfall - RCP 2.6 Average rainfall - RCP 2.6 ∆% ∆% (-8) • (-5) (-5) • 0 0 • 5 5 • 10 10 • 15 15 • 20 (-6) • (-3) (-3) • 0 0 • 3 As seen in previous analyses published by the Group, heat waves and fire risk will change significantly, both in- creasing under the various climate scenarios considered. Fire risk is described by the Fire Weather Index (FWI), an indicator widely used internationally that takes account of temperature, humidity, rainfall, and wind in order to calculate an estimate of fire risk. Figures provided by the ICTP may be used to describe the trend in fire risk in or- der to support the business in properly managing this risk. Studies that examine the changes in the 2030-2050 forecasts compared with 1990-2010 show that, under all scenarios, there is an increase in the number of high-risk days (index > 45) in summer. This change mainly impacts the islands and southern Italy, where the increase in high- risk days goes from about +6 to +8 days compared with historical values. Chronic phenomena: chronic temperature changes can be analyzed to obtain information about the potential ef- fects on the cooling and heating demand of local energy systems. As was done in 2020, to measure the thermal requirement are Heating Degree Days (HDDs), i.e., the sum, for all days of the year with a Taverage ≤ 15 °C, of the differences between the internal temperature (with Tinternal assumed to be 18 °C) and the average temperature, and Cooling Degree Days (CDDs), i.e., the sum, for all days of the year with Taverage ≥ 24 °C, of the differences between the Taverage and the Tinternal (assumed to be 21 °C), respec- tively, for heating and cooling requirements. The analysis for Italy has been refined both by increasing the number of models considered, from 3 to 6, and by increasing data resolution, from about 50x50 km to 12x12 km. The coun- try averages have been calculated as an average over the country, weighting each geographical node by population thanks to the use of the Shared Socioeconomic Pathways (SSPs) associated with each RCP scenario. In 2030-2050, the heating requirement is expected to decrease from 7% to 15% compared with 2000-2020 under the various sce- narios, while CDDs are always greater than historical data, with an increasing trend going from the RCP 2.6 scenario (~+50%) to RPC 8.5 (~+100%). CDD and HDD Italy: differential between RCP (2030-2050) and historical values (2000-2020) 100% 74% 49% -7% -11% -15% SSP1-RCP 2.6 SSP2-RCP 4.5 SSP5-RCP 8.5 Heating Degree Days (HDD) Cooling Degree Days (CDD) With regard to rainfall, changes in the areas of interest for the Group’s hydroelectric power generation have been analyzed. A preliminary analysis points to no significant change, with a generalized slightly downward trend in southern Italy and a slight increase in the north under the RCP 2.6 and RCP 4.5 scenarios. Reference scenario 89 89 Physical scenario analysis - Spain Acute phenomena: as regards fire risk, the number of days at extreme risk (i.e., Fire Weather Index > 45) is higher in the RCP 8.5 scenario than in the RCP 2.6 scenario, and is al- ways greater than the historical average. The south-central region of Spain is expected to see the greatest increase in average number of days of high fire risk per year in sum- mer under all future scenarios. Increase in average number of days of high fire risk per year in summer under the various RCP scenarios compared with historical values (2000-2020) RCP 2.6 RCP 2.6 RCP 4.5 RCP 4.5 RCP 8.5 RCP 8.5 ∆ days FWI > 45 (-1) • 0 (-1) • 0 0 • 2 0 • 2 2 • 4 2 • 4 4 • 6 4 • 6 6 • 8 6 • 8 8 • 10 8 • 10 10 • 12 10 • 12 12 • 14 12 • 14 As seen in previous analyses published by the Group, heat waves are expected to be more widespread geographi- cally and more frequent in 2030-2050, particularly in the southern regions of the country. Extreme rainfall will change in frequency throughout most of Spain. A preliminary analysis that looked at days of average annual rainfall in millimeters above the nine- ty-fifth percentile pointed to a reduction in certain areas of southern Spain even under the RCP 2.6 scenario. Chronic phenomena: the analysis of heating and cooling needs has been refined and updated in the same man- ner as for Italy. For the period 2030-2050, compared with 1990-2020, we estimate a reduction in Heating Degree Days (HDDs) under all scenarios within a range of -8% un- der RCP 2.6 to -17% under RCP 8.5. The data also confirms the increase (+35%) in Cooling Degree Days (CDDs) under the RCP 2.6 scenario and increases of 58% and 81%, re- spectively, under the RCP 4.5 and RCP 8.5 scenarios. CDD and HDD Spain: differential between RCP (2030-2050) and historical values (2000-2020) 81% 58% 35% -8% -12% -17% SSP1-RCP 2.6 SSP2-RCP 4.5 SSP5-RCP 8.5 Heating Degree Days (HDD) Cooling Degree Days (CDD) 90 90 Integrated Annual Report 2021 With regard to rainfall, changes in the areas of interest for the Group’s hydroelectric power generation have been analyzed. According to a preliminary analysis, the figures do not change significantly when comparing 2030-2050 to 1990-2009, pointing to a generalized slight downward trend in southern Spain under all scenarios. Physical scenario analysis - Latin America Acute phenomena: for very large countries such as Brazil, the trend in acute phenomena can differ significantly in the various areas of the country. To have a holistic view of the entire continent and identify the areas of greatest interest for our studies, we have analyzed a number of acute phe- nomena using standard indicators. The analyses have been based on data from a set of 6 climate models at a spatial resolution of 25x25 km. In order to study the phenomenon of extreme tempera- tures, we have used the Warm Spell Duration Index (WSDI), which considers heat waves of at least 6 consecutive days with an average daily high above the ninetieth percentile. Comparing 2030-2050 with 1990-2020, the figures point to a significant increase in heat waves even under the RCP 2.6 scenario, particularly in certain areas of Brazil, in Co- lombia, in Peru, and in northern Chile. This increase in ex- treme temperatures is expected to be even more accentu- ated under the other scenarios, particularly RCP 8.5. Warm Spell Duration Index (heat stress): difference between RCP (2030-2050) and historical values (2000-2020) RCP 2.6 RCP 4.5 RCP 8.5 ∆ days 0 • 10 10 • 20 20 • 30 30 • 40 40 • 50 50 • 60 60 • 100 With regard to extreme rainfall, we have considered daily rainfall above the ninety-fifth percentile, as was done for Italy and Spain. Future changes in this phenomenon vary to a greater degree. Under the RCP 2.6 scenario, certain areas, such as northern Brazil and northern Argentina, are expected to see declines, whereas other areas, such as western Colombia and certain areas of Brazil and Peru, are expected to see increases in extreme rainfall. Chronic phenomena: for the major countries in which we have a presence, we studied the potential changes in heating and cooling needs related to chronic temperature changes. Here, too, we calculated the changes in Heat- ing Degree Days (HDDs) and Cooling Degree Days (CDDs) for 2030-2050 compared with 1990-2020 based on data from 6 models at a resolution of 25x25 km. The country averages have been calculated as an average over the country, weighting each geographical node by population using the Shared Socioeconomic Pathways (SSPs) associ- ated with each RCP scenario. In each country studied, the CDDs increase progressively across all scenarios: under the RCP 2.6 scenario, they increase by 42% in Chile, but by only 14% and 19% in the other countries considered. Under the RCP 4.5 scenario, the increases become 108% in Chile and just over 25% for Argentina, Brazil and Peru, settling at 20% for Colombia. The increase in CDDs compared with the historical values is even more significant under the RCP 8.5 scenario. As for HDDs, the RCP 2.6 scenario forecasts considerable reductions in Colombia (-51%), Brazil (-21%), and Peru (-15%). This trend is even greater under the RCP 4.5 scenario: ~-61% in Colombia; ~-28% in Brazil; and ~-20% in Peru. Reference scenario 91 91 CDDs and HDDs in the countries of interest to the Group: difference between RCP 2.6 and historical values (2000-2020) Cooling Degree Days (CDD) - RCP 2.6 Heating Degree Days (HDD) - RCP 2.6 ∆% ∆% 10 • 15 15 • 20 20 • 25 25 • 30 30 • 35 35 • 40 40 • 45 (-60) • (-50) (-50) • (-40) (-40) • (-30) (-30) • (-20) (-20) • (-10) (-10) • (-0) With regard to rainfall, changes in the areas of interest for the Group’s hydroelectric power generation have been analyzed. Initial analyses, which compare 2030-2050 fore- casts under the three scenarios with the historical period 1990-2009, show a prevalent downward trend in chronic rainfall. The most significant average reductions are ex- pected to be seen in Chile and Colombia, at just under 10%. A closer look at the averages for Chile shows that, in the areas considered, the expected rainfall for 2030-2050 is in line with the rainfall experienced over the last decade (2010-2019). These figures show how, in these areas, we are already seeing climate change compared with the his- torical period used as a benchmark. Overall effect of the transition and physical scenarios on electricity demand Italy and Spain The use of integrated energy system models makes it possible to quantify the individual service demand of a country. This level of detail therefore makes it possible to discriminate the specific effects that a change in temper- ature can have on energy requirements. For this purpose, the Paris, Slow Transition, and Best Place transition sce- narios described above have been expanded to include the effect that temperature increases, measured in terms of Heating Degree Days (HDDs) and Cooling Degree Days (CDDs) as discussed above, have on (total, not just electric- ity) energy demand for residential and commercial heat- ing and cooling. By defining a strategic base scenario in line with achieving the Paris objectives and with Europe’s commitment to reduce greenhouse gas emissions,(15) we were able to associate HDDs and CDDs consistent with the RCP 2.6 scenario with the Paris and Best Place scenarios, while those that are consistent with the RCP 4.5 scenario are associated with the Slow Transition scenario. For fur- ther stress testing, this latter scenario was also associated with the RCP 8.5 scenario. Given current policy and the Eu- ropean Union’s keen focus on achieving carbon neutrali- ty by 2050, all three scenarios (i.e., Paris, Slow Transition, and Best Place) for Italy and Spain converge on this result. However, the Slow Transition scenario, as specified above, is associated with a different, higher RCP because it cor- responds to a slower downward trend in greenhouse gas emissions. As concerns the effect of the transition con- (15) European Commission - Fit for 55: https://www.consilium.europa.eu/en/policies/green-deal/eu-plan-for-a-green-transition/. 92 92 Integrated Annual Report 2021 sidered on its own, the greater speed in achieving carbon neutrality under the Paris scenario makes it, on average, a more electrified scenario than the Slow Transition, which points to lower average figures for electricity demand of 2031-2050 of about 2% for Italy and 1.5% for Spain. In turn, as mentioned, the crucial role that green hydrogen will play under the Best Place scenario is expected to lead to elec- tricity demand far above the Paris scenario, of 19% for Italy and 15% for Spain. Similarly to the previous year, the speed of the energy transition has had a much greater impact on electricity demand than the increase in temperature as a result of climate change. Decarbonization policies, together with technological innovation, social responsibility, and con- sequent changes in consumer behavior, will play an active role in trends in electricity demand and in the energy mix generally. However, analysis makes it clear that an increase in temperature as a result of climate change will lead to an increase in electricity demand, even if limited within a range of one percentage point for both Italy and Spain. Considering the integrated view, the potential effect of more ambitious transition scenarios has a more significant impact on electricity demand than the increase in temper- ature resulting from climate change. Although the trends in degree days (both HDDs and CDDs) are similar, the percentage differences in electricity de- mand in Spain for the three scenarios are lower than in Ita- ly. The essential difference concerns the energy system by 2030, for which Spain’s existing national energy plan is al- ready very ambitious and in line with RCP 2.6, meaning that the Slow Transition scenario is closer to the Paris scenario. Therefore, we expect less volatility in energy system trends and in electricity demand over the 2031-2050 period. Italy - Average impact on electricity demand (2031-2050) of the three transition scenarios paired with RCP 2.6 and 4.5 Paris RCP 2.6 to Slow Transition RCP 4.5 Paris RCP 2.6 to Best Place RCP 2.6 Italy 19% 19% Baseline RCP 2.6 Paris 0.8% Baseline RCP 2.6 Paris -2.1% -1.3% Temperature effect Transition effect Baseline RCP 4.5 Slow Transition Temperature effect Transition effect Baseline RCP 2.6 Best Place Reference scenario 93 93 Spain - Average impact on electricity demand (2031-2050) of the three transition scenarios paired with RCP 2.6 and 4.5 Paris RCP 2.6 to Slow Transition RCP 4.5 Paris RCP 2.6 to Best Place RCP 2.6 Spain 15% 15% Baseline RCP 2.6 Paris 0.5% Baseline RCP 2.6 Paris -1.6% -1.1% Temperature effect Transition effect Baseline RCP 4.5 Slow Transition Temperature effect Transition effect Baseline RCP 2.6 Best Place In order to investigate the effect of temperature on tran- sition scenarios further and at the same time expand the range of assumptions regarding climate change, a sensitivi- ty analysis was carried out by associating the Slow Transition scenario with RCP 8.5, in addition to RCP 4.5. An assumption of a further temperature increase, without changing the en- ergy transition, results in a more limited change in demand equal to -0.8% for Italy and -0.6% for Spain. Effect of temperature and transition on electricity demand, average over specified period of temperature and transition contributions for different combinations of transition scenarios and climate pathways Paris to Slow Transition RCP 4.5 Paris to Slow Transition RCP 8.5 Paris to Best Place Temperature effect from RCP 2.6 to RCP 4.5 Transition effect Total impact Transition effect Temperature effect from RCP 2.6 to RCP 8.5 Total impact Transition effect Temperature effect from RCP 2.6 to RCP 2.6 Total impact Italy 2022-2030 2031-2050 -1.3% -2.1% 0.0% 0.8% -1.3% -1.3% -1.3% -2.1% 0% 1.3% -1.3% -0.8% 2.7% 19.0% 0.0% 0.0% 2.7% 19.0% Spain 2022-2030 2031-2050 -0.9% -1.6% 0.0% 0.5% -0.9% -1.1% -0.9% -1.6% 0.0% 0.9% -0.9% -0.6% 3.1% 15.2% 0.0% 0.0% 3.1% 15.2% 94 94 Integrated Annual Report 2021 As a final consideration, however, note that, in the future, greater than forecast electrification of residential heating could change both the sign and the size of the tempera- ture effect in both countries. It is therefore necessary to monitor developments over time in the share of electrifi- cation of heating during the annual review. Effect of the variation in temperatures on electricity demand in the main Latin American countries in which the Group operates In Latin American countries, the impact of temperature trends, quantified through the Heating Degree Days (HDDs) and Cooling Degree Days (CDDs) metrics, was estimated using econometric forecasting models based on historical elasticity. The analysis shows that Brazil could experience a signifi- cant increase in demand due to the increase in tempera- ture, with an estimated increase of between 0.8% and 1.5% in prospective demand (calculated as the average of the demand forecasts in the 2030-2050 period). The driving factor would be the greater demand for cooling expect- ed in the country. This change is also confirmed using a system modeling approach. However, these forecasts are subject to a significant degree of uncertainty given the vol- atility of Brazilian economic growth. Argentina could also experience an increase in demand linked to an increase in temperature, estimated at between 0.3% and 0.6% of prospective demand. Similarly to Brazil, this forecast depends largely on the impact of macroeco- nomic developments in this country on electricity demand. The same considerations can also be extended to the oth- er countries in which the Group is present. In particular, in the rest of South America, where we again observe the positive elasticity of electricity demand to temperatures, the expected rise in temperature would still have less im- pact than economic growth. In fact, in Chile and Colombia, historical evidence still shows a strong coupling between the growth of electricity demand and GDP growth, with demand from the industrial sector accounting for around 50% of electricity consumption. Furthermore, the variabil- ity of the macroeconomic context could have repercus- sions on the electrification of the residential and service sectors, which represent the most immediate drivers of the increase in electricity demand in the event of an in- crease in temperatures. The following table summarizes the main temperature effects in the South American countries, with ranges ob- tained by applying a 95% confidence interval to our base- line case. Upper bound Lower bound Country Argentina Brazil Chile Colombia Country Argentina Brazil Chile Colombia Temperature effect (annual average) from RCP 2.6 to RCP 4.5 from RCP 2.6 to RCP 8.5 TWh 0.68 7.92 0.05 0.08 % 0.3 0.8 0.0 0.1 TWh 1.37 15.83 0.10 0.17 % 0.6 1.5 0.1 0.1 Temperature effect (annual average) from RCP 2.6 to RCP 4.5 from RCP 2.6 to RCP 8.5 TWh 0.57 2.48 0.01 0.02 % 0.3 0 0.0 0.0 TWh 1.15 4.96 0.01 0.05 % 0.5 0 0.0 0.0 Effect of the variation in temperature on electricity demand in the main Latin American countries in which the Group operates (average 2030-2050). Reference scenario 95 95 Assessment of the risks and opportunities connected with the Strategic Plan The process of defining the Group’s strategies is accom- panied by a careful analysis of the risks and opportunities connected with those strategies. Identifying those risks and opportunities within the Enel Group’s strategic and industrial planning process is de- signed to span the horizon of the Plan in an integrated manner. Although the strategy underlying the Plan, as described above, envisages a phase of careful analysis and verifica- tion of the strategic risk factors and variables, it retains scenario assumptions regarding future events that will not necessarily occur, as they depend on variables that can- not be controlled by management. Upside and downside developments may occur as time unfolds. Before being able to approve the Strategic Plan, a quan- titative analysis of the risks and opportunities associated with the Group’s strategic positioning is presented an- nually to the Control and Risk Committee appointed by the Board of Directors. In particular, risk factors such as macroeconomic and energy variables (such as exchange rates, inflation, commodity prices and electricity demand), regulatory developments, weather and climate events and risks connected with the competition are identified. Based on the nature of the risk and opportunity drivers, the analytical approach that best represents their volatil- ity is selected. In practice, we perform scenario analysis for all those variables whose market time series provide a robust foundation to estimate levels of correlation and representative volatility for future risk, and a deterministic analysis based on what-ifs of the possible evolution of the business with respect to the main risk factors for the exe- cution of the Business Plan. The validity of the results is also monitored with ex-post analyses by risk cluster. In 2021, most of the actual upside and downside events fell well within the limits estimated by the risk models of the Strategic Plan presented at the end of 2020. Focusing on the scenario risk analysis for the Strategic Plan, exchange rates, electricity demand and the volatility of energy and commodity prices represent almost all the volatility of the drivers. In particular, in addition to the US dollar the most impacting currencies are the Chilean peso, the Colombian peso and the Brazilian real. Nevertheless, the Group’s very structure ensures that the volatility of the South American currencies has only a negligible im- pact on profits. Italy and Spain represent nearly all of the Group’s exposure to the impact of the volatility of energy prices and commodity price fluctuations on margins. Examining the other risk factors, such as those connect- ed with weather and climate events, we can see that ge- ographical diversification significantly reduces the expo- sure to the risk associated with renewable resources – a highly positive factor considering the Group’s positioning and the steady expansion of renewable generation. Fur- thermore, with regard to climate change, the risk associ- ated with “acute” events is managed as part of investment for adaptation to climate change and the Group’s insur- ance strategy. With regard to risk factors estimated deterministically, the monitoring of all possible regulatory issues is crucial for assessing any upside or downside impact on the Group. In general, correlations between all the risk factors create diversification effects that substantially mitigate total ex- posures. 96 96 Integrated Annual Report 2021 Reference scenario 97 97 Risk management The Group adopts a risk governance model supported by principles (risk governance pillars) and by a homogeneous taxonomy of risks for the Group (risk catalog). The governance of the Group’s risks is based on a struc- tured and formalized set of elements that are periodical- ly defined and updated in line with the evolution of the Group, with the international risk management standard ISO 31000 and with the best risk management practices. Pillars of risk governance The risk governance pillars provide for: 1 Group Risk Committee established at the highest level and headed by the CEO of the Enel Group. 2 Local risk committees established for the main Business Lines and geographical segments (countries and regions), led by the head of the appropriate organization (head of Business Line/country/ region) coordinating with the Group Risk Committee. 3 Risk Appetite Framework expressly formalized in the Group risk catalog. 4 Three lines of defense Clear and defined assignment of roles and responsibilities in accordance with the principle of three lines of defense (1 = Management, 2 = Control, 3 = Internal Audit). 5 System of risk procedures and policies to develop processes for the measurement, management, monitoring and control of significant risks. 6 Reporting system for ongoing and structured reporting to decision- makers on risk exposures and metrics, delivered at the level of the Group, Business Line and significant geographical area. Risk catalog In view of the nature of its operations, Enel adopts a six-cat- egory classification of the risks to which it is exposed: Stra- tegic, Financial, Digital Technology, Operational, Compli- ance, Governance and Culture. Strategic Governance and Culture Digital Technology RISKS Financial Operational Compliance 98 98 Integrated Annual Report 2021 Risks are defined in a risk catalog that serves as a reference for all areas of the Group and for all the units involved in management and monitoring processes. The adoption of a common language facilitates the mapping and comprehen- sive representation of risks within the Group, thus facilitating the identification of those that impact Group processes and the roles of the organizational units involved in their man- agement. The six most significant categories of risk in relation to the impacts on the Group are described as follows: Category Risk Definition Climate change Risk associated with delayed or inadequate strategic and operational initiatives for climate change adaptation and mitigation. Competitive environment Risk associated with evolving market trends that may affect the Group’s competitive positioning in the markets, growth and profitability. Innovation Risk associated with inadequate technology scouting, erroneous or incomplete analysis of the uncertainty, complexity or feasibility of innovative projects. Strategic Legislative and regulatory developments Risk associated with adverse developments in the legislative or regulatory environment that are not promptly identified, assessed or managed. Macroeconomic and geopolitical trends Risk associated with a deterioration in global economic and geopolitical conditions associated with economic, financial, political, social or macroeconomic crises. Strategic planning and capital allocation Risk associated with scenarios that do not capture emerging trends, compromising the implementation of timely mitigation actions. Corporate culture and ethics Risk associated with the inadequate integration of the Group’s principles of ethics, diversity and equal opportunities in corporate processes and activities. Corporate governance Risk associated with ineffective corporate governance rules and/or a lack of integrity and transparency in decision-making processes. Governance and Culture Digital Technology Reputation Stakeholders IT effectiveness Cyber security Digitalization Risk of adversely impacting the public image of the Group and prejudicing the relationship of trust with shareholders. Risk of ineffective engagement with the main stakeholders in Enel’s strategic positioning in terms of sustainability and financial objectives, with potential adverse effects on its reputation and competitiveness. Risk associated with ineffective IT system support for business processes and operational activities. Risk arising from cyber-attacks and theft of sensitive company and customer data attributable to a lack of security in networks, operating systems and databases. Risk of ineffective business processes and incurring higher operating costs associated with the lack of digitalization in the workflow, systems integration and adoption of new technologies. Service continuity Risk associated with exposure of IT/OT systems to service interruptions and data loss. Risk management 99 99 Category Risk Definition Appropriate capital structure and access to financing Risk that the Group’s debt/equity ratio or the mix of long- and short- term debt may not support financial flexibility, enable easy access to funding sources or achieve borrowing cost targets. Interest rate Commodity Currency Financial Risk associated with adverse fluctuations in interest rates that affect financial expense or the fair value measurement of sensitive financial assets and liabilities. Risk associated with adverse trends in commodity markets, price volatility or lack of demand for commodities and natural resources. Risk associated with adverse changes in exchange rates affecting costs and revenue denominated in foreign currencies, the fair value measurement of sensitive financial assets and liabilities and the consolidation of subsidiaries with different currencies of account. Credit and counterparty Risk associated with non-compliance with contractual payment and delivery obligations, deterioration of credit worthiness, significant exposures to a single counterparty or counterparties operating in the same sector or geographical area. Liquidity Asset protection Business interruption Potential impact associated with the inability to promptly meet short-term financial commitments except on unfavorable financial terms or the inability to liquidate assets on the financial markets in the presence of restrictions on the divestment of assets. Risk associated with ineffective safeguards for the Group’s physical assets (theft, embezzlement, mismanagement) and financial assets (insurance, legal safeguards). Risk associated with the partial or total interruption of operations resulting from technical failures, malfunctions, human errors, sabotage, unavailability of raw materials or adverse weather events. Customer needs and satisfaction Risk associated with the failure to fully satisfy customer expectations and needs in terms of quality, accessibility, sustainability and innovation. Environment Risk of significant impacts on the quality of the environment and on the ecosystems involved following a violation of environmental regulations. Operational Health and safety Risk of potential impacts on the health and safety of employees and other parties following a violation of health and safety regulations. Intellectual property Risk associated with the infringement or fraudulent use of the Group’s intellectual property rights. People and organization Risk of impacts on organizational arrangements or internal staff skills associated with ineffective recruitment, training and incentive processes. Process efficiency Risk associated with inadequate management and monitoring of processes and operational activities. Procurement, logistics and supply chain Risk of potential effects associated with inadequate procurement or contract management activities. Service quality management Risk associated with the inability of third-party suppliers of internal services to meet the agreed service standards. 100 100 Integrated Annual Report 2021 Category Risk Definition Compliance Accounting compliance Risk of potential impacts associated with violation of international and national accounting laws and regulations as a result of the incorrect application and/or interpretation of the international accounting standards adopted by the Group. Antitrust and consumer rights compliance Risk associated with the violation of antitrust laws and regulations concerning consumer rights. Corruption Risk of adverse impacts associated with willful misconduct or corruption by persons within or outside the Group in order to obtain an unfair or illegal advantage. Personal data protection Risk associated with the violation of applicable data protection and privacy legislation. External disclosure Risk associated with the dissemination of reports, accounting documents, communications or other notices containing incorrect, inaccurate or incomplete information. Compliance with financial regulations Risk associated with the violation of international or national financial laws and regulations. Compliance with tax regulations Risk associated with the violation of international or national tax laws and regulations. Compliance with other laws and regulations Risk associated with non-compliance with other international, national or local laws and regulations not previously described (e.g., those governing electricity markets, distribution, generation, tenders, authorizations, stock exchanges and golden powers, etc.). Internal control and risk management system To effectively manage these risks, Enel has adopted an in- ternal control and risk management system (the ICRMS), which is periodically updated. It strengthens the Group’s awareness of its risk profile, identifying any opportunities it may offer. This system is the set of rules, procedures, and organiza- tional structures developed to identify, measure, monitor and manage the main risks to which the Group is exposed. The internal control and risk management system makes it possible to comprehensively define – for each risk and with an integrated approach – the risk strategy, appropri- ate management and control arrangements, the develop- ment and updating of metrics, risk measurement models and risk limits. With regard to the COVID-19 pandemic, the actions taken in recent years by the Group to increase its resilience to such a development can leverage our sound financial posi- tion, geographical diversification and integrated business model to mitigate and address unforeseen events and their potential effects with mitigation actions and contin- gency plans. Risk management 101 101 Strategic risks This section provides disclosure on the following strategic risks: • Legislative and regulatory developments • Macroeconomic and geopolitical trends • Risks and strategic opportunities associated with climate change • Competitive environment Legislative and regulatory developments The Group operates in regulated markets and changes in the operating rules of the various systems, as well as the prescriptions and obligations characterizing them, impact the operations and performance of the Parent. Accordingly, Enel closely monitors legislative and regulato- ry developments, such as: • periodic revisions of regulation in the distribution segment; • the liberalization of electricity markets, with special at- tention being paid to the acceleration provided for in Italy and expected developments in South America; • developments in capacity payment mechanisms in the generation segment. In order to manage the risks associated with these develop- ments, Enel has intensified its relationships with local govern- ance and regulatory bodies, adopting a transparent, collabo- rative and proactive approach in addressing and eliminating sources of instability in the legislative and regulatory frame- work. Macroeconomic and geopolitical trends The considerable internationalization of the Group – which has a presence in many regions, including South America, North America, Africa and Russia – requires Enel to consid- er country risk, i.e., the risks of a macroeconomic, financial, institutional, social or climatic nature and those specifical- ly associated with the energy sector whose occurrence could have a significant adverse impact on both revenue flows and the value of corporate assets. Enel has adopted a quantitative Open Country Risk assessment model capa- ble of specifically monitoring the riskiness of the countries in which it operates. Economic factors Institutional & political factors Social factors Energy factors Open Country Risk is a quantitative model that extends the more conventional definition of country risk used in the existing literature by providing a more com- plete analysis of the risks involved, incorporating economic, financial, political, climate and energy factors. 102 102 Integrated Annual Report 2021 The Open Country Risk model seeks to go beyond the more conventional definition of country risk, which focus- es on the ability of a government to repay the debt it has issued, to offer a broader view of the risk factors that can impact a country. The model is divided into four risk com- ponents: economic; institutional and political; social; and energy factors. More specifically, the Open Country Risk model has the ambition to measure the economic resilience of individual countries, defined as the balance of their position with re- spect to the rest of the world, the effectiveness of internal policies, the vulnerabilities of their banking and corporate system that might portend systemic crises and their at- tractiveness in terms of economic growth, and finally a quantification of extreme climate events as a cause of stress at the environmental and economic level (econom- ic factors). This is accompanied by an assessment of the robustness of the country’s institutions and the political context (institutional and political factors), an in-depth analysis of social phenomena, measuring the level of well-being, inclusion and social progress (social factors), and the effectiveness of the energy system and its po- sitioning within the energy-transition process, as these are all essential factors for evaluating the sustainability of investments in the medium to long term (energy factors). Specifically, the introduction of extreme climate events within the Open Country Risk model makes it possible to develop a uniform assessment on the evolution of certain climate hazards at the country level on a global scale. More information on climate scenarios and the framework used within the Open Country Risk model is discussed in the section “Risks and strategic opportunities associated with climate change”. Finally, with regard to the analysis of the energy-transition process, the Open Country Risk model also includes risk and opportunity analyses designed for forecasting pur- poses, quantifying the actions and the paths taken by the individual countries. For example, the model incorporates various factors reflecting the weight of renewable sources in energy generation, the electrification process and the environmental sustainability of the national energy sys- tem, which together are crucial characteristics for evalu- ating the country’s potential growth and attractiveness in the medium to long term. In order to mitigate this risk, the model supports the cap- ital allocation and investment evaluation processes. To further support the investment evaluation process, Enel has adopted a methodology called “Total Societal Impact” that, adopting an integrated approach based on advanced economic models, clearly and robustly expresses the di- rect, indirect and induced impacts of investment initia- tives at the national, regional or local levels. By quantifying standard international metrics, Total Societal Impact cov- ers a wide range of economic, social and environmental indicators that play a strategic role in correctly assessing the social and environmental contribution of Enel’s pro- jects. In fact, considering some of the indicators that can be analyzed, such as the contribution to GDP, the increase in income of the weakest social groups, the calculation of carbon dioxide emissions avoided and the recovery of end-of-life materials from a circular economy perspec- tive, it is clearly now essential to have a broad overview of the situation in order to evaluate a specific project in a given country with a view to creating shared value for all. The year 2021 was the second year in a row in which the world had to face the COVID-19 health crisis. However, the economies of many mature and developing coun- tries experienced a significant recovery last year after the sharp decline in 2020, with estimated global GDP growth of around 5.8% year-on-year in 2021. This progress was mainly achieved thanks to high vaccination rates (although there remain considerable disparities in vaccination cov- erage between high and low-income countries) and to the expansionary fiscal and monetary policies adopted by governments and central banks. Recent data show that the growth outlook for 2022 is less optimistic, with the pace of expansion set to slow compared with the previous year, with global annual GDP growth projected to be around 4%. This would be attribut- able to possible factors such as a resurgence of COVID-19 cases triggered by the spread of new variants around the world, continuing inflationary pressures with rising food and energy prices, which could cause inflation expecta- tions to de-anchor from the targets pursued by central banks, and new supply interruptions. Finally, a range of economic and socio-political risk fac- tors needs to be carefully monitored in Latin America as well. For example, a worsening of the pandemic caused by the spread of new variants could place a greater strain on healthcare systems in the countries of the area. Central banks in the area have been among the most reactive in raising interest rates in response to high levels of inflation, and could also continue to adopt such restrictive strat- egies in 2022, representing a downside risk to the eco- nomic recovery. Finally, other risks are connected with the high levels of public debt accumulated by governments in these two years of the pandemic, and with political uncer- tainty associated with elections in Brazil and Colombia or the potentially overly radical political agenda that might be pursued by the new President of Chile, Gabriel Boric. Risk management 103 103 Risks and strategic opportunities associated with climate change The identification and management of risks connected with climate change and actions to seize opportunities Climate change and the energy transition will impact Group activities in a variety of ways. In order to identify the main types of risk and opportuni- ty and their impact on the business associated with them in a structured manner consistent with the Task Force on Climate-Related Financial Disclosures (TCFD), we have adopted a framework that explicitly represents the main relationships between scenario variables and types of risk and opportunity, specifying the strategic and operational approaches to managing them, comprising mitigation and adaptation measures. There are two main macro-categories of risks/opportuni- ties: those connected with developments in physical varia- bles and those linked to the evolution of the transition sce- narios. The framework described has been created with a view to ensuring overall consistency, making it possible to analyze and evaluate the impact of physical and transition phenomena within solid alternative scenarios, construct- ed using a quantitative and modeling approach combined with ongoing dialogue with both internal stakeholders and external authorities. Physical risks are divided in turn between acute (i.e., ex- treme events) and chronic, with the former linked to ex- tremely intense meteorological conditions and the latter to more gradual but structural changes in climate conditions. Extreme events expose the Group to the risk of prolonged unavailability of assets and infrastructure, the cost of re- storing service, customer disruptions and so on. Chronic changes in climate conditions expose the Group to other risks or opportunities: for example, structural changes in temperature could cause changes in electricity demand and have an impact on output, while alterations in rainfall or wind conditions could impact the Group’s business by increasing or decreasing potential electricity generation. The energy transition towards a more sustainable model characterized by a gradual reduction of CO2 emissions has risks and opportunities connected both with changes in the regulatory and legal context and trends in technology development and competition, electrification and the con- sequent market developments. Consistent with the climate and transition scenarios used by Enel to determine risks and opportunities, the main transition-related phenomena are beginning to emerge in relation to customer behavior, industrial strategies being adopted in all economic sectors and regulatory policies. By 2030, the transition trends will become visible in response to the evolution of the context: the Enel Group has decided to guide and facilitate the transition, preparing to seize all the opportunities that may arise. As discussed previously, our strategic choices, which are already strongly oriented towards the energy transition, with more than 90% of in- vestments directed at improving a number of the Sustain- able Development Goals, enable us to incorporate risk mit- igation and opportunity maximization “by design”, adopt- ing a positioning that takes account of the medium- and long-term phenomena we have identified. The strategic choices are accompanied by the operating best practices adopted by the Group. 104 104 Integrated Annual Report 2021 Framework of main risks and opportunities Scenario phenomena Time horizon Risk & opportunity category Description Impact Management approach Acute physical Starting with short term (1-3 years) Extreme events Risk: especially extreme weather/climate events. Extreme events can damage assets and interrupt operations. Chronic physical Starting with long term (2030-2050) Market Risk/opportunity: increase or decrease in electricity demand; increase or decrease in output. Electricity demand is also affected by temperature, whose fluctuation can impact our business. Renewables generation can also be impacted by structural changes in resource availability. Transition Starting with short term (1-3 years) Policy & Regulation Risk/opportunity: policies on CO2 prices and emissions, energy transition incentives, greater scope for investment in renewables and resilience. Policies concerning the energy transition and resilience can impact the volume of and returns on investments. Transition Starting with medium term (2025-2029) Market Transition Starting with medium term (2025-2029) Product & Services Starting with medium term (2025-2029) Technology Risk/opportunity: changes in the prices of commodities and energy, evolution of energy mix, changes in retail consumption, changes in competitive environment. Opportunity: increase in margins and greater scope for investment as a consequence of the transition in terms of greater penetration of electrical transport and new technologies for the electrification and energy efficiency of final consumption. Considering two alternative transition scenarios, the Group assesses the impact of rising trends in the proportion of renewable sources in the energy mix and the electrification of final energy consumption. Considering two alternative transition scenarios, the Group assesses the impact of different trends in the electrification of energy consumption. With the current trend in the penetration of electrification efficiency technologies, the Group considers two alternative transition scenarios to assess opportunities to scale up current businesses. The Group adopts best practices to manage the restoration of service as quickly as possible. We also work to implement investments in resilience (e.g., the Italian case). With regard to risk assessment in insurance, the Group has a loss prevention program for property risk that also assesses the main exposures to natural events, supported by preventive maintenance activities and internal risk management policies. Looking forward, the assessments will also include the potential impacts of long-term trends in the most significant climate variables. The Group's geographical and technological diversification means that the impact of changes (positive and negative) in a single variable is mitigated at the global level. In order to ensure that operations always take account of weather and climate phenomena, the Group adopts a range of practices such as, for example, weather forecasting, real-time monitoring of plants and long- term climate scenarios to identify any chronic changes in renewable source availability. The Group is minimizing its exposure to risks through the progressive decarbonization of its generation fleet. The Group's strategic actions, which are focused on investment in renewables, grids and customers, enable us to mitigate potential threats and exploit the opportunities connected with the energy transition. The Group is also actively contributing to the formation of public policies through its advocacy efforts. These activities are conducted within platforms for dialogue with stakeholders called "Energy Transition Roadmaps" that explore national decarbonization scenarios in the various countries in which Enel operates in environmental, economic and social terms. The Group is maximizing opportunities by adopting a strategy founded on the energy transition, the electrification of energy consumption and rapid growth in renewables output. The Group is maximizing opportunities thanks to its strong positioning in new businesses and "beyond commodity" services. The Group is maximizing opportunities thanks to its strong positioning in global networks. Risk management 105 105 tive impact assessments performed to date are discussed below. The above activities are performed on the founda- tion of an ongoing effort during the year to analyze, assess and manage the information produced. As declared by the TCFD, the process of disclosing information on the risks and opportunities connected with climate change will be gradu- al and incremental from year to year. Enel’s resilience to the energy transition and climate change The impacts of climate change, technological evolution, the evolution of policies and changes in macroeconom- ic fundamentals make it ever more important to develop resilient business strategies, i.e., strategies capable of withstanding external shocks, and therefore of absorbing the causes of potential crises and thriving even when ex- ternal conditions change, whether slowly or rapidly. Jointly considering the factors associated with energy-transition scenarios and the various climate change scenarios is therefore a prerequisite for long-term planning. The set of transition and climatic scenarios plays a role in guiding strategic and industrial decisions, taking ac- count, for example, of the future effects of temperature on electricity demand, the investments necessary to sup- port the process of ever greater electrification and de- carbonization, the evolution of the market environment and of consumer habits. Given that Enel’s Strategic Plan concentrates more than 94% of investment on combat- ting climate change through the progressive expansion of generation from renewable sources and the development of infrastructure and services to guide energy systems and customers towards progressive electrification, while at the same time significant reducing the use of fossil fuels, the Group’s investments and activities delineate, by design, a long-term growth path that is in line with an energy transi- tion consistent with the Paris Agreement. The application of long-term climate scenarios enables the construction of adaptation plans for the Group’s asset and business portfolio. Climate scenarios are developed starting with the identification of the most relevant phys- ical phenomena for each business (such as heat waves, extreme rainfall, fire risk, etc.), to produce analyses that provide both high-level indicators (such as comparable country risk indices) and high-resolution data, which make it possible to study physical hazards at the single-site lev- el. The approach applies to both the existing portfolio and new investments. Asset vulnerability assessment makes it possible to identify priority actions to increase resilience. The framework illustrated above also highlights the rela- tionships that link the physical and transition scenarios with the potential impact on the Group’s business. These effects can be assessed from the perspective of three time horizons: the short term (1-3 years), in which sensitivity analyses based on the Strategic Plan presented to investors in 2021 can be performed; the medium term (until 2029), in which it is possible to assess the effects of the energy transition; and the long term (2030-2050), in which chronic structural changes in the climate should be- gin to emerge. In order to facilitate the correct identification and man- agement of the risks and opportunities associated with climate change, a Group policy was published in 2021 that describes the common guidelines for assessing these risks and opportunities. The “Climate change risks and oppor- tunities” policy defines a shared approach for integrating issues relating to climate change and the energy transition into the Group’s processes and activities, thus informing industrial and strategic choices to improve business resil- ience and long-term sustainable value creation, in line with the adaptation and mitigation strategy. The main steps considered in the policy are described below. • Prioritization of phenomena and scenario analysis. These activities include the identification of physical and tran- sition phenomena relevant to the Group and the con- sequent preparation of the scenarios to be considered, which are developed through the analysis and process- ing of data from internal and external sources. For the phenomena so identified, functions can be developed to connect the scenarios (for example, data on changes in renewable sources) to the operation of the business (for example, changes in expected potential output). • Evaluation of impacts. This includes all the analyses and activities needed to quantify the effects at an operation- al, economic and financial level, consistent with the pro- cesses in which they are integrated (for example, design of new buildings, evaluation of operational performance, etc.). • Operational and strategic actions. The information ob- tained from the previous activities is integrated into pro- cesses, informing the decisions of the Group and the business activities. Some examples of activities and pro- cesses that benefit from this are capital allocation, such as in the evaluation of investments in existing assets or new projects, the development of resilience plans, risk management and financing activities, engineering and business development. The main sources of risk and opportunity identified, the best practices for the operational management of weather and climate phenomena, and the qualitative and quantita- 106 106 Integrated Annual Report 2021 Scenario integration High level (e.g., Open Country Risk, evolution of energy system) Site specific (e.g., high resolution climate data) Prioritization Specification of adaptation priorities at the local level and main adaptation risks and actions at the country level Vulnerability assessment Analysis of vulnerabilities to quantify risk at the asset level (existing and new investment) Adaptation plans Development of long-term adaptation plans to increase resilience Chronic and acute physical phenomena: repercussions on our business, risks and opportunities Taking the scenarios developed by the Intergovernmental Panel on Climate Change (IPCC) as our reference point, de- velopments in the following physical variables and the as- sociated operational and industrial impacts connected with potential risks and opportunities are assessed. Chronic physical changes creating risks and opportunities The climate scenarios developed with the Internation- al Centre for Theoretical Physics (ICTP) in Trieste do not provide definitive indications of structural changes before 2030, but changes could begin to emerge between 2030 and 2050. The main impacts of chronic physical changes would be reflected in the following variables: Variables impacted by chronic physical changes • Electricity demand: variation in the average temperature level with a potential increase or reduction in electricity demand. • Thermal generation: variation in the level and average temperatures of the oceans and rivers, with effects on thermal generation. • Hydroelectric generation: variation in the average level of rainfall and snowfall and tempera- tures with a potential increase or reduction in hydro generation. • Solar generation: variation in the average level of solar radiation, temperature and rainfall with a potential increase or reduction in solar generation. • Wind generation: variation in the average wind level with a potential increase or reduction in wind generation. Risk management 107 107 The Group will work to estimate the relationships be- tween changes in physical variables and the change in the potential output of individual plants in the different categories of generation technology. As part of the assessment of the effects of long-term cli- mate change, we have identified chronic events relevant to each technology and began the analysis of the related impacts on potential output. Priority High Low Not material Rain/ snow Wind Sunshine Sea level Air temperature River/sea temperature Under assessment Event Thermal Solar Wind Hydro Storage Geothermal Infrastructure and Networks Enel X Scenario analysis has shown that chronic structur- al changes in the recent trends of physical variables will become significant beginning in 2030. However, in order to obtain an indicative estimate of the potential impacts, and include the possible early emergence of chronic ef- fects, it is possible to test sensitivity of the Business Plan to the factors potentially influenced by the physical sce- nario, regardless of any direct relationship with climate variables. Of course, such stress testing has an extremely low probability of occurrence based on historical events and geographical diversification. The variables examined are electricity demand (+/-1% per year), whose variations can potentially impact the generation and retail business- es. It was stress tested for all countries in which the Group operates. The output potential of renewable plants was also stressed (+/-10% over a single year). Variations in this variable can potentially impact the generation business. It was stressed separately at the individual technology level around the globe. The data reported show the effect on a single year for a single generation technology and include both the volume and price effects. 108 108 Integrated Annual Report 2021 Time horizon Downside scenario current policies Upside scenario current policies Short (within 3 years) Medium (until 2030) Long (2030-2050) Scenario phenomena Risk & opportunity category Description Time horizon Impact GBL affected Scope Quantification - Type of impact Quantification - range Upside/ Downside < €100 mn €100- 300 mn > €300 mn Chronic physical Market Risk/ opportunity: increased or decreased power demand. Short Chronic physical Market Risk/ opportunity: increased or decreased renewables output Short Electricity demand is also influenced by temperature, the fluctuations of which can have an impact on the business. Although structural changes should not occur in the short-medium term, to assess the sensitivity of the Group's performance to potential temperature changes, sensitivity analyses are conducted with respect to changes in electricity demand of +/- 1% of the Group total. Renewables output is also influenced by the availability of resources whose fluctuations can have an impact on the business. Although structural changes should not occur in the short-medium term, to assess the sensitivity of the Group's performance to potential temperature changes, sensitivity analyses are conducted with respect to changes in potential output of +/- 10% per year by individual technology. Enel Green Power and Thermal Generation and Infrastructure and Networks Group EBITDA/year Enel Green Power and Thermal Generation Group Potential Hydro Output Group Potential Wind Output EBITDA/year EBITDA/year Group Potential Solar Output EBITDA/year +1% -1% +10% -10% +10% -10% +10% -10% Risk management 109 109 Preliminary analysis of the impact of chronic climate changes on renewable generation Preliminary analyses were conducted to translate chronic climate changes into impacts on potential output for the main RES technologies operated by the Group: wind, solar and hydroelectric. For each technology, two pilot sites were selected, based on the geographical position and the availability of histor- ical data on the site, for which a link function was calculat- ed, starting from the observed data, which makes it possi- ble to translate trends in climatic variables into production information. This function was then applied to the data for climate projections to estimate the difference in output expected in 2030-2050 compared with historical figures. The results of these initial analyses at the pilot sites are reported below. Pilot sites Input parameters Results Site 1 Climate variables used to calculate link function: wind speed, air density Time step: monthly Time horizon: 2030-2050 vs. historical Site 1: output in line with historical trend in RCP 2.6 scenario and down slightly in RCP 4.5 and RCP 8.5 scenarios Site 2: output stable in RCP 2.6 and RCP 4.5 scenarios and up slightly in RCP 8.5 scenario Climate variables used to calculate link function: global horizontal irradiance (GHI), temperature Time step: daily Time horizon: 2030-2050 vs. historical No material changes for the business at either of the plants examined Climate variables used to calculate link function: precipitation, temperature Time step: monthly Time horizon: 2030-2050 vs. historical For both areas, average output is unchanged in RCP 2.6 scenario but declines slightly in RCP 8.5 scenario Site 2 Site 1 Site 2 Watershed 2 Watershed 1 Slight increase or slight decrease means a change that does not exceed +/- 5%. Acute physical changes creating risks and opportunities (extreme With regard to acute physical phenomena events), the intensity and frequency of extreme physical phenomena can cause significant and unexpected phys- ical damage to assets and generate negative externalities associated with the interruption of service. Within climate change scenarios, the acute physical com- ponent plays a leading role in defining the risks to which the Group is exposed, due both to the broad geographical diversification of its asset portfolio and the primary impor- tance of renewable resources in electricity generation. Acute physical phenomena, in different cases such as wind storms, floods, heat waves, cold snaps, etc., are character- ized by considerable intensity and a frequency of occur- rence that, while not high in the short term, is clearly trend- ing upwards in medium- and long-term climate scenarios. Therefore, the Group, for the reasons described above, is already managing the risk associated with extreme events in the short term. At the same time, the methodology is also being extended to longer time horizons (up to 2050) in accordance with the climate change scenarios that have been developed (RCP 8.5, 4.5 and 2.6). Acute event risk assessment methodology In order to quantify the risk deriving from extreme events, the Group uses a consolidated catastrophic risk analysis 110 110 Integrated Annual Report 2021 approach, which is adopted in the insurance sector and in the IPCC reports.(16) Through its insurance business units and the captive insurance company Enel Insurance NV, the Group manages the various phases of assessing the risks connected with natural disasters: from assessment and quantification to the corresponding insurance coverage to minimize impacts. The methodology is applicable to all extreme events that can be analyzed, such as wind storms, heat waves, tropi- cal cyclones, flooding, etc. In all of these types of natural disaster, three independent factors can be identified, as briefly described below. • The event probability (hazard), i.e., the theoretical fre- quency of the event over a specific time frame: the re- currence interval. In other words, a catastrophic event that has, for example, a recurrence interval of 250 years has a probability of occurrence in any given year of 0.4%. This information, which is necessary for assessing the level of frequency of the event, is then associated with the geographical distribution of Group assets. For this purpose, the Group adopts the hazard map tool, which associates the estimated frequency associ- ated with an extreme event, for the different types of natural disasters, with each geographical point of the global map. This information, organized in geo-refer- enced databases, can be obtained from global reinsur- ance companies, weather consulting firms or academic institutions. • Vulnerability, which indicates in percentage terms how much value would be lost upon the occurrence of a giv- en catastrophic event. In more specific terms, reference can be made to the damage to material assets, the im- pact on the continuity of electricity generation and/or distribution or the provision of electrical services to end users. The Group, especially in the case of damage to its as- sets, conducts and promotes specific vulnerability anal- yses for each technology in its portfolio: solar, wind and hydroelectric generation plants, transmission and dis- tribution grids, primary and secondary substations, etc. These analyses are naturally focused on the extreme events that most impact the different types of technol- ogies. This produces a sort of matrix that associates the significantly impacted type of asset with the individual natural catastrophic events. • Exposure is the set of economic values present in the Group’s portfolio that could be materially impacted in the presence of catastrophic natural events. Again, the dimensions of the analyses are specific for the different production technologies, distribution assets and ser- vices to end users. The three factors described above (hazard, vulnerability and exposure) constitute the fundamental elements of any assessment of the risk associated with extreme events. In this sense, the Group, with respect to climate change sce- narios, differentiates its risk analyses in accordance with the specificities of the various associated time horizons. The following table summarizes the scheme adopted for the assessment of the impacts deriving from acute phys- ical phenomena. Time horizon Hazard Vulnerability Exposure Short term (1-3 years) Hazard maps based on historical data and meteorological models Long term (to 2050 and/or 2100) Hazard maps and specific studies for the different RCP climate scenarios of the IPCC Vulnerability, being linked to the type of extreme event, to the specifics of the type of damage and to the technical requirements of the technology in question, is essentially independent of time horizons Group values in the short term Group values in the long term (16) L. Wilson, “Industrial Safety and Risk Management”, University of Alberta Press, Alberta 2003. T. Bernold, “Industrial Risk Management”, Elsevier Science Ltd, Amsterdam, 1990. H. Kumamoto and E.J. Henley, “Probabilistic Risk Assessment and Management for Engineers and Scientists”, IEEE Press, 1996. Nasim Uddin, Alfredo H.S. Ang (eds.), “Quantitative risk assessment (QRA) for natural hazards”, ASCE, Germany, 2012. UNISDR, “Global Assessment Report on Disaster Risk Reduction: Revealing Risk, Redefining Development”, UNISDR, Geneva, 2011. IPCC, “Managing the Risks of Extreme Events and Disasters to Advance Climate Change Adaptation - A Special Report of Working Groups I-II of the Inter- gover nmental Panel on Climate Change (IPCC)”, Cambridge University Press, Cambridge, 2012. Risk management 111 111 In the case of the vulnerability of assets within the portfolio, therefore, a priority table of the impacts of the main extreme events on the various technologies was defined in collabo- ration with the relevant Global Business Lines of the Group: Priority High Low Not material Heat waves Flooding/ heavy rain Heavy snow/ icing Hail Windstorms Wildfires Lightning Under assessment Under assessment Under assessment Under assessment Under assessment Under assessment Event Thermal Solar Wind Hydro Storage Geothermal Infrastructure and Networks Enel X “Heavy/wet snow” includes icing, which is relevant for Infrastructure and Networks. Managing the risk of extreme events in the short term Over the short term (1-3 years) the Group, in addition to risk assessment and quantification, takes actions to re- duce the impacts that the business may suffer following catastrophic extreme events. Two main types of action can be distinguished: obtaining effective insurance coverage and climate adaptation activities, preventing losses that could be caused by extreme events. The general characteristics of these actions are illustrated below and, naturally, in the case of adaptation activities for damage prevention and mitigation, specific reference will be made to the Group’s Generation and Infrastructure and Networks Global Business Lines. Impact of acute physical events on the Group The Enel Group has a well-diversified portfolio in terms of its generation technologies, geographical distribution and asset scale and, consequently, the portfolio’s exposure to natural risks is also diversified. The Group implements vari- ous risk mitigation measures, which, as described below, in- clude both insurance coverage and other management and operational arrangements to further lower the Company’s risk profile. The empirical evidence indicates negligible repercussions from these risks, as shown by the data for the last five years. Considering the most significant events, defined as events with a gross impact of more than €10 million, the cumulative gross impact amounts to about €270 million, which repre- sents less than 0.14% of the value of the Group’s insured assets as at 2022 (about €202 billion), most of which was recovered through insurance reimbursements. 112 112 Integrated Annual Report 2021 Insurance in the Enel Group Each year, the Group develops global insurance programs for its businesses in the various countries in which it op- erates. The two main programs, in terms of coverage and volumes, are the following: • the Property Program for material damage to assets and the resulting business interruption. Accordingly, in addition to the costs of rebuilding assets (or parts thereof), the financial losses due to the stoppage of electricity generation and/or distribution are also cov- ered, within the limits and conditions defined in the policies; • the Liability Program, which insures against loss- es caused to third parties, including the impact that extreme events may have on the Group’s assets and business. Based on effective risk assessment, it is possible to spec- ify appropriate limits and insurance conditions within the policies, and this also applies in the case of extreme nat- ural events linked to climate change. In fact, in the latter case, the impacts on the business can be significant but, as has happened in the past in various locations around the world, the Group has demonstrated a high degree of resilience, thanks to the ample insurance coverage limits, thanks in part to the Group’s solid reinsurance capabilities through the captive company Enel Insurance NV. The presence of this effective insurance coverage does not make the actions that the Group takes in the preven- tive maintenance of its generation and distribution assets any less important. In fact, while on the one hand the ef- fects of these activities are immediately reflected in the mitigation of the impacts of extreme events, on the other hand they are a necessary prerequisite for optimizing risk financing and minimizing the cost of the Group’s glob- al insurance coverage programs, including the risk as- sociated with catastrophic natural events. This adaptive strategy takes the form of management strategies and actions that go beyond insurance alone and change with the surrounding conditions. For example, the Group has managed to sterilize much of the strong upward trend in premiums on the insurance markets through changes to its risk retention policies for assets, as well as through internal risk transfer policies that reward the Business Lines that are most virtuous in terms of risk mitigation. From this perspective, the method and the information extracted from the ex-post analysis of events play a cru- cial role in determining the processes and practices to be deployed in mitigating such events in the future. Climate change adaptation in the Enel Group The Group implements adaptation solutions for weath- er and climate events in order to effectively manage the chronic and acute phenomena affecting each activity and Business Line. The adaptation solutions can involve both short-term and long-term actions, such as planning investments in re- sponse to climate phenomena. Adaptation activities also include the implementation of procedures, policies and best practices. For new investments, it is also possible to take advance action in the design and construction phase to reduce the impact of climate risks by design (for example, through risk and vulnerability assessment in the design phase) and to take account of any chronic effects (e.g., the inclusion of climate scenarios in long-term renewable resource estimates). Once the relevant weather and climate phenomena have been identified, the activities implemented to maximize adaptability can be classified as follows: • adverse event prevention and management: proce- dures for advanced preparation for extreme events (for example, acquiring short-term forecast weather data and training) and procedures for restoring nor- mal operations as quickly as possible (for example, the definition of operational and organizational proce- dures to be activated in response to critical events); • enhancing asset resilience: measures to increase the resilience of assets, such as the quantitative assess- ment of potential acute and chronic risks to better de- fine requirements in the design phase and actions to be implemented for existing assets. The following table provides a high-level summary of the type of actions that Enel implements to effectively man- age adverse events and to increase resilience to weather phenomena and their evolution due to climate change. In the following sections, certain activities are described in greater detail. Risk management 113 113 Business Line A. Adverse event prevention and management B. Enhancing asset resilience Enel Green Power and Thermal Generation Existing assets 1. Critical incident and event management 2. Site-specific emergency management plans and procedures 3. Specific tools for forecasting imminent extreme events Global Infrastructure and Networks Enel X Existing assets 1. Strategies and guidelines for risk prevention, readiness, response and recovery actions for the distribution grid 2. Global Infrastructure and Networks guidelines for emergency and critical event management 3. Risk prevention and preparation measures for fires involving electrical installations (lines, transformers, etc.) Existing assets 1. Enel X critical event management 2. e-Mobility: guidelines for asset maintenance and monitoring (repair or replacement of charging infrastructure) Existing assets 1. Guidelines for hydraulic risk assessment and design 2. Lessons-learned feedback from O&M to E&C and BD New construction In addition to actions for existing assets: 1. Climate change risk assessments (CCRA) included in environmental impact documentation (pilot) Existing assets and new construction 1. Guidelines for developing grid resilience enhancement plans (e.g., the “Network Resilience Enhancement Plan” of e-distribuzione) Existing assets 1. e-Mobility: the continuous improvement program Adaptation measures - Generation With regard to generation, over time the Group has im- plemented targeted measures at specific sites and estab- lished ad hoc management activities and processes. Measures implemented for specific sites in recent years include: • improving cooling water management systems for cer- tain plants in order to counter the problems caused by the decline in water levels on rivers, such as the Po in Italy; • installing fogging systems to improve the flow of inlet air and offset the reduction in power output caused by the increase in ambient temperature in CCGTs; • installing drainage pumps, raising embankments, peri- odic cleaning of canals and interventions to consolidate land adjacent to plants to prevent landslides in order to mitigate flood risks; • periodic site-specific reassessments for hydro plants of flood scenarios using numerical simulations. The sce- narios developed are managed with mitigation actions and interventions for civil works, dams and water inlets. The Group adopts a series of best practices to manage the impact of weather events on power generation, such as: Group practices for managing weather events in generation operations • weather forecasting both to monitor renewable resource availability and detect extreme events, with warning systems to ensure the protection of people and assets; • hydrological simulations, land surveys (including with the use of drones), monitoring any vul- nerabilities through digital GISs (Geographic Information Systems) and satellite measurements; • advanced monitoring of over 100,000 parameters (with over 160 million historical measure- ments) for dams and hydroelectric works; • real-time remote monitoring of generation plants; • safe rooms in plants in areas exposed to tornadoes and hurricanes, such as the wind farms in Main areas: Oklahoma in the United States; Maintenance O&M Operation • adoption of specific guidelines for performing hydrological and hydraulic studies from the ear- liest development stages, aimed at assessing the risks inside plants and in the areas outside plants, with application in the design phase of drainage and mitigation systems in compliance with the principle of hydraulic invariance; • verification of potential climate trends for the main project parameters in order to take them into account in the sizing of systems for relevant projects (for example, assessments of the temperature of the coolant source in order to ensure greater flexibility in cooling in new CCGTs) 114 114 Integrated Annual Report 2021 Dams and Hydraulic Infrastructure Safety Critical Event Management and civil engineering works (for example, rainfall assessments for designs of drainage systems at solar plants); • estimation of extreme wind speeds using updated databases containing the logs and historical trajectories of hurricanes and tropical storms, enabling the selection of the wind turbine tech- nology best suited to the emerging conditions. In addition, in order to ensure rapid response to adverse events, the Group has adopted specific emergency man- agement procedures with protocols for real-time commu- nication and management of all activities to restore oper- ations rapidly and standard checklists for damage assess- ment and the safe return to service for all plants as rapidly as possible. One solution to minimize the impacts of cli- mate phenomena is represented by the lessons-learned feedback process, which is implemented by the technical functions. It is governed by the existing operating model and influences future projects. Adaptation measures - Infrastructure and Networks In the Infrastructure and Networks Business Line, the Enel Group has adopted an approach in recent years called “4R” to cope with extreme climate events. A specific policy (which seeks to implement an innovative strategy to ensure the resilience of the distribution grid) has been developed to define the measures to be taken both in preparation for an emergency within the network and for the prompt res- toration of service once climate events have caused dam- age to assets and/or outages. The 4R strategy is divided into four phases. • Risk prevention: this includes actions that make it pos- sible to reduce the probability of losing network com- ponents because of an event and/or to minimize its effects, i.e., interventions aimed both at increasing the robustness of the infrastructure and maintenance in- terventions. • Readiness: this includes all measures aimed at increas- ing the speed with which a potentially critical event can be identified, ensuring coordination with Civil Protection authorities and local institutions and preparing the nec- essary resources once a grid disruption has occurred. • Response: this represents the phase in which the oper- ational capacity to cope with an emergency upon the occurrence of an extreme event is assessed. It is directly related to the ability to mobilize operational resources in the field and the capacity to remotely restore power supply through resilient backup systems. • Recovery: this is the last phase, in which the goal is to return the network to ordinary operating conditions as soon as possible in cases where an extreme weather event has caused service interruptions despite the in- creased resilience measures taken previously. Following this approach, the Business Line has prepared various policies for specific actions to address the various aspects and risks associated with climate change. In par- ticular: Guidelines for Readiness Response and Recovery actions during emergencies Guideline for Network Resilience Enhancement Plan This policy covers the last three phases of the 4R approach, indicating guidelines and measures to improve preparation strategies, mitigate the impact of total blackouts and, finally, restore ser- vice to as many customers as possible in the shortest time possible. This policy seeks to identify the most impactful extraordinary climate events on the network, to evaluate the specific KPIs of the network and to improve them based on proposed interven- tions in order to be able to evaluate the order of priority. In this manner, actions are selected that, when implemented, will minimize the impact on the network of particularly critical extreme events in a given area/region. The policy therefore covers the first two phases of the 4R ap- proach, suggesting measures regarding risk prevention and readiness. In Italy, this policy has been translated into the Resilience Plan that e-distribuzione has prepared each year since 2017, which represents an addendum to the Development Plan for investments over a 3-year time horizon to reduce the impact of extreme events in certain critical areas, name- ly heat waves, icing and windstorms (with the associated risk of falling trees). In 2017-2020, some €520 million were invested and about €345 million will be invested in the following three-year period, as specified in the addendum to the 2021-2023 Plan. To address these risks, investments Risk management 115 115 include the targeted replacement of uninsulated lines with insulated conductors, the under- grounding of cables in some cases or solutions involving routes to restore power that are not vulnerable to the above phenomena. As in Italy, similar issues are being explored in other countries, both in Europe and South America, in order to prepare an ad hoc investment planning process to enhance the resilience of networks to extreme events, taking due account of the distinctive characteristics of each territory. Measures for Risk Prevention and Preparation in case of wildfires affecting the electrical installations This policy is dedicated to addressing the risk of wildfires, outlining an integrated approach to emergency management measures applied in the case of forest fires, whether they are of ex- ternal origin or, in a small minority of cases, are caused by the grid itself and could potentially threaten Enel plant. The document provides guidelines to be implemented in the various territo- ries involved to identify areas/plant at risk, define specific prevention measures (e.g., evaluation of specific maintenance plans and any upgrades) and, in the event of a fire, manage the emergency optimally in order to limit its impact and restore service as soon as possible. Support actions These include the implementation of systems for weather forecasting, monitoring the status of the network and evaluating the impact of critical climate phenomena on the network, the preparation of operational plans and the organization of specific exercises. Particularly important in this regard are advance agreements for the mobilization of extraordinary resources to respond to emergencies, comprising both internal personnel and contractors. For example, in Italy a trial has begun of sensors on above-ground lines in areas that are highly exposed to snow and wind (Project Newman). Moreover, with a view not only to assessing weather emer- gencies in the short/medium term, but also in considera- tion of the climate change we are witnessing, Infrastruc- ture and Networks is mapping key phenomena at the glob- al level as part of an analysis of the specific climate risks in countries in which it operates, seeking to associate a risk level with each phenomenon and prioritize the most ex- posed areas. Infrastructure and Networks is collaborating with leading research institutes to analyze trends in the most critical threats in the various countries in which the Group oper- ates, and to estimate their future impact on the network in the medium and long term. The following are some examples. Heavy rainfall/wind storms • In 2021, the selection of external partners was initiated for an investigation of scenarios concerning the evolution of intense rainfall events in various countries. For example, with regard to explosive cyclogenesis in Spain, a prelimi- nary survey of the events with the greatest impact on the grid was conducted, following the policy concerning the enhancement of grid resilience, which will form the basis for subsequent detailed analyses starting from 2022. Heat waves • In 2021, heat waves in the other countries in which Infra- 116 116 Integrated Annual Report 2021 structure and Networks operates were investigated fur- ther after having produced initial results for Italy in 2020. This critical event is characterized by the persistence of high temperatures over a period of several days in corre- spondence with the absence of precipitation which, by hindering the dissipation of heat from underground ca- bles, causes an anomalous increase in the risk of multiple failures on grids, especially in urban areas and in summer tourist locales. • In Spain, despite the increase in the frequency and inten- sity of heat waves, especially where the presence of un- derground cables is relatively low, no significant historical correlation between heat waves and failures has been found in the analyses conducted to date. • Finally, starting from 2022, similar analytical work will be performed in other geographical areas. Wildfires • With regard to fire risk, despite the insignificance of events recorded to date, the Business Line, consistent with the policy noted above, is preparing an in-depth analysis of the scenarios through 2050 concerning the evolution of the phenomenon, with a view to possible im- provements in the policy itself. So far, each country has conducted a study to identify the areas at greatest risk of forest fires. Today, this study also makes use of GIS (Ge- ographic Information System) mapping for more precise identification of grids in different environments (protect- ed natural areas, forests, habitats). This makes it possible to adopt even more effective construction or mainte- nance design measures with a view to preventing fire risk. Inclusion of climate change effects in the assessment of new projects Many activities connected with the evaluation and imple- mentation of new projects can benefit from general and site-specific climate analyses, which the Group is begin- ning to integrate with those already considered in the eval- uation of new projects. For example: • preliminary studies: in this phase, climate data can serve as a preliminary screening tool, with the analysis of spe- cific climate phenomena, such as those discussed previ- ously in the analysis of physical scenarios, and synthetic indicators such as the Climate Risk Index, integrated into the Open Country Risk model. These data provide a pre- liminary measure of the most relevant phenomena in an area among those identified as being relevant for each technology; • estimation of expected output: the climate scenarios will be progressively integrated to enable the evaluation of how climate change will modify the availability of renew- able sources at the specific site. In the in-depth devel- opment of the preliminary analyses on potential output, the approach applied for now to selected pilot sites is described and then scaled up over the entire generation portfolio; Policy & Regulation • environmental impact analysis: the Group has begun to integrate a Climate Change Risk Assessment into project documentation. This contains a representation of the main physical phenomena and their expected change in the area; • resilient design: as noted, the development of resilient assets by design is a key climate change adaptation activity. The Group is working to progressively consider analyses based on climate data, such as the increase in the frequency and intensity of acute events. The latter will integrate existing analyses based on historical data already in use, in order to increase the resilience of future assets, including all necessary adaptation actions over the useful life of a project. Transition phenomena: repercussions on our business, risks and opportunities With regard to the risks and opportunities associated with transition variables, we use the different reference scenar- ios in combination with the elements that make up the risk identification process (e.g., competitive context, long-term vision of the industry, materiality analysis, technological evolution, etc.) to identify the drivers of potential risks and opportunities. Priority is given to the most material phe- nomena. The main risks and opportunities identified within this framework are described below. Limits on emissions and carbon pricing The enactment of laws and regulations that introduce more stringent emission limits by govern- ment action (non-market driven) and market-based mechanisms. • Opportunities: command & control regulations and market-based mechanisms strengthening CO2 price signals to foster investment in carbon-free technologies. • Risks: lack of a coordinated approach among the various actors and policy-makers involved and limited effectiveness of the policy instruments deployed, with an impact on the speed of the trend towards electrification and decarbonization in the various sectors, compared with a decisive Group strategy focused on the energy transition. Incentives for the energy transition Development incentives and opportunities with a view to the energy transition, consequently guiding the energy system towards the use of low-emission energy resources as the mainstream approach in the energy mixes of countries, greater electrification of energy consumption, energy efficiency, flexibility of the electrical system and upgrading of infrastructure, with a positive im- pact on the return on investment and new business opportunities. • Opportunities: additional volumes and greater margins due to additional investment in the elec- tricity industry, in line with the electrification strategy, decarbonization and the upgrading/dig- italization of enabling infrastructure. • Risks: obstacles to achieving energy-transition targets due to regulatory systems that do no effectively support the energy transition (delays in permitting processes, no upgrading of the electricity grid, etc.). Risk management 117 117 Resilience regulation To improve standards or introduce ad hoc mechanisms to incentivize investments in resilience in the context of the evolution of climate change. • Opportunities: benefits from investments that reduce service quality and continuity risks for the community. • Risks: in the case of especially severe extreme events with a greater-than-expected impact, there is a risk that recovery could be slower than planned, with an associated reputational risk. Financial measures for the energy transition Market Market dynamics Technology Penetration of new technologies supporting the transition Products & Services Electrification of residential energy consumption and industrial processes Incentives for the energy transition through appropriate policy measures and financial instru- ments, which should be capable of supporting an investment framework and a long-term, credible and stable positioning of policy-makers. Introduction of rules and/or public and private financial instruments (e.g., funds, mechanisms, taxonomies, benchmarks) aimed at integrating sustainability into financial markets and public finance instruments. • Opportunities: the creation of new markets and sustainable finance products consistent with the investment framework, activating greater public resources for decarbonization and access to fi- nancial resources in line with energy-transition objectives and the related impact on costs and on finance charges; introduction of subsidized support tools (funds and calls) for the transition. • Risks: actions and instruments are not sufficient to provide incentives consistent with an overall positioning tailored to the energy transition, uncertainty or slowdown in the introduction of new instruments and rules due to the deterioration in the public finances or differences in applica- tion in the geographical areas in which the Group operates. Market dynamics, such as those connected with the variability of commodity prices, the increase in electricity consumption due to the energy transition and the penetration of renewables and distributed generation, have an impact on business drivers, with effects on margins and on pro- duction and sales volumes. • Opportunities: positive effects associated with the growth in electricity demand and the greater room for renewables and all sources of flexibility. • Risks: exposure of merchant technologies to market price volatility. Gradual penetration of new technologies such as electric vehicles, storage, demand response and green hydrogen; digital lever to transform operating models and “platform” business models. • Opportunities: investments in developing technology solutions, as well as the positive effects of the increase in electricity demand and the greater space for renewables deriving from the production of green hydrogen. • Risks: slowdowns and interruptions in the supply chain for raw materials, including metals for batteries (such as lithium, nickel and cobalt) and semiconductors, could lead to delays in pro- curement and/or increase costs, potentially slowing the penetration of renewables, storage and electric vehicles. With the gradual electrification of end uses, the penetration of products with lower costs and a smaller impact in terms of local residential and industrial emissions will expand (for example, the use of heat pumps). • Opportunities: increase in electricity consumption against a background of declining energy consumption thanks to the greater efficiency of electricity. • Risks: additional competition in this market segment. 118 118 Integrated Annual Report 2021 Electric mobility Use of more efficient and effective modes of transportation from the point of view of climate change, with a special focus on the development of electric mobility and charging infrastructure; electrification of industrial energy users. • Opportunities: positive effects of the increase in electricity demand and greater margins connected with the penetration of electric transportation and associated beyond-commodity services. • Risks: additional competition in this market segment. The Group has already taken strategic actions to miti- gate potential risks and exploit the opportunities offered by the energy transition. Thanks to our industrial and fi- nancial strategy incorporating ESG factors, an integrated approach shaped by sustainability and innovation makes it possible to create long-term shared value. A strategy focused on complete decarbonization and the energy transition makes the Group resilient to the risks as- sociated with the introduction of more ambitious policies for emissions reductions and maximizes opportunities for the development of renewable generation, infrastructure and enabling technologies. Unlike chronic climate impacts, developments in the tran- sition scenario could have impacts in the short and medi- um/long term (by 2030) as well. As with climate variables, we can test the current Business Plan (2022-2024) for its sensitivity to the factors potentially influenced by the transition scenario, with particular regard to the price of CO2 (ETS). Examining the main transition vari- ables, the price of CO2 appears to be a reliable driver of reg- ulatory measures that could accelerate the transition pro- cess. To assess the impact of possible changes in this driver, the effects of a potential change of +/-10% in the CO2 price for Italy and Spain are determined. This price change would modify the equilibrium price of both wholesale markets, with repercussions on the margins of Global Power Genera- tion for both conventional and renewables plants. To quantify the risks and opportunities engendered by the energy transition in the long term, the transition scenarios described in the section “Enel’s energy-transition scenar- ios” have been considered. The effects of the Slow Tran- sition and Best Place scenarios on the variables that can most impact the business were then identified, in particu- lar electricity demand influenced by developments in the electrification of consumption – and hence the penetra- tion of electrical technologies – and the power generation mix. These considerations offer ideas for determining what the Group’s strategic positioning for resource allocation could be. Enel’s benchmark scenario – the Paris scenario – envis- ages a greater ambition for decarbonization and energy efficiency, supported by increasing the electrification of fi- nal energy consumption and the development of renewa- bles capacity. The dynamics of the energy transition could bring greater opportunities for the Group. In particular, on the retail electricity market, the progressive electrification of final consumption – in particular in transportation and the residential segment – will lead to a significant increase in electricity consumption to the detriment of other more polluting forms of energy. Likewise, the gradual increase in renewables share of the energy mix should lead to a reduc- tion in the wholesale price of electricity in the medium to long term. This impact is limited, however, considering an unchanged market design based on system marginal pric- es in the medium term. Any alternative market structures could induce different effects. With regard to the financial impact of changes in transition scenarios, the Group analyzed the impact of the Slow Tran- sition and Best Place scenarios on 2030 results in terms of EBITDA compared with the benchmark Paris scenario. With regard to the electrification of consumption, how- ever, the Slow Transition scenario envisages lower pene- tration rates for the most efficient electrical technologies, in particular electric vehicles and heat pumps, produc- ing a decrease in electricity demand compared with the Paris scenario, which would have a limited impact on the commodity and beyond-commodity retail business. At the same time, the decline in electricity demand would leave less room for growth in renewables, with an impact on the generation business. The Best Place scenario assumes a more rapid reduction in the costs of green hydrogen production technologies. This translates into greater penetration for this energy source, displacing blue and gray hydrogen, with a conse- quent additive effect on national electricity demand and the installation of renewables capacity compared with the Paris scenario. All of the scenarios, but especially the Paris and Best Place scenarios, will entail a considerable increase in the com- plexities that will have to be managed by grids in the var- ious geographical areas. In fact, we expect a significant increase in distributed generation and other resources, such as storage systems, the greater penetration of elec- tric mobility with the related charging infrastructures, as well as the growing rate of electrification of consumption Risk management 119 119 and the appearance of new actors with new modes of consumption. These developments will lead to the decentralization of power withdrawal/injection points, an increase in electric- ity demand and the average power required, and strong variability of energy flows, requiring dynamic and flexible management of the network. The Group, therefore, ex- pects that in this scenario incremental investments will be needed to ensure connections and adequate levels of quality and resilience, encouraging the adoption of inno- vative operating models. These investments must be ac- companied by consistent policy and regulatory scenarios to ensure adequate financial returns within the Infrastruc- ture and Networks Business Line. Risk & opportunity category Time horizon Scope of analysis GBL affected Geographic scope Description of impact Quantification - Type of impact Quantification - range < €100 mn €100- 300 mn > €300 mn Time horizon Upside Downside Short (within 3 years) Medium (until 2030) Long (2030-2050) 10% - Upside vs. Paris -10% - Downside vs. Paris Policy & Regulation Short/ Medium Enel Green Power and Thermal Generation Italy and Iberia For any given Paris scenario, the Group has assessed the impact on performance of actions to modify the price of CO2. Enel Green Power and Thermal Generation Global Customer Global Market Medium Market/ Products & Services Medium Considering two alternative transition scenarios, the Group assessed the impact of an increase in the penetration of renewables on the benchmark power price and on additional capacity at 2030. Considering two alternative transition scenarios, the Group assessed the impact of trends in efficiency, the adoption of electric devices and the penetration of EVs to estimate the potential effect on commodity consumption, including the impact on gas customers due to the increase in electrification and on the demand for beyond-commodity services. Considering the potential impact of regulatory measures to incentivize energy transition, the Group assesses the exposure to changes of +/- 10% in the price of CO2 using sensitivity analysis. Greater room for investment in new renewables capacity associated with a decrease in power prices due to increased penetration of renewables. Less room for investment in new renewables capacity associated with an increase in power prices due to decreased penetration of renewables. Increase in margins due to impact of transition in terms of the electrification of energy consumption, mainly linked to forecast increases in green hydrogen. Decrease in margins due to impact of transition in terms of slower electrification of energy consumption, mainly in residential and transport sectors, and reduced penetration of new technologies. EBITDA/year EDITDA 2030 Best Place vs. Paris EDITDA 2030 Slow Transition vs. Paris EDITDA 2030 Best Place vs. Paris EDITDA 2030 Slow Transition vs. Paris Note: the estimated transition impacts take account of current coverage levels. 120 120 Integrated Annual Report 2021 Competitive environment The markets and businesses in which the Group operates are exposed to steadily growing competition and evolution, from both a technological and regulatory point of view, with the timing of these developments varying from country to country. As a result of these processes, Enel is exposed to growing competitive pressure and, as electricity is this century’s en- ergy vector, competition driven by contiguous sectors is also rising, although this offers utilities the opportunity to move into new businesses. The differentiation on which the Group can count, both ge- ographically and in the various sectors in which it operates, is an important mitigation factor, but in order to orient stra- tegic development guidelines more effectively, the evolution of the competitive environment is constantly monitored, both inside and outside the world of utilities. Financial risks As part of its operations, Enel is exposed to a variety of financial risks that, if not appropriately mitigated, can di- rectly impact our performance. In line with the Group’s risk catalog, these risks include the following: • Interest rate • Commodity • Currency • Credit and counterparty • Liquidity The internal control and risk management system (the ICRMS) provides for the specification of policies that establish the roles and responsibilities for risk management, monitoring and control processes, ensuring compliance with the princi- ple of organizational separation of units responsible for oper- ations and those in charge of monitoring and managing risk. The financial risk governance system also defines a system of operating limits at the Group and individual region and coun- try levels for each risk, which are monitored periodically by risk management units. For the Group, the system of limits constitutes a decision-making tool to achieve its objectives. For further information on the management of financial risks, please see note 47 to the consolidated financial statements. Interest rate The Group is exposed to the risk that changes in the level of interest rates could produce unex- pected changes in net financial expense or financial assets and liabilities measured at fair value. The exposure to interest rate risk derives mainly from the variability of the terms of financing, in the case of new debt, and from the variability of the cash flows in respect of interest on float- ing-rate debt. The interest rate risk management policy seeks to contain financial expense and its volatility by optimizing the Group’s portfolio of financial liabilities and using OTC derivatives. Risk control through specific processes, risk indicators and operating limits enables us to limit possible adverse financial impacts and, at the same time, to optimize the structure of debt with an adequate degree of flexibility. The volatility that characterized the financial markets from the outset of the pandemic has in many cases returned to pre-COVID 19 levels and was offset by risk mitigation actions using derivative financial instruments. Commodity Enel operates in energy markets and for this reason is exposed to the risk of incurring losses as a result of an increase in the volatility of the prices of energy commodities, such as power, gas and fuel, and other commodities, such as minerals and metals (price risk), or owing to a lack of demand or energy commodity shortages (volume risk). If not managed effectively, these risks can have a significant impact on results. To mitigate this Risk management 121 121 Currency exposure, the Group has developed a strategy of stabilizing margins by contracting for supplies of fuel and materials and the delivery of electricity to end users or wholesalers in advance. Enel has also implemented a formal procedure that provides for the measurement of the resid- ual commodity risk, the specification of a ceiling for maximum acceptable risk and the imple- mentation of a hedging strategy using derivatives on regulated markets and over-the-counter (OTC) markets. The commodity risk control process limits the impact of unexpected changes in market prices on margins and, at the same time, ensures an adequate margin of flexibility that makes it possible to seize short-term opportunities. Beginning in 2021, monitoring of the risk was extended to the main raw materials to which the Group is exposed. In order to mitigate the risk of interruptions in the supply of fuel and raw materials, the Group has diversified fuel sources, using suppliers from different geographical areas. In 2021, the spread of the COVID-19 pandemic triggered a complex global economic crisis, causing significant increases in the volatility of prices of energy commodities and other raw materials. Enel has contained the risk below the limits estimated in 2020 for 2021, thanks to careful and timely mitigation measures, the geographical diversification of our business, the growing impetus given to the energy transition through the decarbonization process and the use of renewable sources for power generation. Finally, the adoption of global and local strat- egies, such as flexibility in contractual clauses and proxy hedging techniques (in the event that hedging derivatives are not available on the market or are not sufficiently liquid), has made it possible to optimize results even in a highly dynamic market context. In view of their geographical diversification, access to international markets for the issuance of debt instruments and transactions in commodities, Group companies are exposed to the risk that changes in exchange rates between the presentation currency and other currencies could generate unexpected changes in the performance and financial aggregates in their respective financial statements. Given the current structure of Enel, the exposure to currency risk is mainly linked to the US dol- lar and is attributable to: • cash flows in respect of the purchase or sale of fuel or electricity; • cash flows in respect of investments, dividends from foreign subsidiaries or the purchase or sale of equity investments; • cash flows connected with commercial relationships; • financial assets and liabilities. The possible impacts of currency risk are reflected in: • costs and revenue denominated in foreign currencies with respect to the time at which pric- ing conditions were defined or the investment decision was made (economic risk); • revaluations or adjustments to fair value of financial assets and liabilities sensitive to exchange rates (transaction risk); • the consolidation of subsidiaries with different currencies of account (translation risk). The currency risk management policy is based on systematically hedging the exposures of the Group companies, with the exception of translation risk. Appropriate operational processes ensure the definition and implementation of appropriate hedging strategies, which typically employ financial derivatives obtained on OTC markets. Risk control through specific processes and indicators enables us to limit possible adverse fi- nancial impacts and, at the same time, to optimize the management of cash flows on the man- aged portfolios. During the year, currency risk was managed through compliance with the risk management policies, encountering no difficulties in accessing the derivatives market. The volatility that characterized the financial markets during the initial phase of the pandemic 122 122 Integrated Annual Report 2021 Credit and counterparty has in many cases returned to pre-COVID 19 levels and was offset by risk mitigation actions us- ing derivative financial instruments. The Group’s commercial, commodity and financial transactions expose it to credit risk, i.e., the possibility that a deterioration in the creditworthiness of counterparties or the failure to dis- charge contractual payment obligations could lead to the interruption of incoming cash flows and an increase in collection costs (settlement risk) as well as lower revenue flows due to the replacement of the original transactions with similar transactions negotiated on unfavorable market conditions (replacement risk). Other risks include the reputational and financial risks as- sociated with significant exposures to a single counterparty or groups of related customers, or to counterparties operating in the same sector or in the same geographical area. The exposure to credit risk is attributable to the following types of operations: • the sale and distribution of electricity and gas in free and regulated markets and the supply of goods and services (trade receivables); • trading activities that involve the physical exchange of assets or transactions in financial in- struments (the commodity portfolio); • trading in derivatives, bank deposits and, more generally, financial instruments (the financial portfolio). The policy for managing credit risk associated with commercial activities and transactions in commodities provides for a preliminary assessment of the creditworthiness of counterparties and the adoption of mitigation instruments, such as obtaining guarantees. The control process based on specific risk indicators and, where possible, limits ensures that the economic and financial impacts associated with a possible deterioration in credit standing are contained within sustainable levels. At the same time, this approach preserves the neces- sary flexibility to optimize portfolio management. In addition, the Group undertakes transactions to factor receivables without recourse, which results in the complete derecognition of the corresponding assets involved in the factoring. Finally, with regard to financial and commodity transactions, risk mitigation is pursued through the diversification of the portfolio (giving preference to counterparties with a high credit rating) and the adoption of specific standardized contractual frameworks that contain risk mitigation clauses (e.g. netting arrangements) and possibly the exchange of cash collateral. Despite the deterioration in the collection status of certain customer segments, which was tak- en into consideration in determining impairment of trade receivables, the Group’s portfolio has so far demonstrated resilience to the global pandemic. This reflects the expansion of digital collection channels and a solid diversification of commercial customers with a low exposure to the impact of COVID-19 (e.g., utilities and distribution companies). Liquidity Enel’s liquidity risk management policy is designed to maintain sufficient liquidity to meet expected commitments over a given time horizon without resorting to additional sources of financing, also retaining a prudential liquidity reserve, sufficient to meet any unexpected com- mitments. Furthermore, in order to meet its medium- and long-term commitments, Enel pur- sues a borrowing strategy that provides for a diversified structure of funding sources, which it uses to meet its financial needs, and a balanced maturity profile. Liquidity risk is the risk that the Group, while solvent, would not be able to discharge its obliga- tions in a timely manner or would only be able to do so on unfavorable terms or in the presence of constraints on disinvestment from assets with consequent capital losses, owing to situa- tions of tension or systemic crises (credit crunches, sovereign debt crises, etc.) or changes in the perception of Group riskiness by the market. Risk management 123 123 Among the factors that define the risk perceived by the market, the credit rating assigned to Enel by rating agencies plays a decisive role, since it influences its ability to access sources of financing and the related financial terms of that financing. A deterioration in the credit rating could therefore restrict access to the capital market and/or increase the cost of funding, with consequent negative effects on the financial position, financial performance and cash flows of the Group. In 2021, Enel’s risk profile only changed compared with 2020 for Moody’s, whose rating went from “Baa2” with a positive outlook to “Baa1” with a stable outlook. Enel’s rating remained “BBB+” with a stable outlook for Standard & Poor’s and “A-” with a stable outlook for Fitch. In order to manage liquidity efficiently, treasury activities have largely been centralized at the Parent level, meeting liquidity requirements primarily by drawing on the cash generated by or- dinary operations and managing any cash surpluses appropriately. As regards the impact of COVID-19, despite the effects of the pandemic the liquidity risk indi- ces monitored for the Group remained within the limits established for 2021. Digital Technology risks The risks discussed in this section are as follows: • Cyber security • Digitalization, IT effectiveness and service continuity Cyber security The speed of technological developments that constantly generate new challenges, the ever-in- creasing frequency and intensity of cyber-attacks and the attraction of critical infrastructures and strategic industrial sectors as targets underscore the potential risk that, in extreme cases, the normal operations of companies could grind to a halt. Cyber-attacks have evolved dramat- ically in recent years: their number has grown exponentially, as has their complexity and impact (theft of company data on customers), making it increasingly difficult to promptly identify the source of threats. In the case of the Enel Group, this exposure reflects the many environments in which it operates (data, industry and people), a circumstance that accompanies the intrinsic complexity and interconnection of the resources that over the years have been increasingly inte- grated into the Group’s daily operating processes. The Group has adopted a holistic governance approach to cyber security that is applied to all the sectors of IT (Information Technology), OT (Operational Technology) and IoT (Internet of Things). The framework is based on the commitment of top management, on global strategic manage- ment, on the involvement of all business areas as well as of the units involved in the design and implementation of our systems. It seeks to use cutting edge technologies, to design ad hoc busi- ness processes, to strengthen people’s IT awareness and to implement regulatory requirements for IT security. In addition, the Group has developed an IT risk management methodology founded on “risk- based” and “cyber security by design” approaches, thus integrating the analysis of business risks into all strategic decisions. Enel has also created its own Cyber Emergency Readiness Team (CERT) in order to proactively respond to any IT security incidents. Finally, back in 2019, the Group also took out an insurance policy for cyber security risks in order to mitigate those risks with other tools in addition to technical countermeasures. 124 124 Integrated Annual Report 2021 Digitalization, IT effectiveness and service continuity The Group is carrying out a complete digital transformation of how it manages the entire en- ergy value chain, developing new business models and digitizing its business processes, inte- grating systems and adopting new technologies. A consequence of this digital transformation is that the Group is increasingly exposed to risks related to the functioning of the IT systems, which are integrated across the Company with impacts on processes and operations, which could expose IT and OT systems to service interruptions or data losses. These risks are managed using a series of internal measures developed by the Global Digital Solutions (GDS) unit, which is responsible for guiding the Group’s digital transformation. It has set up an internal control system that introduces control points along the entire IT value chain, enabling us to prevent the emergence of risks engendered by such issues as the creation of services that do not meet business needs, the failure to adopt adequate security measures and service interruptions. The internal control system of the Global Digital Solutions unit over- sees both the activities performed in-house and those outsourced to external associates and service providers. Furthermore, Enel is promoting the dissemination of a digital culture and digital skills within the Group in order to successfully guide the digital transformation and mini- mize the associated risks. Operational risks The risks discussed in this section are as follows: • Health and safety • Environment • Procurement, logistics and supply chain • People and organization Health and safety The main health and safety risks to which Enel personnel and contractors are exposed are associated with opera- tions at the Group’s sites and assets. The violation of the laws, regulations and procedures governing health and safety, work environments, management of corporate structures, assets and processes, which could have an adverse impact on the health of employees, workers or stakeholders, can give rise to the risk of incurring admin- istrative or judicial penalties and related economic, finan- cial and reputational impacts. These risks were identified through an analysis of the main events that have occurred in the last three years. In particular, in terms of probabil- ity of occurrence, mechanical incidents (falls, collisions, crushing and cuts) are the most common, while the most severe in terms of potential associated impact are electri- cal incidents (possibly fatal injuries). In addition, in relation to the presence of the Group in different areas of the world, employees and contractors could be exposed to health risks connected with poten- tial emerging infectious diseases of a pandemic and po- tentially pandemic nature, which could have an impact on their health and well-being. Enel has adopted a Declaration of Commitment to Health and Safety, signed by the Group’s top management. In implementing the policy, each Group Business Line has its own Occupational Health and Safety Management Sys- tem compliant with the international standard BS OHSAS 18001, which is based on the identification of hazards, the qualitative and quantitative assessment of risks, the plan- ning and implementation of prevention and protection measures, the verification of the effectiveness of the pre- vention and protection measures and any corrective ac- tions. This system also considers the rigor employed in the selection and management of contractors and suppliers and the promotion of their involvement in programs for continuous improvement of safety performance. The Enel Group has defined a structured health manage- ment system, based on prevention and protection meas- ures, which also plays a role in the development of a cor- porate culture aimed at promoting the psycho-physical Risk management 125 125 health and organizational well-being of workers, as well as helping to balance personal and professional life. Furthermore, with regard to emergencies in relation to risks connected with the ongoing pandemic, a unit has been set up within the Personnel and Organization department of the Parent with liaisons in each Business Line and country in order to ensure the definition of the global strategy and policies for emergency management and their adoption in every Group organization. In particular, this organizational structure and the related management processes make it possible to direct, integrate and monitor, both at Group level and in the individual countries in which it operates, all the prevention, protection and intervention actions aimed at protecting the health of employees and contractors, also in relation to exogenous health risk factors that may not be strictly related to work activities. Additional information on risk management is provided in the “Workplace health and safety” section. Environment Recent years have seen the continuation of the growth in the sensitivity of the entire community to risks con- nected with development models that impact the quality of the environment and ecosystems with the exploitation of scarce natural resources (including raw materials and water). In some cases, the synergistic effects between these impacts, such as global warming and the increasing ex- ploitation and degradation of water resources, have in- creased the risk of environmental emergencies in the most sensitive areas of the planet, with the risk of spark- ing competition among different uses of water resources such as industrial, agricultural and civil uses. In response to these needs, authorities have imposed in- creasingly restrictive environmental regulations, placing ever more stringent constraints on the development of new industrial initiatives and, in the most impactful indus- tries, incentivizing or requiring the elimination of tech- nologies no longer considered sustainable. Specifically, the European Commission has launched a work plan to define challenging targets for environmen- tal recovery, both in terms of air quality and the recovery of rivers and contaminated land, and for the reduction of biodiversity loss. In this context, companies in every sector, and above all industry leaders, are ever more aware that environmental risks are economic risks. As a result, they are called upon to increase their commitment and accountability for de- veloping and adopting innovative and sustainable techni- cal solutions and development models. Enel has made the effective prevention and minimization of environmental impacts and risks a foundational ele- ment of each project across its entire life cycle. The adoption of ISO 14001-certified environmental man- agement systems across the entire Group ensures the implementation of structured policies and procedures to identify and manage the environmental risks and oppor- tunities associated with all corporate activities. A struc- tured control plan combined with improvement actions and objectives inspired by the best environmental prac- tices, with requirements exceeding those for simple en- vironmental regulatory compliance, mitigate the risk of impacts on the environment, reputational damage and litigation. Also contributing are the multitude of actions to achieve the challenging environmental improvement objectives set by Enel, such as those regarding atmos- pheric emissions, waste production and water consump- tion, especially in areas with high water stress. The risk of water scarcity is directly mitigated by Enel’s development strategy, which is based on the growth of generation from renewable sources that are essentially not dependent on the availability of water for their oper- ation. Special attention is also devoted to assets in areas with a high level of water stress, in order to develop tech- nological solutions to reduce consumption. Ongoing col- laboration with local river basin management authorities enables us to adopt the most effective shared strategies for the sustainable management of hydroelectric gener- ation assets. Finally, with regard to protecting biodiversity, an analysis of the impacts/dependencies of the business on natural resources was conducted and priority areas for action were defined along the entire value chain. On the basis of this analysis, appropriate terrestrial, marine and river monitoring actions are being implemented in ecosystems to verify the effectiveness of the measures adopted to protect, restore and conserve biodiversity. 126 126 Integrated Annual Report 2021 Procurement, logistics and supply chain The purchasing processes of Global Procurement and the associated governance documents form a structured system of rules and control points that make it possible to combine the achievement of economic business objectives with full compliance with the fundamental principles set out in the Code of Ethics, the Enel Global Compliance Program, the Zero-Tolerance-of-Corruption Plan and the Human Rights Policy, without renouncing the promotion of initiatives for sustainable economic development. These principles have been incorporated into the organiza- tional processes and controls that Enel has voluntarily decid- ed to adopt in order to establish relationships of trust with all its stakeholders, as well as define stable and constructive relationships that are not based exclusively on ensuring fi- nancial competitiveness but also take account of best prac- tices in essential areas for the Group, such as the avoidance of child labor, occupational health and safety and environ- mental responsibility. Thanks to the greater interaction and integration with the outside world and with the different parts of the corporate organization, the procurement process has assumed an increasingly central role in the creation of value. Global Procurement contributes to a resilient and sustainable supply chain, thinking from a circular economy perspective and fostering innovation, sharing the Group’s values and ob- jectives with suppliers who thereby become enablers of the achievement of Enel’s targets. More specifically, bonus factors have been introduced in ten- ders in order to engender virtuous behavior on the part of our suppliers. For example, the environmental impact of any customer is strongly influenced by the impact of its upstream supply chain, and that is why Global Procurement pushes its suppliers to objectively measure their carbon footprint and improve their performance. From the point of view of the procurement process, the various procurement units almost systematically adopt the tender mechanism, thus ensuring maximum competition and equal access opportunities for all operators who are in People and organization possession of the technical, economic/financial and envi- ronmental requirements, security, human, legal and ethical rights. Procurement with direct assignment and without a competitive procedure can only take place in exceptional cases, duly motivated, in compliance with current legislation on the matter. Furthermore, the single global supplier qualification system for the entire Enel Group, even before the procurement pro- cess begins, verifies that potential suppliers who intend to participate in procurement procedures are aligned with the Company’s strategic vision and expectations in all the areas and requirements cited earlier and that they have adopted the same values. With regard to the risk governance system, Global Procure- ment is focused on the application of metrics that indicate the level of risk before and after the mitigation action, in or- der to implement precautionary measures to reduce uncer- tainty to a tolerable level or mitigate any impacts in all busi- ness, technological and geographical areas. The effectiveness of supply chain risk management is mon- itored through specific indicators – including the probability of insolvency, the concentration of contracts with individual suppliers or industrial groups, the supplier’s dependence on Enel, a performance indicator for the correctness of conduct during the tender, quality, punctuality and sustainability in the execution of the contract, country risk, etc. – for which thresholds have been specified to guide the definition of the procurement, negotiation and tender award strategy, ena- bling informed choices of risk and potential benefit (savings). The actions taken to counter the impact of the COVID-19 emergency have focused in differentiating supply sources to avoid interruptions in the supply chain and the remote per- formance of activities that would ordinarily require physical interaction between Enel and the supplier (e.g., inspections at the company). Enel has set itself the goal of leading the transition to a more sustainable system, an essential step for the future of the planet, by accelerating the decarbonization of our energy mix through an expansion of renewables and the ever-increasing electrification of energy consumption. Enel could be exposed to the risk of incurring judicial or administrative penalties, economic or financial losses and reputational harm following a partial or total interruption of commercial operations and the supply of the electric- ity services to customers as a result of technical failures, malfunctioning assets and plant, human error, sabotage, unavailability of raw materials or adverse weather events or infectious diseases of epidemic or pandemic potential that could limit the normal operation of the Group’s activities or its supply chain. The profound transformations of the energy sector have increased the importance of recruiting people with new experience and professional skills, as well as imposing the need for major cultural and organizational changes in or- der to achieve Group objectives. Organizations must move to adopt new, agile and flexible business models. Policies to Risk management 127 127 enhance diversity and to manage and promote talent have become key factors for companies that are managing the transition and have a widespread geographical presence. Enel places the people who work for it at the center of its business model. The management of human capital is a priority for which specific objectives have been estab- lished. These include: the development of the digital ca- pabilities and skills, as well as the promotion of reskilling and upskilling programs for employees in order to sup- port the energy transition and external skilling to foster the development of a reference ecosystem; the effective engagement of employees in the pursuit of the corporate purpose, which ensures the achievement of better results while offering greater satisfaction to our people; the de- velopment of systems for evaluating the working environ- ment and performance; the dissemination of diversity and inclusion policies to all countries in which the Group oper- ates, as well as instilling an inclusive organizational culture based on the principles of non-discrimination and equal opportunity, key drivers for attracting and retaining talent. The Group is involved in enhancing the resilience and flex- ibility of organizational models through the simplification and digitalization of processes in order to enable the ef- fectiveness and autonomy of our people within new flexi- ble working schemes, which have already been effectively tested in the response to the COVID-19 pandemic emer- gency, which will be a key element of future approaches to work. Compliance risks The risks discussed in this section are as follows. • Personal data protection Risks connected with the protection of personal data In the era of the digitalization and globalization of mar- kets, Enel’s business strategy has focused on accelerating the transformation towards a business model based on a digital platform, using a data-driven and customer-centric approach along the entire value chain. The Group, which is present in more than 40 countries, has the largest customer base in the public services sector (more than 69 million customers), and currently employs more than 66,000 people. Consequently, the Group’s new business model requires the management of an increas- ingly large and growing volume of personal data in order to achieve the financial and business results envisaged in the 2021-2023 Strategic Plan. This exposes Enel to the risks connected with the protec- tion of personal data (an issue that must also take account of the substantial growth in privacy legislation in most of the countries in which Enel operates). These risks may re- sult in the loss of confidentiality, integrity or availability of the personal information of our customers, employees and others (e.g., suppliers), with the risk of incurring fines de- termined on the basis of global turnover, the prohibition of the use of certain processes and consequent financial losses and reputational harm. In order to manage and mitigate this risk, Enel has adopted a model for the global governance of personal data, with the appointment of personnel responsible for privacy is- sues at all levels (including the appointment of Data Pro- tection Officers at the global and country levels) and the adoption of digital compliance tools to map applications and processes and manage risks with an impact on pro- tecting personal data, in compliance with specific local regulations in this field. 128 128 Integrated Annual Report 2021 Risk management 129 129 REPORT ON OPERATIONS 4. Group Performance Integrated disclosure Financial and non-financial results are reported in integrated form to give an overall view of the Group's performance. Group ordinary profit in 2021 up 7.6% on 2020 An improvement in ordinary operating performance and a decrease in non-controlling interests following Group reorganization in Latin America. Capital expenditure reaches €13 billion to accelerate the energy transition 43.6% in Enel Green Power and 40.7% in Infrastructure and Networks. 84.6% of total capital expenditure in businesses aligned with the European taxonomy 55% of debt consists of sustainable financing Consistent with its Sustainability-Linked Financing Framework, the Group is increasingly active in the development of sustainable finance tools with KPIs linked to the achievement of the Sustainable Development Goals (SDGs). 130 Integrated Annual Report 2021 131 Definition of performance indicators In order to present the results of the Group and the Par- ent and analyze their financial structure, Enel has pre- pared separate reclassified schedules that differ from the schedules envisaged under the IFRS-EU adopted by the Group and by Enel SpA and contained in the consolidat- ed financial statements and separate financial statements, respectively. These reclassified schedules contain different performance indicators from those obtained directly from the consolidated financial statements and separate finan- cial statements, which management believes are useful in monitoring the performance of the Group and the Parent and representative of the financial performance and posi- tion of our business. With regard to those indicators, on April 29, 2021, CON- SOB issued warning notice no. 5/21, which gives force to the Guidelines issued on March 4, 2021 by the European Securities and Markets Authority (ESMA) on disclosure re- quirements under Regulation (EU) 2017/1129 (the Prospec- tus Regulation), which took effect on May 5, 2021. The Guidelines update the previous CESR Recommenda- tions (ESMA/2013/319, in the revised version of March 20, 2013) with the exception of those concerning the special issuers referred to in Annex no. 29 of Delegated Regulation (EU) 2019/980, which were not converted into Guidelines and remain applicable. Accordingly, as from May 5, 2021, the references to the above CESR Recommendations contained in previous CONSOB communications shall be considered to have been replaced by references to the ESMA Guidelines cit- ed above, including the references in Communication no. DEM/6064293 of July 28, 2006 regarding the net financial position. The Guidelines are intended to promote the usefulness and transparency of alternative performance indicators included in regulated information or prospectuses within the scope of application of Directive 2003/71/EC in order to improve their comparability, reliability and comprehen- sibility. In line with the regulations cited above, the criteria used to construct these indicators are the following. Gross operating profit: an operating performance indica- tor, calculated as “Operating profit“ plus “Depreciation, amortization and impairment losses“. Ordinary gross operating profit: defined as “Gross operat- 132 132 Integrated Annual Report 2021 ing profit“ from core businesses connected with the Own- ership and Stewardship business models. It does not in- clude costs connected with corporate restructurings and costs directly attributable to the COVID-19 pandemic. Ordinary operating profit: defined as “Operating profit“ from core businesses connected with the Ownership and Stewardship business models. It is calculated by adjusting “Operating profit“ for the ef- fects of transactions not connected with core operations referred to with regard to gross operating profit and ex- cluding significant impairment losses on assets and/or groups of assets following impairment testing (including reversals of impairment losses) or classification under “As- sets held for sale“. Group ordinary profit: it is defined as “Group profit“ gener- ated by Enel’s core business connected with the Owner- ship and Stewardship business models. It is equal to “Group profit“ adjusted primarily for the items discussed under “Ordinary operating profit“, net of any tax effects and non-controlling interests. Low carbon ordinary EBITDA: it is the ordinary gross oper- ating profit of the set of products, services and technolo- gies included in the following Business Lines: Enel Green Power, Infrastructure and Networks, Enel X and End-user Markets (excluding gas). Net non-current assets: calculated as the difference be- tween “Non-current assets“ and “Non-current liabilities“ with the exception of: • “Deferred tax assets“; • “Securities“ and “Other financial assets“ included in “Other non-current financial assets“; • “Long-term borrowings“; • “Employee benefits“; • “Provisions for risks and charges (non-current portion)“; • “Deferred tax liabilities“. Net working capital: calculated as the difference between “Current assets“ and “Current liabilities“ with the exception of: • “Current portion of long-term loan assets“, “Factoring re- ceivables“, “Securities“, “Cash collateral“ and “Other finan- cial assets“ included in “Other current financial assets“; • “Cash and cash equivalents“; • “Short-term borrowings“ and the “Current portion of long-term borrowings“; • “Provisions for risks and charges (current portion)“; • “Other financial liabilities“ included in debt. Net assets held for sale: calculated as the algebraic sum of “Assets held for sale“ and “Liabilities included in disposal groups held for sale“. Net capital employed: calculated as the sum of “Net non-current assets“ and “Net current assets“, “Provisions for risks and charges“, “Deferred tax liabilities“ and “De- ferred tax assets“, as well as “Net assets held for sale“. Net financial debt: a financial structure indicator, deter- mined by: • “Long-term borrowings“, “Short-term borrowings“ and “Current portion of long-term borrowings“, taking ac- count of “Long- and short-term financial borrowings“ included respectively in “Other non-current financial liabilities“ and “Other current financial liabilities“; • net of “Cash and cash equivalents“; • net of the “Current portion of long-term loan assets“, “Current securities“ and “Other financial assets“ includ- ed in “Other current financial assets“; • net of “Non-current securities“ and “Non-current finan- cial assets“ included in “Other non-current financial as- sets“. Main changes in the consolidation scope In the two periods under review, the consolidation scope changed as a result of a number of transactions. For more information, please see note 8 to the consolidated finan- cial statements. Definition of performance indicators 133 133 Performance of the Group 134 134 Integrated Annual Report 2021 Performance of the Group 222.6 TWh NET ELECTRICITY GENERATION of which 108.8 TWh of renewable generation 57.5% NET EFFICIENT INSTALLED RENEWABLES CAPACITY for a total of 50.1 GW 45 million END USERS WITH ACTIVE SMART METERS(1) 69.3 million RETAIL CUSTOMERS 2.2 million km ELECTRICITY DISTRIBUTION AND TRANSMISSION GRID 157,209 no. CHARGING POINTS 60% of end users are digitalized of which 24.8 million on the free market +49.6% on 2020 (1) Of which 23.5 million second-generation smart meters in 2021 and 18.2 million in 2020. The following presents the operating and financial perfor- mance of the Group. Operations 2020 Change SDG 7 7 7 7 9 9 9 11 11 11 Net electricity generation (TWh) of which: - renewable (TWh) Total net efficient installed capacity (GW) Net efficient installed renewables capacity (GW) Net efficient installed renewables capacity (%) Additional efficient installed renewables capacity (GW) Electricity transported on Enel’s distribution grid (TWh)(1) 2021 222.6 108.8 87.1 50.1 57.5% 5.18 510.3 207.1 105.4 84.0 45.0 53.6% 2.91 485.2 End users with active smart meters (no.)(1) (2) 44,968,974 44,293,483 Electricity distribution and transmission grid (km)(1) End users (no.) Electricity sold by Enel (TWh) Gas sold to end users (billions of m3) Retail customers (no.) - of which free market(1) Demand response capacity (MW) Charging points (no.)(1) Storage (MW) 2,233,368 75,178,777 309.4 9.9 69,342,818 24,839,600 7,713 157,209 375 2,232,023 74,303,931 298.2 9.7 69,517,932 22,931,809 6,038 105,079 123 15.5 3.4 3.1 5.1 3.9 2.27 25.1 675,491 1,345 874,846 11.2 0.2 (175,114) 1,907,791 1,675 52,130 252 (1) The figures for 2020 reflect a more accurate calculation of the numbers. (2) Of which 23.5 million second generation smart meters in 2021 and 18.2 million in 2020. Performance of the Group 135 135 Net electricity generated by Enel in 2021 increased by 15.5 TWh (7.5%) from 2020. This rise mainly reflects an increase in wind generation (+6.8 TWh), mainly in Brazil and North America, and a larger contribution from combined-cycle plants (+8.4 TWh), above all in Italy, Spain and Chile. Net electricity generation by source (2021) 2021 2021 Total 222.6 TWh 2021 2021 207.1 TWh in 2020 Total 222.6 TWh Total renewable sources 48.9% 50.9% in 2020 Total renewable sources 48.9% At the end of December 2021, the Group’s net efficient in- stalled capacity totaled 87.1 GW, an increase of 3.1 GW on 2020. During 2021, 2.6 GW of new wind capacity and 2.2 GW of new solar capacity were installed, while a number of com- 50.9% in 2020 49.1% in 2020 207.1 TWh in 2020 Total traditional sources 51.1% Total traditional sources 51.1% panies in Australia were fully consolidated (0.3 GW of solar 49.1% in 2020 capacity) after having been equity accounted until December 31, 2020. At the same time, a number of coal-fired plants in Italy and Spain were decommissioned (2.0 GW). Net efficient installed capacity by source (2021) 25.6% Hydroelectric 30.1% in 2020 25.6% 17.0% Hydroelectric Wind 30.1% in 2020 15.0% in 2020 17.0% 3.5% Wind Solar 15.0% in 2020 2.8% in 2020 3.5% 2.8% Solar Geothermal and other 2.8% in 2020 3.0% in 2020 2.8% Geothermal and other 3.0% in 2020 32.0% Hydroelectric 33.1% in 2020 32.0% 17.1% Hydroelectric Wind 33.1% in 2020 14.8% in 2020 17.1% 7.3% Wind Solar 14.8% in 2020 4.6% in 2020 7.3% 1.1% Solar Geothermal and other 4.6% in 2020 1.1% in 2020 1.1% Geothermal and other 1.1% in 2020 23.2% Combined-cycle 20.9% in 2020 23.2% 11.5% Combined-cycle Nuclear 20.9% in 2020 12.5% in 2020 11.5% 10.2% Nuclear Fuel oil and turbo-gas 12.5% in 2020 9.4% in 2020 10.2% Fuel oil and turbo-gas 6.2% 9.4% in 2020 Coal-fired 6.3% in 2020 6.2% Coal-fired 6.3% in 2020 17.3% Combined-cycle 17.9% in 2020 17.3% 13.5% Combined-cycle Fuel oil and turbo-gas 17.9% in 2020 13.9% in 2020 13.5% 7.9% Fuel oil and turbo-gas Coal-fired 13.9% in 2020 10.6% in 2020 7.9% Coal-fired 3.8% 10.6% in 2020 Nuclear 4.0% in 2020 3.8% Nuclear 4.0% in 2020 2021 Total 87.1 GW 2021 84.0 GW in 2020 Total 87.1 GW Total renewable sources 57.5% 53.6% in 2020 Total renewable sources 57.5% 84.0 GW in 2020 Total traditional sources 42.5% 46.4% in 2020 Total traditional sources 42.5% 53.6% in 2020 46.4% in 2020 136 136 Integrated Annual Report 2021 At the end of December 2021, the Group’s net efficient in- stalled renewables capacity reached 50.1 GW, an increase of 5.1 GW compared with 2020, and represents 57.5% of total net efficient installed capacity. Fighting climate change and ensuring environmental sustainability 227 gCO2eq /kWh DIRECT GREENHOUSE GAS EMISSIONS - SCOPE 1 - SPECIFIC +5.1% on 2020 26.3 million m3 TOTAL WATER CONSUMPTION +28.9% on 2020 60.3% ZERO-EMISSIONS GENERATION (% of total) €17,335 million ORDINARY EBITDA FROM LOW-CARBON PRODUCTS, SERVICES AND TECHNOLOGIES €12,302 million CAPEX ON LOW-CARBON PRODUCTS, SERVICES AND TECHNOLOGIES Main climate change indicators Direct greenhouse gas emissions - Scope 1(1) Indirect greenhouse gas emissions - Scope 2 - location based(1) Indirect greenhouse gas emissions - Scope 2 - market based(1) Indirect greenhouse gas emissions - Scope 3(1) - of which emissions connected with gas sales(1) Specific direct greenhouse gas emissions - Scope 1(1) (2) Specific emissions of SO2 Specific emissions of NOx Specific emissions of particulates Zero-emission generation Total direct fuel consumption Average efficiency of thermal plants(3) Water withdrawals in water-stressed areas(4) Specific water requirement for total generation Reference price of CO2 (million/teq) (million/teq) (million/teq) (million/teq) (million/teq) (gCO2eq/kWh) (g/kWh) (g/kWh) (g/kWh) (% of total) (Mtoe) (%) (%) (l/kWh) (€) 2021 51.6 4.3 7.1 69.1 22.3 227 0.07 0.35 0.005 60.3 26.3 44.4 27.4 0.2 2020 45.7 4.1 6.9 64.9 21.9 216 0.10 0.36 0.01 63.4 23.9 44.2 23.3 0.2 53.24 24.72 Ordinary EBITDA for low-carbon products, services and technologies(5) (millions of €) 17,335 15,703 Capex for low-carbon products, services and technologies (millions of €) 12,302 9,575 Ratio of capex for low-carbon products, services and technologies to total (%) 94.0 94.0 Change 5.9 0.2 0.2 4.2 0.4 11 12.9% 4.9% 2.9% 6.5% 1.8% 5.1% (0.03) (0.01) -30.0% -2.8% (0.005) -50.0% (3.1) 2.4 0.2 4.1 - 28.52 1,632 2,727 - -4.9% 10.0% 0.5% 17.6% - - 10.4% 28.5% - (1) The figures for 2020 have been modified following the introduction of a new calculation method deriving from the implementation of the Net-Zero project. (2) Specific emissions are calculated considering total direct emissions (Scope 1) as a ratio of total renewable, nuclear and thermal generation (including the con- tribution of heat). (3) The calculation does not consider Italian O&G plants being decommissioned or of marginal impact. In addition, the figures do not take account of consumption and generation for cogeneration relating to Russian thermal generation plants. Average efficiency is calculated on the basis of the plant fleet and is weighted by generation. (4) Value for 2020 recalculated following extension of the category of plants in water-stressed areas. (5) For comparative purposes only, €87 million in 2020 in respect of the component recognized through profit or loss deriving from the remeasurement at fair value of the financial assets connected with service concession arrangements involving distribution operations in Brazil falling within the scope of IFRIC 12 have been reclassified from financial income to revenue. The latter classification had an impact of the same amount on operating profit. For more information, please see note 7 to the consolidated financial statements. Performance of the Group 137 137 The Group’s ambition for leadership in the fight against cli- mate change was further strengthened in 2021: the target of an 80% reduction by 2030 in Scope 1 emissions com- pared with 2017 was confirmed, in line with the scenario for containing temperature increases to 1.5 °C compared with pre-industrial levels, as certified by the Science Based Tar- gets initiative (SBTi), and achieving the Net-Zero target by 2040. The year 2021 closed with a 6% decrease in carbon intensity compared with the base year. Direct emissions of CO2 equivalent (Scope 1) amounted to 51.6 million metric tons, an increase of 12.9% compared with 2020. The increase was attributable to the growing de- mand for electricity compared with the previous year, with a rise in thermal generation, which offset the decline in hydro- electric generation for the year. Electricity generated by Enel from zero-emission sources in 2021 amounted to 60.3% of total output, a slight decrease compared with 2020 as a result of the increase in fossil fuel generation, but still significantly higher than in 2019 (when it was equal to 54.9%) due to the increase in solar and wind generation. Specific emissions of SO2 and particulates declined com- pared with 2020 by 30% and over 50%, respectively. Specific NOx emissions also recorded a slight decrease (-2.8% com- pared with 2020). Responsible water resource management Total withdrawals Water withdrawals in water-stressed areas(1) Specific water requirement for total generation Total water consumption Water consumption in water-stressed areas (%)(1) (millions of m3) (%) (l/kWheq) (millions of m3) (%) 2021 55.6 27.4 0.2 26.3 33.8 2020 Change 51.5 23.3 0.2 20.4 31.6 4.1 4.1 - 5.9 2.2 8.0% 17.6% - 28.9% 7.0% (1) Value for 2020 recalculated following extension of the category of plants in water-stressed areas. Water is an essential part of electricity generation, al- though the gradual shift to renewables, notably solar and wind, is reducing the specific water requirement. Enel constantly monitors all generation sites located in ar- eas at risk of water scarcity (water-stressed areas) in order to ensure the most efficient management of the resource. Site monitoring is conducted through the following levels of analysis: • mapping of generation sites in water-stressed areas identified on the basis of the (baseline) water stress conditions indicated by the World Resources Institute “Aqueduct Water Risk Atlas“; • identification of “critical“ generation sites, i.e., those lo- cated in water-stressed areas that draw fresh water for operating needs; • verification of the water management procedures adopted in these plants in order to minimize consump- tion and maximize withdrawals from lower quality or more abundant sources (waste, industrial or sea water). About 14% of the Enel Group’s total electricity output uses fresh water in water-stressed areas. In 2021 total water re- quirements(17) were 46.5 million cubic meters, an increase of 8% on 2020 owing to the rise in thermal generation. The specific water requirement for 2021 was 0.2 l/kWheq. Preserving biodiversity Preserving biodiversity is one of the strategic objectives of Enel’s environmental policy. The Group promotes spe- cific projects in the various areas in which it operates in order to help protect local species, their natural habitats, and the local ecosystems in general. These projects cover a vast range of areas, including: inventory and monitoring; programs to protect specific species at risk of extinction; methodological research and other studies; repopulation and reforestation; the construction of infrastructure sup- ports to promote the presence and activities of various species (e.g., artificial nests along power distribution lines for birds or fish ladders at hydroelectric plants), and eco- logical restoration and reforestation programs. In 2021, 183 projects were under way to safeguard spe- (17) The water requirement consists of all water withdrawals from surface sources (including rainwater), underground sources, third-parties, the sea and waste- water sources (relating to supplies from third parties) used for process needs and closed-cycle cooling, except for the amount of sea water returned to the sea after desalination (brine). The latter item (brine), on the other hand, contributes to withdrawals. 138 138 Integrated Annual Report 2021 cies and natural habitats, with a total total of 9,092 hec- tares involved in habitat recovery efforts. The area involved in restoration projects in 2021 increased compared with the previous year (4,356 hectares in 2020), reflecting both the start of new restoration projects and an increase in the areas involved in restoration as part of existing projects. Electricity distribution and access, ecosystems and platforms Electricity transported on Enel’s distribution grid totaled 510.3 TWh in 2021, up 25.1 TWh (+5.2%) from 2020, attrib- utable essentially to Italy (+12.3 TWh), Spain (+6.6 TWh) and Brazil (+2.5 TWh). The number of Enel end users with active smart meters in- creased by 675,491 in 2021, mainly in Italy (+332,311) and Romania (+205,006). Electricity sold by Enel in 2021 came to 309.4 TWh, in- creasing by 11.2 TWh (+3.8%) compared with the previous year. Quantities increased mainly in Italy (+2.6 TWh) and Latin America (+9.5 TWh) – mainly in Brazil (+4.1 TWh) and Chile (+3.7 TWh). In addition, gas sold by Enel in 2021 to- taled 9.9 billion cubic meters, an increase of 0.2 billion cu- bic meters compared with the previous year. Enel’s leadership position has been gained thanks to the attention we place on the customer in providing quality services: aspects that concern more than just the provi- sion of electricity and/or natural gas, extending, above all, to intangible aspects of our service that relate to the per- ception and satisfaction of our customers. Through our products for both the residential and business markets, Enel provides dedicated offers with a lower envi- ronmental impact and a concentration on the most vul- nerable segments of the population. In fact, all the coun- tries in which the Group operates provide forms of support (often linked to government initiatives) which assist these segments of the population in paying their electricity and gas bills, so as to give everyone equal access to electricity. Enel has also established numerous processes to ensure customers receive a high level of service. In Italy, the com- mercial quality of all our contact channels (customer ser- vice calls, Enel Points and stores, utility bills, app, e-mail, social media, account manager, fax) is ensured through systematic monitoring of the sales and management pro- cesses. The goal is to ensure compliance with applicable laws and regulations and respect for the privacy, freedom and dig- nity of our customers. In order to ensure the quality, accessibility and reliability of its service, Enel is committed to ensuring an efficient and digitalized electricity grid, which enables a more sustain- able lifestyle through the use of electricity for all our cus- tomers. As a DSO (distribution system operator), Enel has embraced the challenges of the energy transition to de- velop the grid of the future: smart, modern and digital. To support this ambitious transformation, Grid Futurability® has been launched, a new long-term strategy to design the grid that Enel intends to create by 2030, both from an industrial point of view and in integration with stakehold- ers, with the aim of preparing it to support a decarbonized and electrified world. The grid also represents a “mine of materials“ that, when suitably regenerated, can be used as inputs in the produc- tion of new assets or new products in other production chains. Using an approach called “grid mining“, the entire value chain of assets is being analyzed in order to recover valuable materials/devices from obsolete grid infrastruc- tures, with the aim of minimizing the environmental impact and the consumption of resources by maximizing the pos- itive social aspects, with a view to creating long-term value. Enel is also continuing its efforts to expand digitalization, electronic invoicing and new services. With Enel X, we offer innovative solutions to residential customers (technological solutions for smart homes, home automation, solar and pho- tovoltaic systems, boilers, maintenance services, lighting, etc.), government customers (public lighting, monitoring services for smart cities, security systems, etc.) and large customers (demand response services, consulting and energy efficien- cy solutions). We also promote electric mobility through the development of public and private charging infrastructures. Enel charging points increased by 52,130 units in 2021 compared with 2020. Private charging points increased by 48,430, mainly in North America and Italy, while public charging points increased by 3,700, primarily in Italy and Spain. Performance of the Group 139 139 Group performance €17,567 million GROSS OPERATING PROFIT €7,680 million OPERATING PROFIT €3,189 million GROUP PROFIT €16,903 million in 2020 -9.2% on 2020 +22.2% on 2020 €19,210 million ORDINARY GROSS OPERATING PROFIT of which 68.7% eligible and aligned with European taxonomy €12,235 million ORDINARY OPERATING PROFIT €5,593 million GROUP ORDINARY PROFIT of which 28.4% from Enel Green Power +7.6% on 2020 Millions of euro Ordinary income statement(1) Income statement Revenue(2) (3) Costs(2) 2021 2020 Change 2021 2020 Change 88,006 66,004 22,002 33.3% 88,006 66,004 22,002 33.3% 71,318 47,878 23,440 49.0% 72,961 49,002 23,959 48.9% Net results from commodity contracts(2) 2,522 (99) 2,621 - 2,522 (99) 2,621 - Gross operating profit/(loss)(3) 19,210 18,027 1,183 6.6% 17,567 16,903 664 3.9% Depreciation, amortization and impairment losses 6,975 6,656 Operating profit/(loss)(3) Financial income(3) Financial expense Net financial expense(3) Share of profit/(loss) of equity-accounted investments Pre-tax profit/(loss) Income taxes Profit/(Loss) from continuing operations Profit/(Loss) from discontinued operations Profit for the year (owners of the Parent and non- controlling interests) 12,235 11,371 319 864 4.8% 7.6% 8,448 1,439 17.0% 8,455 (775) -9.2% 5,420 8,247 4,520 900 19.9% 6,804 1,443 21.2% 4,520 7,213 (2,827) (2,284) (543) -23.8% (2,751) (2,693) 102 134 (32) -23.9% 571 (299) 904 962 (58) 870 20.0% 13.3% -2.2% - 9,887 7,680 5,424 8,175 9,510 2,831 6,679 - 9,221 2,541 6,680 - 6,679 6,680 289 290 3.1% 11.4% (1) - (1) - - - 5,500 1,643 3,857 - 5,463 1,841 3,622 37 0.7% (198) -10.8% 235 6.5% - - - 3,857 3,622 235 6.5% Attributable to owners of the Parent Attributable to non-controlling interests 5,593 1,086 5,197 1,483 396 7.6% (397) -26.8% 3,189 668 2,610 1,012 579 22.2% (344) -34.0% (1) The ordinary income statement does not include non-recurring items. The summary of results presents a reconciliation of reported figures with ordinary figures for the following aggregates: gross operating profit, operating profit, and profit for the year (attributable to owners of the Parent). (2) The figures for 2020 have been adjusted, for comparative purposes only, to take account of the effects of the different classification resulting from the fair value measurement of outstanding contracts at the end of the period for purchase and sale of commodities with physical settlement. This change in classification had no impact on operating profit. For more information, please see note 7 to the consolidated financial statements. (3) For comparative purposes only, €87 million in 2020 in respect of the component recognized through profit or loss deriving from the remeasurement at fair value of the financial assets connected with service concession arrangements involving distribution operations in Brazil falling within the scope of IFRIC 12 have been reclassified from financial income to revenue. The latter classification had an impact of the same amount on operating profit. For more informa- tion, please see note 7 to the consolidated financial statements. 140 140 Integrated Annual Report 2021 Revenue Millions of euro Sale of electricity Transport of electricity Fees from network operators Transfers from institutional market operators Sale of gas Transport of gas Sale of fuels Fees for connection to electricity and gas networks Revenue from construction contracts(1) 2021 46,963 10,732 800 833 4,823 599 1,791 787 1,268 2020 34,745 10,710 932 1,395 2,718 611 602 759 819 Sale of commodities with physical settlement and fair value gain/(loss) on contracts settled in the period(2) 13,421 8,669 Change 12,218 22 (132) (562) 2,105 (12) 1,189 28 449 4,752 Other income Total(1) (2) 5,989 88,006 4,044 66,004 1,945 22,002 35.2% 0.2% -14.2% -40.3% 77.4% -2.0% - 3.7% 54.8% 54.8% 48.1% 33.3% (1) For comparative purposes only, €87 million in 2020 in respect of the component recognized through profit or loss deriving from the remeasurement at fair value of the financial assets connected with service concession arrangements involving distribution operations in Brazil falling within the scope of IFRIC 12 have been reclassified from financial income to revenue. The latter classification had an impact of the same amount on operating profit. For more informa- tion, please see note 7 to the consolidated financial statements. (2) The figures for 2020 have been adjusted, for comparative purposes only, to take account of the effects associated with the change in classification connect- ed with the fair value measurement of outstanding contracts at the end of the period for the purchase and sale of commodities with physical settlement. The change in classification had no impact on operating profit. For more details, please see note 7 to the consolidated financial statements. In 2021, revenue increased by €22,002 million due to an increase in the sale of electricity in an environment of ris- ing average prices, particularly in End-user Markets and in renewables generation, particularly in Brazil and Italy. These effects were amplified by the increase in sales in 2021 at- tributable to commodity sales contracts with physical set- tlement, to thermal generation as a result of greater quan- tities generated at rising prices, particularly in Italy, Spain and Latin America, and to the increase in revenue recog- nized by the distribution companies in Brazil. Also of note was the gain – recognized in “other income“ – realized on the sale of Open Fiber for a total of €1,763 million. Finally, with regard to revenue, we report the results of the alignment of this indicator with the European taxonomy by reason of their substantial contribution to climate change mitigation, in compliance with the principle of not doing harm to other environmental objectives (DNSH) and the minimum social safeguards, as discussed in the sections “European Union taxonomy“ and “Statement on the align- ment of Enel’s business with the European taxonomy“. Performance of the Group 141 141 Turnover (revenue) under the European taxonomy Turnover 2021 31.0% 29.1% €88.0 billion 39.9%(1) Considering all retail electricity sales as “non-eligible” 32.6% 31.0% 36.4% €88.0 billion (1) Excluding the capital gain on the sale of Open Fiber from turnover, eligible-aligned turnover is equal to 40.8% of total. Eligible-aligned Eligible-not aligned Non-eligible In 2021, 39.9% of turnover (revenue) was generated by business activities aligned with the EU taxonomy, com- pared with 46.2% in 2020. Considering all retail electricity sales as “non-eligible“, 32.6% of revenue was aligned. Although revenue from taxonomy eligible-aligned activ- ities increased in 2021 compared with 2020 (by €4,654 million), thanks in particular to greater energy generation from renewable sources and an increase in revenue from the transmission, distribution and sale of electricity with Certificates of Origin, the increase in revenue from not eli- gible activities, essentially due to greater trading activities, thermal generation and sales of gas in the retail market, caused the percentage weight of revenue from taxonomy eligible-aligned activities to decrease in 2021. Costs Millions of euro Electricity purchases(1) Consumption of fuel for electricity generation Fuel for trading and gas for sale to end users(1) Materials(1) Personnel expenses Services, leases and rentals Other operating expenses Capitalized costs Total(1) 2021 28,359 4,486 16,414 3,530 5,281 15,913 2,095 (3,117) 72,961 2020 16,111 2,634 7,506 2,465 4,793 15,676 2,202 (2,385) 49,002 Change 12,248 1,852 8,908 1,065 488 237 (107) (732) 23,959 76.0% 70.3% - 43.2% 10.2% 1.5% -4.9% -30.7% 48.9% (1) The figures for 2020 have been adjusted, for comparative purposes only, to take account of the effects associated with the change in classification connect- ed with the fair value measurement of outstanding contracts at the end of the period for the purchase and sale of commodities with physical settlement. The change in classification had no impact on operating profit. For more details, please see note 7 to the consolidated financial statements. Costs increased primarily as a result of increased provisioning of commodities, particularly in relation to an increase in the average price of fuels generally (and gas in particular) and of electricity. For further details on operating costs, see the notes to the consolidated financial statements. In addition, with regard to ordinary operating expenses, we re- port the results of the alignment of this indicator with the Eu- ropean taxonomy by reason of their substantial contribution to climate change mitigation, in compliance with the principle of not doing harm to other environmental objectives (DNSH) and the minimum social safeguards, as discussed in the sec- tions “European Union taxonomy“ and “Statement on the alignment of Enel’s business with the European taxonomy“. 142 142 Integrated Annual Report 2021 Ordinary operating expenses (opex) under the European taxonomy Opex (ordinary) 2021 31.1% €1.4 billion(1) 4.3% 64.6% (1) Only expenses required by the taxonomy. Eligible-aligned Eligible-not aligned Non-eligible Considering all retail electricity sales as “non-eligible” 31.1% 4.7% €1.4 billion(1) 64.2% In 2021, 64.6% of ordinary operating expenses (opex) were generated by business activities aligned with the EU tax- onomy, compared with 65.6% in 2020. Considering all re- tail electricity sales as “non-eligible“, 64.2% of operating expenses were aligned. The percentage of ordinary operating expenses of taxono- my eligible-aligned activities decreased in 2021 compared with the previous year, mainly reflecting a slight decrease in transmission and distribution costs (taxonomy eligi- ble-aligned) and an increase in thermal generation costs. Net results from commodity contracts Net results from commodity contracts in 2021 improved by €2,621 million compared with the previous year, due mainly to fluctuations in market prices. Ordinary gross operating profit The table below presents gross operating profit/(loss) by Business Line. Millions of euro Thermal Generation and Trading Enel Green Power Infrastructure and Networks(1) End-user Markets Enel X Services Holding and other Total(1) 2021 1,702 4,815 7,663 3,086 298 79 1,567 19,210 2020 2,230 4,721 7,801 3,197 161 94 (177) 18,027 Change (528) 94 (138) (111) 137 (15) 1,744 1,183 -23.7% 2.0% -1.8% -3.5% 85.1% -16.0% - 6.6% (1) For comparative purposes only, €87 million in 2020 in respect of the component recognized through profit or loss deriving from the remeasurement at fair value of the financial assets connected with service concession arrangements involving distribution operations in Brazil falling within the scope of IFRIC 12 have been reclassified from financial income to revenue. The latter classification had an impact of the same amount on operating profit. For more informa- tion, please see note 7 to the consolidated financial statements. Performance of the Group 143 143 The increase in ordinary gross operating profit is mainly attributable to the development of new commercial ini- tiatives by Enel X, particularly in Italy, and the start-up of new renewable energy plants, especially in Brazil, as well as the gain on the sale of Open Fiber within the scope of the Stewardship business model. These effects were only partially offset by a decrease in margins, primarily in Italy, on trading and on End-user Mar- kets for the release of a provision (in the amount of €75 million) in 2020 related to a dispute with a trader, as well as the recognition of a fine of €27 million assessed by Italy’s Privacy Authority in 2021. Gross operating profit reflects the unfavorable trend in exchange rates, particularly in Lat- in America, in the amount of €314 million. Finally, the following additional effects that essentially off- set each other should also be noted: • the release in Spain, in 2020, of the electricity discount provision net of allocations for early-retirement incen- tives for a total of €377 million; • greater provisions in 2020 for early-retirement incen- tives in Italy in application of Article 4 of the Fornero Law in the amount of €126 million; • the reversal in 2021 of provisions following the closure of a dispute concerning hydroelectric fees in Spain in the amount of €300 million; • gains recognized in 2021 resulting from the reimburse- ment related to the CO2 allowances granted free of charge in Spain in the amount of €186 million; • a decrease in other income connected with the electri- cal business (€288 million), mainly related to the reim- bursement of system charges and network fees (Res- olutions nos. 50/2018 and 461/2020 of the Regulatory Authority for Energy, Networks and the Environment - ARERA) within the scope of distribution operations in Italy. In addition, with regard to ordinary gross operating profit (ordinary EBITDA), we report the results of the alignment of this indicator with the European taxonomy by reason of their substantial contribution to climate change mitiga- tion, in compliance with the principle of not doing harm to other environmental objectives (DNSH) and the minimum social safeguards, as discussed in the sections “Europe- an Union taxonomy“ and “Statement on the alignment of Enel’s business with the European taxonomy“. Ordinary gross operating profit (ordinary EBITDA) under the European taxonomy EBITDA (ordinary) 2021 20.8% €19.2 billion 10.5% Considering all retail electricity sales as “non-eligible” 20.8% 13.5% €19.2 billion 68.7%(1) 65.7 % (1) Excluding the capital gain on the sale of Open Fiber from ordinary EBITDA, eligible-aligned ordinary EBITDA is equal to 75.6% of total. Eligible-aligned Eligible-not aligned Non-eligible In 2021, 68.7% of ordinary gross operating profit was gen- erated by business activities aligned with the EU taxonomy, compared with 73.4% in 2020. Considering all retail electricity sales as “non-eligible“, 65.8% of ordinary gross operating profit was aligned in 2021. The percentage of the ordinary gross operating profit of taxonomy eligible-aligned activities decreased in 2021 com- pared with 2020, mainly reflecting the changes discussed in “Turnover (revenue) under the European taxonomy“. 144 144 Integrated Annual Report 2021 Gross operating profit Millions of euro 2021 Ordinary gross operating profit/(loss) 1,702 4,815 7,663 3,086 298 79 1,567 19,210 Thermal Generation and Trading Enel Green Power Infrastructure and Networks End-user Markets Enel X Services Holding and other Total Energy-transition and digitalization costs COVID-19 costs Gross operating profit/(loss) (795) (8) 899 (47) (7) (423) (94) (15) (160) (56) (1,590) (30) (2) 4,761 7,210 2,990 - 283 (5) (1) (53) (86) 1,510 17,567 Millions of euro 2020 Thermal Generation and Trading Enel Green Power Infrastructure and Networks(1) End-user Markets Enel X Services Holding and other Total(1) Ordinary gross operating profit/(loss) 2,230 4,721 7,801 3,197 161 94 (177) 18,027 Energy-transition and digitalization costs COVID-19 costs (517) (13) (64) (10) (231) (50) (65) (11) (7) (2) Gross operating profit/(loss) 1,700 4,647 7,520 3,121 152 (95) (46) (47) (12) (991) (1) (133) (190) 16,903 (1) For comparative purposes only, €87 million in 2020 in respect of the component recognized through profit or loss deriving from the remeasurement at fair value of the financial assets connected with service concession arrangements involving distribution operations in Brazil falling within the scope of IFRIC 12 have been reclassified from financial income to revenue. The latter classification had an impact of the same amount on operating profit. For more informa- tion, please see note 7 to the consolidated financial statements. The Group has continued the energy-transition and digi- talization process with additional provisions for personnel expenses, costs for the restructuring and conversion of certain plants in Italy, and write-downs of fuel and replace- ment-part inventories associated with the coal plants, which are not included in ordinary gross operating profit. Ordinary operating profit Millions of euro Thermal Generation and Trading Enel Green Power Infrastructure and Networks(1) End-user Markets Enel X Services Holdings and other Total(1) 2021 729 3,480 4,813 1,753 44 (113) 1,529 2020 1,456 3,460 4,846 1,906 (7) (85) (205) 12,235 11,371 Change (727) 20 (33) (153) 51 (28) 1,734 864 -49.9% 0.6% -0.7% -8.0% - -32.9% - 7.6% (1) For comparative purposes only, €87 million in 2020 in respect of the component recognized through profit or loss deriving from the remeasurement at fair value of the financial assets connected with service concession arrangements involving distribution operations in Brazil falling within the scope of IFRIC 12 have been reclassified from financial income to revenue. The latter classification had an impact of the same amount on operating profit. For more informa- tion, please see note 7 to the consolidated financial statements. Ordinary operating profit for 2021 increased by €864 mil- lion as a result of the factors described above for ordinary gross operating profit and, above all, the increase in de- preciation and amortization recognized in 2021 within the scope of distribution in Italy and Spain due to the technical obsolescence of a number of digital meters, which result- ed in a reduction in their useful life, as well as to new plants that have begun operating in the last two years. Performance of the Group 145 145 Operating profit Millions of euro 2021 Thermal Generation and Trading Enel Green Power Infrastructure and Networks End-user Markets Enel X Services Holding and other Total Ordinary operating profit/(loss) 729 3,480 4,813 1,753 Energy-transition and digitalization costs and impairment losses Write-downs of generation plants in Spain - Non-Peninsular Territories, Mexico, and Australia Other impairment losses COVID-19 costs Operating profit/(loss) (1,819) (47) (423) (94) (1,488) (185) - (8) (2,586) (159) (7) 3,082 - (12) (30) - - (2) 44 (15) - 1 - (113) 1,529 12,235 (160) (56) (2,614) - (45) (5) - - (1) (1,673) (215) (53) 4,348 1,657 30 (323) 1,472 7,680 Millions of euro 2020 Thermal Generation and Trading Enel Green Power Infrastructure and Networks(1) End-user Markets Enel X Services Ordinary operating profit/(loss) 1,456 3,460 4,846 1,906 Energy-transition and digitalization costs and impairment losses Write-down of the Mexico, Australia and Argentina CGUs Other impairment losses COVID-19 costs Operating profit/(loss) (1,422) (50) (231) (65) - (6) (13) 15 (534) (132) (10) (216) - (50) - (13) (11) 2,734 4,349 1,817 (7) (7) - - (2) (16) (85) (95) - - (46) (226) Holding and other Total(1) (205) 11,371 (12) (1,882) - - (1) (750) (151) (133) (218) 8,455 (1) For comparative purposes only, €87 million in 2020 in respect of the component recognized through profit or loss deriving from the remeasurement at fair value of the financial assets connected with service concession arrangements involving distribution operations in Brazil falling within the scope of IFRIC 12 have been reclassified from financial income to revenue. The latter classification had an impact of the same amount on operating profit. For more informa- tion, please see note 7 to the consolidated financial statements. In addition to the factors described above in relation to gross operating profit, the most significant non-recurring items include the write-down of coal-fired plants, particu- larly in Italy, within the scope of the broader energy tran- sition, which is a strategic pillar for the Group, and the im- pairment losses recognized on the assets related to the CGUs of Spain (Non-Peninsular Territories) (€1,488 million), Mexico (€155 million), and Australia (€30 million). Other impairment losses mainly involve the assets asso- ciated with the PH Chucas plant in Costa Rica to reflect the deterioration of future earnings at this plant and the impairment loss of €45 million for the head office following the partial demolition of the property to be restructured. 146 146 Integrated Annual Report 2021 Group ordinary profit Group ordinary profit in 2021 came to €5,593 million, as compared with the €5,197 million for the same period of the previous year. This increase is due to the factors described above in re- lation to ordinary operating profit, partially offset by an in- crease in taxes. The effective tax rate increased in 2021 as a result of: • tax reforms in Argentina and Colombia; • a tax inspection at Enel Iberia and related adjustment to the tax credit; • the tax benefit recognized in Italy in 2020 in relation to the patent box mechanism. These effects were partially offset by application of the participation exemption (PEX) on the gain realized on the sale of the investment in Open Fiber. Group profit Group profit in 2021 came to €3,189 million (€2,610 million in 2020), an increase of €579 million compared with 2020. The table below provides a reconciliation of Group profit with Group ordinary profit, indicating the non-recurring items and their respective impact on performance, net of the associated tax effects and non-controlling interests. Millions of euro Group ordinary profit Energy-transition and digitalization costs and impairment losses Write-downs of generation plant assets Other impairment losses COVID-19 costs Write-down of certain assets related to the sale of the investment in Slovenské elektrárne Group profit 2021 5,593 (1,839) (1,027) (42) (36) 540 3,189 2020 5,197 (1,020) (637) (11) (86) (833) 2,610 Performance of the Group 147 147 Statement on the alignment of Enel’s business with the European taxonomy Financial metrics calculation process As described in the section “European Union taxono- my“, Enel performed a specific implementation process to classify all its economic activities along its value chain in accordance with the following three categories: eligi- ble-aligned, eligible-not aligned and not eligible. The calculation of the financial metrics associated with each economic activity was performed using a specific process during which the following criteria were imple- mented and the following considerations were made: • the three financial metrics required under the Europe- an taxonomy regulation – turnover (revenue), capital expenditure (capex) and operating expenditure (opex or ordinary operating expenses) – were calculated in accordance with the eligibility analysis described in the section “European Union taxonomy“; • although not expressly requested, Enel also performed an assessment for ordinary gross operating profit, be- lieving that this metric best represents the actual finan- cial performance of integrated utilities such as Enel; • the financial information was collected from the ac- counting system used by the Enel Group or from the management systems used by the corporate Business Lines. However, some exceptions were also made to provide a more detailed representation of the figures or to exclude certain specific activities from the over- all eligibility-alignment calculation (such as non-aligned hydroelectric generation or infrastructure considered eligible-not aligned among eligible-aligned distribution systems). For example, the following proxies were used: – hydroelectric: eligible-not aligned hydroelectric plants were excluded considering their output mul- tiplied by average unit revenue for 2020 and 2021. This approach was also extended to capital expendi- ture, ordinary operating expenses and ordinary gross operating profit; – distribution: new connections between a substation or network and a generation plant whose green- house gas intensity exceeds the threshold of 100 gCO2eq/kWh have been excluded considering their power (in MW) multiplied by average revenue (thou- sands of euro/MW) for 2020 and 2021. This approach was only applied to revenue and capital expenditure; • the aggregate financial data in the reporting refer to “segment“ values and include items concerning third parties and inter-segment transactions; • revenue from electricity sales was calculated consider- ing the quantity of retail power sales by Group compa- nies in Italy and Spain accompanied by Certificates of 148 148 Integrated Annual Report 2021 Origin (based on data from national authorities) and ap- plying the average unit revenue. This revenue is consid- ered eligible-aligned since it regards electricity gener- ated using technologies that comply with the technical screening criteria of the European taxonomy. This ap- proach was also implemented for capital expenditure, ordinary operating expenses and ordinary gross oper- ating profit. To prevent double counting, eligible reve- nue by sector is included net of inter-segment transac- tions (Enel Green Power, Distribution and Retail); • the 2020 data were recalculated on the basis of the new eligibility analysis performed in 2021 after the publica- tion of the 2020 Sustainability Report and the publica- tion of the Climate Delegated Act in the Official Journal of the European Union. The main differences in each business segment are as follows: – electricity generation: 100% of geothermal installed capacity is now considered eligible-aligned com- pared with 10% in the previous analysis, while an additional 0.5% of hydroelectric installed capacity is now considered eligible (rising from 99% to 99.5%); – electricity transmission and distribution: DSOs in Chile, Colombia and Peru are now considered eligible and new infrastructure installed in 2020 to connect power plants with a carbon intensity threshold above 100 gCO2eq/kWh have been excluded from the fi- nancial data of all eligible-aligned DSOs; – Enel X: e-Home and distributed generation solutions are now considered eligible-aligned (they were pre- viously considered not eligible); – sales: the retail sale of electricity in Italy and Spain accompanied by Certificates of Origin is now con- sidered eligible-aligned (it was previously considered not eligible); • total revenue, capital expenditure and ordinary gross operating profit of each specific activity correspond to Group totals, while the total ordinary operating expens- es of each specific activity correspond only to the total ordinary costs considered in the types of operating ex- penses envisaged under the European taxonomy; • the share of the KPIs relating to each individual eco- nomic activity is calculated on the basis of the total rev- enue, capital expenditure and ordinary gross operating profit of the Group and the total ordinary costs consid- ered in the types of operating expenses envisaged by the European taxonomy. The share of revenue, capital expenditure, ordinary operating expenses and ordinary gross operating profit of each individual economic ac- tivity contributes to the climate change mitigation goal. This is the only European taxonomy objective reported in the table, as the alignment analysis was performed only for this objective as it is more relevant than the cli- mate change adaptation objective and the criteria for the other environmental objectives are not yet available. The 2021-2023 Strategic Plan presented on the occasion of the 2020 Capital Markets Day held in November 2020 declared that between 80% and 90% of capital expenditure was aligned with the European taxonomy for the three- year period, reflecting the regulatory uncertainty prevailing when it was announced (the Climate Delegated Act had not yet been approved). However, 85.6% of the capital expendi- ture established for 2021 in the 2021-2023 Strategic Plan is now considered to be aligned with the European taxonomy according to the updated analysis conducted in 2021. The same main changes are considered for the restated 2020 data. In addition, the new 2022-2024 Strategic Plan pre- sented on the occasion of the 2021 Capital Markets Day states that over 85% of capital expenditure will be allocated to aligned activities in the 2022-2024 period. Statement on the alignment of Enel’s business with the European taxonomy In 2021, the level of alignment of the Group’s economic activities with the European taxonomy due to their sub- stantial contribution to the climate change mitigation objective, in compliance with the principle of not doing harm to other environmental objectives (DNSH) and the minimum social safeguards is indicated in the following tables and in the sections “Revenue“, “Costs“, “Ordinary gross operating profit/(loss)“ and “Capital expenditure“. Finally, EU taxonomy reporting pursuant to the European taxonomy regulation and the delegated act is provided in full in the 2021 Sustainability Report – Non-Financial Statement pursuant to Regulation (EU) 2020/852. Performance of the Group 149 149 Turnover (revenue) under the European taxonomy DNSH Criteria (“Do No Significant Harm“)(4) Category(6) r e v o n r u T e t u o s b A l 1 2 0 2 ) ( 1 “ e u n e v e r “ Taxo- nomy Code millions of euro 1 2 0 2 ) ( 2 “ e u n e v e r “ i f o n o rt o p o r P r e v o n r u T % r e v o n r u T e t u o s b A l ) ( 1 “ e u n e v e r “ i f o n o rt o p o r P r e v o n r u T 0 2 0 2 ) ( 2 “ e u n e v e r “ o t n o i t u b i r t n o c l a i t n a t s b u S e g n a h c e t a m i l c ) ( 3 n o i t a g i t i m e n i r a m d n a r e t a W s e c r u o s e r n o i t a t p a d a y m o n o c e r a u c r i C l e g n a h c e t a m i l C n o i t a g i t i m e g n a h c e t a m i l C n o i t u l l o P d n a y t i s r e v d o B i i s m e t s y s o c e m u m n M i i ) ( 5 s d r a u g e f a s y t i v i t c a g n i l b a n E y t i v i t c a l a n o i t i s n a r T millions of euro % % Y/N Y/N Y/N Y/N Y/N Y/N Y/N E T Storage of electricity 4.10 - - - - 100.0 4.3 2,392 2.7 2,195 3.3 100.0 4.1 761 0.9 477 0.7 100.0 4.5 5,976 6.8 4,543 6.9 100.0 4.6 380 0.4 484 0.8 100.0 (795) (0.9) (760) (1.2) 4.9 19,907 22.6 18,761 28.4 100.0 (770) (0.9) (786) (1.2) 7.3 (d) 239 0.3 243 0.4 100.0 6.3 (a) 62 0.1 5 7.3 (a-e) 9 - 1 - - 100.0 100.0 Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y E Y Y Y Economic activities A.1 Environmentally sustainable activities (taxonomy-aligned) Electricity generation from wind power Electricity generation using solar photovoltaic technology Electricity generation from hydropower Electricity generation from geothermal energy I I I S E T V T C A D E N G I L A - E L B G I L E Y M O N O X A T I . 1 A Enel Green Power and Retail Intercompany Transmission and distribution of electricity e-distribuzione and Retail Intercompany Individual renovation measures consisting in installation, maintenance or repair of energy efficiency equipment (Enel X - Smart Lighting) Urban and suburban transport, road passenger transport (Enel X - e-Bus) Individual renovation measures consisting in installation, maintenance or repair of energy efficiency equipment (Enel X - Energy Efficiency) 7.3 Individual renovation measures consisting in installation, maintenance or repair of energy efficiency equipment 7.5 Installation, maintenance and repair of instruments and devices for measuring, regulation and controlling energy performance of buildings 7.6 Installation, maintenance and repair of renewable energy technologies (Enel X - Home/Vivi Meglio Unifamiliare) 7.3 (a-e) 7.5 (a) 7.6 (a) 334 0.4 223 0.4 100.0 Y Y Y 150 150 Integrated Annual Report 2021 Economic activities Individual renovation measures consisting in installation, maintenance or repair of energy efficiency equipment (Enel X - Condominium) Professional services related to energy performance of buildings (Enel X - Customer Insight) 7.3 Individual renovation measures consisting in installation, maintenance or repair of energy efficiency equipment 7.6 Installation, maintenance and repair of renewable energy technologies (Enel X - Distributed Energy) Installation, maintenance and repair of renewable energy technologies (Enel X - Battery Energy Storage) 6.13 Infrastructure for personal mobility, cycle logistics 7.4 Installation, maintenance and repair of charging stations for electric vehicles in buildings (and parking spaces attached to buildings) (Enel X - Mobility) Market (power sales to end customer with Certificates of Origin) Turnover of environmentally sustainable activities (taxonomy-aligned) (A.1) I I I S E T V T C A D E N G I L A - E L B G I L E Y M O N O X A T I . 1 A DNSH Criteria (“Do No Significant Harm“)(4) Category(6) e n i r a m d n a r e t a W s e c r u o s e r n o i t a t p a d a y m o n o c e r a u c r i C l e g n a h c e t a m i l C n o i t a g i t i m e g n a h c e t a m i l C n o i t u l l o P d n a y t i s r e v d o B i i s m e t s y s o c e m u m n M i i ) ( 5 s d r a u g e f a s y t i v i t c a g n i l b a n E y t i v i t c a l a n o i t i s n a r T o t n o i t u b i r t n o c l a i t n a t s b u S e g n a h c e t a m i l c ) ( 3 n o i t a g i t i m % Y/N Y/N Y/N Y/N Y/N Y/N Y/N E T 1 2 0 2 ) ( 2 “ e u n e v e r “ r e v o n r u T e t u o s b A l 1 2 0 2 ) ( 1 “ e u n e v e r “ Taxo- nomy Code millions of euro 7.3 (a-e) 9 i f o n o rt o p o r P r e v o n r u T % - r e v o n r u T e t u o s b A l ) ( 1 “ e u n e v e r “ millions of euro 1 0 2 0 2 ) ( 2 “ e u n e v e r “ i f o n o rt o p o r P r e v o n r u T % - 100.0 9.3 88 0.1 98 0.1 100.0 7.3 (d,e) 7.6 (a) 55 - 44 0.1 100.0 7.6 (f) 24 - 16 - 100.0 Y Y Y Y Y Y Y Y Y Y 6.13 7.4 63 0.1 32 - 100.0 Y Y Y Y Y Y 6,416 7.3 4,919 7.5 35,150 39.9 30,496 46.2 100.0 Performance of the Group 151 151 r e v o n r u T e t u o s b A l 1 2 0 2 ) ( 1 “ e u n e v e r “ Taxo- nomy Code millions of euro 1 2 0 2 ) ( 2 “ e u n e v e r “ i f o n o rt o p o r P r e v o n r u T % r e v o n r u T e t u o s b A l ) ( 1 “ e u n e v e r “ 0 2 0 2 ) ( 2 “ e u n e v e r “ i f o n o rt o p o r P r e v o n r u T o t n o i t u b i r t n o c l a i t n a t s b u S e g n a h c e t a m i l c ) ( 3 n o i t a g i t i m DNSH Criteria (“Do No Significant Harm“)(4) Category(6) e g n a h c e t a m i l C n o i t a g i t i m e n i r a m d n a r e t a W s e c r u o s e r n o i t a t p a d a y m o n o c e r a u c r i C l e g n a h c e t a m i l C n o i t u l l o P d n a y t i s r e v d o B i i s m e t s y s o c e m u m n M i i ) ( 5 s d r a u g e f a s y t i v i t c a g n i l b a n E y t i v i t c a l a n o i t i s n a r T millions of euro % % Y/N Y/N Y/N Y/N Y/N Y/N Y/N E T 4.5 28 - 18 - 4.9 689 0.8 648 1.0 24,890 28.3 19,916 30.2 25,607 29.1 20,582 31.2 Economic activities A.2 Taxonomy-eligible but not environmentally sustainable activities (not taxonomy-aligned activities) Electricity generation from hydropower Transmission and distribution of electricity (Argentina and new connections between a substation and power plant >100 gCO2eq/kWh) Market (power sales to end customer without Certificates of Origin) Turnover of taxonomy- eligible but not environmentally sustainable activities (not taxonomy- aligned activities) (A.2) I T O N - E L B G I L E Y M O N O X A T . 2 A I I I S E T V T C A D E N G I L A I I I I S E T V T C A E L B G I L E T O N Y M O N O X A T . B Total (A.1 + A.2) 60,757 69.0 51,078 77.4 B. Taxonomy-not-eligible activities Electricity generation from coal and liquid fossil fuels Electricity generation from gas Electricity generation from nuclear energy Enel X (only activities not eligible) Trading activities (energy sales - wholesale) Market (gas sales to end customer) Services, Holding and Other 1,904 2.2 1,639 2.5 8,064 9.1 4,783 7.2 1,388 1.6 1,342 2.0 798 0.9 585 0.9 21,799 24.8 13,973 21.2 6,276 7.1 3,821 5.8 3,930 4.5 2,025 3.1 Elisions and adjustments (16,910) (19.2) (13,242) (20.1) Turnover of taxonomy- non-eligible activities (B) 27,249 31.0 14,926 22.6 Total (A + B) 88,006 100.0 66,004 100.0 (1) Absolute Turnover “revenue“: revenues from each single activity. If an activity is present in both A.1 and A.2 or B, the figure refers to the proportion of the activity that corresponds to A.1, A.2 or B. (2) Proportion of Turnover “revenue“: percentage impact of revenues from each individual business activity on the Group’s total revenues. (3) Substantial contribution to climate change mitigation: refers to the share of the revenues of each individual economic activity (indicated in the column Turnover “revenue“) that contributes to climate change mitigation. This is the only objective of the EU taxonomy regulation alignment analysis shown in the table, as it is considered more relevant compared to the climate change adaptation objective, while the criteria for the other environmental objectives are not yet available. (4) DNSH: environmental objectives meeting the DNSH criteria are specified for each activity. (5) Minimum safeguards: indicates whether the minimum safeguards are respected for each individual activity. (6) Category: specifies whether the activity makes a direct contribution to climate mitigation or is an enabling or transitional activity. 152 152 Integrated Annual Report 2021 Capital expenditure (capex) under the European taxonomy DNSH Criteria (“Do No Significant Harm“)(4) Category(6) - i d n e p x e l a t i p a c “ x e p a c e t u o s b A l 1 2 0 2 ) ( 1 “ e r u t l a t i p a c “ x e p a c i f o n o rt o p o r P ) ( 2 “ e r u t i d n e p x e - i d n e p x e l a t i p a c “ x e p a c e t u o s b A l 1 2 0 2 0 2 0 2 ) ( 1 “ e r u t l a t i p a c “ x e p a c i f o n o rt o p o r P ) ( 2 “ e r u t i d n e p x e o t n o i t u b i r t n o c l a i t n a t s b u S 0 2 0 2 e g n a h c e t a m i l c ) ( 3 n o i t a g i t i m e g n a h c e t a m i l C n o i t a g i t i m e n i r a m d n a r e t a W s e c r u o s e r n o i t a t p a d a y m o n o c e r a u c r i C l e g n a h c e t a m i l C n o i t u l l o P d n a y t i s r e v d o B i i s m e t s y s o c e m u m n M i i ) ( 5 s d r a u g e f a s y t i v i t c a g n i l b a n E y t i v i t c a l a n o i t i s n a r T Taxo- nomy Code millions of euro % millions of euro % % Y/N Y/N Y/N Y/N Y/N Y/N Y/N E T Economic activities A.1 Environmentally sustainable activities (taxonomy-aligned) Electricity generation from wind power Electricity generation using solar photovoltaic technology Electricity generation from hydropower Electricity generation from geothermal energy 4.3 2,971 22.6 2,601 25.5 100.0 4.1 1,991 15.2 1,430 14.0 100.0 4.5 416 3.2 333 3.3 100.0 4.6 122 0.9 146 1.4 100.0 I I I S E T V T C A D E N G I L A - E L B G I L E Y M O N O X A T I . 1 A Storage of electricity 4.10 153 1.2 23 0.2 100.0 4.9 5,109 39.0 3,836 37.6 100.0 7.3 (d) 53 0.4 47 0.5 100.0 6.3 (a) (1) 7.3 (a-e) 2 - - 32 0.3 100.0 1 - 100.0 Transmission and distribution of electricity Individual renovation measures consisting in installation, maintenance or repair of energy efficiency equipment (Enel X - Smart Lighting) Urban and suburban transport, road passenger transport (Enel X - e-Bus) Individual renovation measures consisting in installation, maintenance or repair of energy efficiency equipment (Enel X - Energy Efficiency) 7.3 Individual renovation measures consisting in installation, maintenance or repair of energy efficiency equipment Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y E Y Y Y Y Y Y Y Y Y 54 0.4 35 0.4 100.0 Y Y Y 7.5 Installation, maintenance and repair of instruments and devices for measuring, regulation and controlling energy performance of buildings 7.3 (a-e) 7.5 (a) 7.6 (a) 7.6 Installation, maintenance and repair of renewable energy technologies (Enel X - Home/Vivi Meglio Unifamiliare) Performance of the Group 153 153 - i d n e p x e l a t i p a c “ x e p a c e t u o s b A l 1 2 0 2 ) ( 1 “ e r u t l a t i p a c “ x e p a c i f o n o rt o p o r P ) ( 2 “ e r u t i d n e p x e - i d n e p x e l a t i p a c “ x e p a c e t u o s b A l 1 2 0 2 0 2 0 2 ) ( 1 “ e r u t l a t i p a c “ x e p a c i f o n o rt o p o r P ) ( 2 “ e r u t i d n e p x e o t n o i t u b i r t n o c l a i t n a t s b u S 0 2 0 2 e g n a h c e t a m i l c ) ( 3 n o i t a g i t i m DNSH Criteria (“Do No Significant Harm“)(4) Category(6) e g n a h c e t a m i l C n o i t a g i t i m e n i r a m d n a r e t a W s e c r u o s e r n o i t a t p a d a y m o n o c e r a u c r i C l e g n a h c e t a m i l C n o i t u l l o P d n a y t i s r e v d o B i i s m e t s y s o c e m u m n M i i ) ( 5 s d r a u g e f a s y t i v i t c a g n i l b a n E y t i v i t c a l a n o i t i s n a r T % Y/N Y/N Y/N Y/N Y/N Y/N Y/N E T Taxo- nomy Code millions of euro 7.3 (a-e) 3 % - millions of euro - % - 100.0 9.3 3 - 1 - 100.0 7.3 (d,e) 7.6 (a) 8 0.1 7 0.1 100.0 7.6 (f) 34 0.3 10 0.1 100.0 Y Y Y Y Y Y Y Y Y Y 6.13 7.4 51 0.4 45 0.4 100.0 Y Y Y Y Y Y 121 0.9 88 0.9 11,090 84.6 8,635 84.7 100.0 Economic activities Individual renovation measures consisting in installation, maintenance or repair of energy efficiency equipment (Enel X - Condominium) Professional services related to energy performance of buildings (Enel X - Customer Insight) 7.3 Individual renovation measures consisting in installation, maintenance or repair of energy efficiency equipment 7.6 Installation, maintenance and repair of renewable energy technologies (Enel X - Distributed Energy) Installation, maintenance and repair of renewable energy technologies (Enel X - Battery Energy Storage) 6.13 Infrastructure for personal mobility, cycle logistics 7.4 Installation, maintenance and repair of charging stations for electric vehicles in buildings (and parking spaces attached to buildings) (Enel X - Mobility) Market (power sales to end customer with Certificates of Origin) Capex of environmentally sustainable activities (taxonomy-aligned) (A.1) I I I S E T V T C A D E N G I L A - E L B G I L E Y M O N O X A T I . 1 A 154 154 Integrated Annual Report 2021 - i d n e p x e l a t i p a c “ x e p a c e t u o s b A l 1 2 0 2 ) ( 1 “ e r u t l a t i p a c “ x e p a c i f o n o rt o p o r P ) ( 2 “ e r u t i d n e p x e - i d n e p x e l a t i p a c “ x e p a c e t u o s b A l 1 2 0 2 0 2 0 2 ) ( 1 “ e r u t l a t i p a c “ x e p a c i f o n o rt o p o r P ) ( 2 “ e r u t i d n e p x e o t n o i t u b i r t n o c l a i t n a t s b u S 0 2 0 2 e g n a h c e t a m i l c ) ( 3 n o i t a g i t i m DNSH Criteria (“Do No Significant Harm“)(4) Category(6) e n i r a m d n a r e t a W s e c r u o s e r n o i t a t p a d a y m o n o c e r a u c r i C l e g n a h c e t a m i l C n o i t a g i t i m n o i t u l l o P d n a y t i s r e v d o B i i s m e t s y s o c e m u m n M i i ) ( 5 s d r a u g e f a s e g n a h c e t a m i l C y t i v i t c a g n i l b a n E y t i v i t c a l a n o i t i s n a r T I T O N - E L B G I L E Y M O N O X A T . 2 A I I I S E T V T C A D E N G I L A I I I I S E T V T C A E L B G I L E T O N Y M O N O X A T . B Economic activities A.2 Taxonomy-eligible but not environmentally sustainable activities (not taxonomy-aligned activities) Electricity generation from hydropower Transmission and distribution of electricity (Argentina and new connections between a substation and power plant >100 gCO2eq/kWh) Market (power sales to end customer without Certificates of Origin) Capex of taxonomy- eligible but not environmentally sustainable activities (not taxonomy-aligned activities) (A.2) Taxo- nomy Code millions of euro % millions of euro % % Y/N Y/N Y/N Y/N Y/N Y/N Y/N E T 4.5 2 - 2 - 4.9 174 1.3 100 1.0 425 3.3 305 3.0 601 4.6 407 4.0 Total (A.1 + A.2) 11,691 89.2 9,042 88.7 B. Taxonomy-non-eligible activities Electricity generation from coal and liquid fossil fuels Electricity generation from gas Electricity generation from nuclear energy Enel X (only activities not eligible) Trading activities (energy sales - wholesale) Market (gas sales to end customer) Services, Holding and Other Adjustments Capex of taxonomy- non-eligible activities (B) 49 0.4 67 0.7 499 3.8 383 3.8 165 1.3 146 1.4 160 1.2 125 1.2 65 0.5 54 0.5 97 207 175 0.7 1.6 1.3 67 0.6 174 139 1.7 1.4 1,417 10.8 1,155 11.3 Total (A + B) 13,108 100.0 10,197 100.0 (1) Absolute capex “capital expenditure“: investments for each individual activity. If an activity is present in both A.1 and A.2 or B, the figure refers to the pro- portion of the activity that corresponds to A.1, A.2 or B. (2) Proportion of capex “capital expenditure“: percentage impact of investments of each individual business activity on the Group’s total investments. (3) Substantial contribution to climate change mitigation: refers to the share of capex “capital expenditure“ of each individual economic activity (indicated in the column capex “capital expenditure“) that contributes to climate change mitigation. This is the only objective of the EU taxonomy regulation alignment analysis shown in the table, as it is considered more relevant compared to the climate change adaptation objective, while the criteria for the other environ- mental objectives are not yet available. (4) DNSH: environmental objectives meeting the DNSH criteria are specified for each activity. (5) Minimum safeguards: indicates whether the minimum safeguards are respected for each individual activity. (6) Category: specifies whether the activity makes a direct contribution to climate mitigation or is an enabling or transitional activity. Performance of the Group 155 155 Operating expenses (opex) under the European taxonomy DNSH Criteria (“Do No Significant Harm“)(4) Category(6) ) ( 1 x e p o e t u o s b A l i f o n o rt o p o r P 1 2 0 2 ) ( 2 x e p o 1 2 0 2 ) ( 1 x e p o e t u o s b A l i f o n o rt o p o r P 0 2 0 2 ) ( 2 x e p o o t n o i t u b i r t n o c l a i t n a t s b u S 0 2 0 2 e g n a h c e t a m i l c ) ( 3 n o i t a g i t i m e g n a h c e t a m i l C n o i t a g i t i m e g n a h c e t a m i l C n o i t a t p a d a e n i r a m d n a r e t a W s e c r u o s e r y m o n o c e r a u c r i C l n o i t u l l o P d n a y t i s r e v d o B i i s m e t s y s o c e m u m n M i i ) ( 5 s d r a u g e f a s y t i v i t c a g n i l b a n E l a n o i t i s n a r T y t i v i t c a Taxo- nomy Code millions of euro % millions of euro % % Y/N Y/N Y/N Y/N Y/N Y/N Y/N E T 4.3 101 7.3 86 5.9 100.0 4.1 44 3.2 27 1.9 100.0 4.5 188 13.5 191 13.1 100.0 Electricity generation from geothermal energy 4.6 Storage of electricity 4.10 6 - 0.4 6 0.4 100.0 - - - 100.0 4.9 546 39.3 636 43.5 7.3 (d) 2 0.1 2 0.1 100.0 Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y E Y Y Y Y 6.3 (a) - 7.3 (a-e) - - - - - - - 100.0 Y Y Y 7.3 (a-e) 7.5 (a) 7.6 (a) 2 0.1 1 0.1 100.0 Y Y Y Y Economic activities A.1 Environmentally sustainable activities (taxonomy-aligned) Electricity generation from wind power Electricity generation using solar photovoltaic technology Electricity generation from hydropower I I I S E T V T C A D E N G I L A - E L B G I L E Y M O N O X A T I . 1 A Transmission and distribution of electricity Individual renovation measures consisting in installation, maintenance or repair of energy efficiency equipment (Enel X - Smart Lighting) Urban and suburban transport, road passenger transport (Enel X - e-Bus) Individual renovation measures consisting in installation, maintenance or repair of energy efficiency equipment (Enel X - Energy Efficiency) 7.3 Individual renovation measures consisting in installation, maintenance or repair of energy efficiency equipment 7.5 Installation, maintenance and repair of instruments and devices for measuring, regulation and controlling energy performance of buildings 7.6 Installation, maintenance and repair of renewable energy technologies (Enel X - Home/Vivi Meglio Unifamiliare) 156 156 Integrated Annual Report 2021 ) ( 1 x e p o e t u o s b A l i f o n o rt o p o r P 0 2 0 2 ) ( 2 x e p o o t n o i t u b i r t n o c l a i t n a t s b u S 0 2 0 2 e g n a h c e t a m i l c ) ( 3 n o i t a g i t i m DNSH Criteria (“Do No Significant Harm“)(4) Category(6) e g n a h c e t a m i l C n o i t a g i t i m e g n a h c e t a m i l C n o i t a t p a d a e n i r a m d n a r e t a W s e c r u o s e r y m o n o c e r a u c r i C l n o i t u l l o P d n a y t i s r e v d o B i i s m e t s y s o c e m u m n M i i ) ( 5 s d r a u g e f a s y t i v i t c a g n i l b a n E l a n o i t i s n a r T y t i v i t c a millions of euro % % Y/N Y/N Y/N Y/N Y/N Y/N Y/N E T ) ( 1 x e p o e t u o s b A l i f o n o rt o p o r P 1 2 0 2 ) ( 2 x e p o 1 2 0 2 Taxo- nomy Code millions of euro 7.3 (a-e) - % - - - 100.0 Economic activities Individual renovation measures consisting in installation, maintenance or repair of energy efficiency equipment (Enel X - Condominium) Professional services related to energy performance of buildings (Enel X - Customer Insight) 7.3 Individual renovation measures consisting in installation, maintenance or repair of energy efficiency equipment 7.6 Installation, maintenance and repair of renewable energy technologies (Enel X - Distributed Energy) Installation, maintenance and repair of renewable energy technologies (Enel X - Battery Energy Storage) I I I S E T V T C A D E N G I L A - E L B G I L E Y M O N O X A T I 9.3 1 0.1 1 0.1 100.0 7.3 (d,e) 7.6 (a) - - - - 100.0 7.6 (f) 1 0.1 1 0.1 100.0 . 1 A 6.13 Infrastructure for personal mobility, cycle logistics 7.4 Installation, maintenance and repair of charging stations for electric vehicles in buildings (and parking spaces attached to buildings) (Enel X - Mobility) Market (power sales to end customer with Certificates of Origin) Opex of environmentally sustainable activities (taxonomy-aligned) (A.1) 6.13 7.4 1 0.1 2 0.1 100.0 6 0.4 5 0.3 100.0 898 64.6 958 65.6 100.0 Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Performance of the Group 157 157 ) ( 1 x e p o e t u o s b A l i f o n o rt o p o r P 1 2 0 2 ) ( 2 x e p o 1 2 0 2 ) ( 1 x e p o e t u o s b A l i f o n o rt o p o r P 0 2 0 2 ) ( 2 x e p o o t n o i t u b i r t n o c l a i t n a t s b u S 0 2 0 2 e g n a h c e t a m i l c ) ( 3 n o i t a g i t i m DNSH Criteria (“Do No Significant Harm“)(4) Category(6) e g n a h c e t a m i l C n o i t a g i t i m e g n a h c e t a m i l C n o i t a t p a d a e n i r a m d n a r e t a W s e c r u o s e r y m o n o c e r a u c r i C l n o i t u l l o P d n a y t i s r e v d o B i i s m e t s y s o c e m u m n M i i ) ( 5 s d r a u g e f a s y t i v i t c a g n i l b a n E l a n o i t i s n a r T y t i v i t c a Taxo- nomy Code millions of euro % millions of euro % % Y/N Y/N Y/N Y/N Y/N Y/N Y/N E T Economic activities A.2 Taxonomy-eligible but not environmentally sustainable activities (not taxonomy-aligned activities) Electricity generation from hydropower 4.5 1 0.1 1 - Transmission and distribution of electricity (Argentina and new connections between a substation and power plant >100 gCO2eq/kWh) Market (power sales to end customer without Certificates of Origin) Opex of taxonomy- eligible but not environmentally sustainable activities (not taxonomy-aligned activities) (A.2) 4.9 25 1.8 19 1.3 34 2.4 29 2.0 60 4.3 49 3.3 Total (A.1 + A.2) 958 68.9 1,007 68.9 I T O N - E L B G I L E Y M O N O X A T . 2 A I I I S E T V T C A D E N G I L A B. Taxonomy-non-eligible activities Electricity generation from coal and liquid fossil fuels Electricity generation from gas Electricity generation from nuclear energy Enel X (only activities not eligible) Trading activities (energy sales - wholesale) Market (gas sales to end customer) I I I I S E T V T C A E L B G I L E T O N Y M O N O X A T . B Services, Holding and Other 59 4.2 78 5.3 228 16.4 233 15.9 97 18 8 8 7.0 1.3 0.6 0.6 95 6.5 13 0.9 9 5 0.7 0.3 99 7.1 101 7.0 Elisions and adjustments (85) (6.1) (80) (5.5) Opex of taxonomy-non- eligible activities (B) 432 31.1 454 31.1 Total (A + B) 1,390 100.0 1,461 100.0 (1) Absolute opex: opex for each individual activity. If an activity is present in both A.1 and A.2 or B, the figure refers to the proportion of the activity that corresponds to A.1, A.2 or B. (2) Proportion of opex: percentage impact of opex of each individual business activity out of the total ordinary operating expenses required by the taxonomy at Group level. (3) Substantial contribution to climate change mitigation: refers to the share of ordinary opex for each individual economic activity (indicated in the column Absolute opex) that contributes to climate change mitigation. This is the only objective of the EU taxonomy regulation alignment analysis shown in the table, as it is considered more relevant compared to the climate change adaptation objective, while the criteria for the other environmental objectives are not yet available. (4) DNSH: environmental objectives meeting the DNSH criteria are specified for each activity. (5) Minimum safeguards: indicates whether the minimum safeguards are respected for each individual activity. (6) Category: specifies whether the activity makes a direct contribution to climate mitigation or is an enabling or transitional activity. 158 158 Integrated Annual Report 2021 Ordinary gross operating profit under the European taxonomy DNSH Criteria (“Do No Significant Harm“)(4) Category(6) t fi o r p g n i t a r e p o s s o r g y r a n d r O i 1 2 0 2 ) 1 ( ) A D T B E I ( t fi o r p g n i t a r e p o s s o r g y r a n d r o i i f o n o rt o p o r P 1 2 0 2 ) 2 ( ) A D T B E I ( t fi o r p g n i t a r e p o s s o r g y r a n d r O i 0 2 0 2 ) 1 ( ) A D T B E I ( t fi o r p g n i t a r e p o s s o r g y r a n d r o i i f o n o rt o p o r P 0 2 0 2 ) 2 ( ) A D T B E I ( o t n o i t u b i r t n o c l a i t n a t s b u S e g n a h c e t a m i l c ) ( 3 n o i t a g i t i m e g n a h c e t a m i l C n o i t a g i t i m e g n a h c e t a m i l C n o i t a t p a d a e n i r a m d n a r e t a W s e c r u o s e r y m o n o c e r a u c r i C l n o i t u l l o P d n a y t i s r e v d o B i i s m e t s y s o c e m u m n M i i ) ( 5 s d r a u g e f a s y t i v i t c a g n i l b a n E l a n o i t i s n a r T y t i v i t c a Taxo- nomy Code millions of euro millions of euro % % % Y/N Y/N Y/N Y/N Y/N Y/N Y/N E T Storage of electricity 4.10 - - - - 100.0 4.3 1,393 7.3 1,490 8.3 100.0 4.1 384 2.0 340 1.9 100.0 4.5 2,771 14.4 2,570 14.2 100.0 4.6 236 1.2 350 1.9 100.0 4.9 7,616 39.7 7,748 43.0 100.0 7.3 (d) 73 0.4 91 0.5 100.0 6.3 (a) 14 0.1 2 - 100.0 7.3 (a-e) 2 - - - 100.0 Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y E Y Y Y Y Y Economic activities A.1 Environmentally sustainable activities (taxonomy-aligned) Electricity generation from wind power Electricity generation using solar photovoltaic technology Electricity generation from hydropower Electricity generation from geothermal energy I I I S E T V T C A D E N G I L A - E L B G I L E Y M O N O X A T I . 1 A Transmission and distribution of electricity Individual renovation measures consisting in installation, maintenance or repair of energy efficiency equipment (Enel X - Smart Lighting) Urban and suburban transport, road passenger transport (Enel X - e-Bus) Individual renovation measures consisting in installation, maintenance or repair of energy efficiency equipment (Enel X - Energy Efficiency) 7.3 Individual renovation measures consisting in installation, maintenance or repair of energy efficiency equipment 7.5 Installation, maintenance and repair of instruments and devices for measuring, regulation and controlling energy performance of buildings 7.6 Installation, maintenance and repair of renewable energy technologies (Enel X - Home/Vivi Meglio Unifamiliare) 7.3 (a-e) 7.5 (a) 7.6 (a) 135 0.7 89 0.5 100.0 Y Y Y Performance of the Group 159 159 t fi o r p g n i t a r e p o s s o r g y r a n d r O i 1 2 0 2 ) 1 ( ) A D T B E I ( t fi o r p g n i t a r e p o s s o r g y r a n d r o i i f o n o rt o p o r P 1 2 0 2 ) 2 ( ) A D T B E I ( t fi o r p g n i t a r e p o s s o r g y r a n d r O i 0 2 0 2 ) 1 ( ) A D T B E I ( t fi o r p g n i t a r e p o s s o r g y r a n d r o i i f o n o rt o p o r P 0 2 0 2 ) 2 ( ) A D T B E I ( DNSH Criteria (“Do No Significant Harm“)(4) Category(6) e g n a h c e t a m i l C n o i t a g i t i m e g n a h c e t a m i l C n o i t a t p a d a e n i r a m d n a r e t a W s e c r u o s e r y m o n o c e r a u c r i C l n o i t u l l o P d n a y t i s r e v d o B i i s m e t s y s o c e m u m n M i i ) ( 5 s d r a u g e f a s y t i v i t c a g n i l b a n E l a n o i t i s n a r T y t i v i t c a o t n o i t u b i r t n o c l a i t n a t s b u S e g n a h c e t a m i l c ) ( 3 n o i t a g i t i m I I I S E T V T C A D E N G I L A - E L B G I L E Y M O N O X A T I . 1 A Economic activities Individual renovation measures consisting in installation, maintenance or repair of energy efficiency equipment (Enel X - Condominium) Professional services related to energy performance of buildings (Enel X - Customer Insight) 7.3 Individual renovation measures consisting in installation, maintenance or repair of energy efficiency equipment 7.6 Installation, maintenance and repair of renewable energy technologies (Enel X - Distributed Energy) Installation, maintenance and repair of renewable energy technologies (Enel X - Battery Energy Storage) 6.13 Infrastructure for personal mobility, cycle logistics 7.4 Installation, maintenance and repair of charging stations for electric vehicles in buildings (and parking spaces attached to buildings) (Enel X - Mobility) Market (power sales to end customer with Certificates of Origin) Ordinary EBITDA of environmentally sustainable activities (taxonomy-aligned) (A.1) Taxo- nomy Code millions of euro millions of euro % % % Y/N Y/N Y/N Y/N Y/N Y/N Y/N E T 7.3 (a-e) 1 - - - 100.0 9.3 16 0.1 13 0.1 100.0 7.3 (d,e) 7.6 (a) 5 - 3 - 100.0 7.6 (f) (3) - 3 - 100.0 Y Y Y Y Y Y Y Y Y Y 6.13 7.4 (11) (0.1) (40) (0.2) 100.0 Y Y Y Y Y Y 565 2.9 568 3.2 13,197 68.7 13,227 73.4 100.0 160 160 Integrated Annual Report 2021 t fi o r p g n i t a r e p o s s o r g y r a n d r O i 1 2 0 2 ) 1 ( ) A D T B E I ( t fi o r p g n i t a r e p o s s o r g y r a n d r o i i f o n o rt o p o r P 1 2 0 2 ) 2 ( ) A D T B E I ( t fi o r p g n i t a r e p o s s o r g y r a n d r O i 0 2 0 2 ) 1 ( ) A D T B E I ( t fi o r p g n i t a r e p o s s o r g y r a n d r o i i f o n o rt o p o r P 0 2 0 2 ) 2 ( ) A D T B E I ( DNSH Criteria (“Do No Significant Harm“)(4) Category(6) e g n a h c e t a m i l C n o i t a g i t i m e g n a h c e t a m i l C n o i t a t p a d a e n i r a m d n a r e t a W s e c r u o s e r y m o n o c e r a u c r i C l n o i t u l l o P d n a y t i s r e v d o B i i s m e t s y s o c e m u m n M i i ) ( 5 s d r a u g e f a s y t i v i t c a g n i l b a n E l a n o i t i s n a r T y t i v i t c a o t n o i t u b i r t n o c l a i t n a t s b u S e g n a h c e t a m i l c ) ( 3 n o i t a g i t i m Economic activities A.2 Taxonomy-eligible but not environmentally sustainable activities (not taxonomy-aligned activities) Electricity generation from hydropower Transmission and distribution of electricity (Argentina and new connections between a substation and power plant >100 gCO2eq/kWh) Market (power sales to end customer without Certificates of Origin) Ordinary EBITDA of taxonomy-eligible but not environmentally sustainable activities (not taxonomy-aligned activities) (A.2) Taxo- nomy Code millions of euro millions of euro % % % Y/N Y/N Y/N Y/N Y/N Y/N Y/N E T 4.5 17 0.1 9 - 4.9 4 - 48 0.3 1,990 10.4 2,065 11.4 2,011 10.5 2,122 11.7 Total (A.1 + A.2) 15,208 79.2 15,349 85.1 I T O N - E L B G I L E Y M O N O X A T . 2 A I I I S E T V T C A D E N G I L A B. Taxonomy-non-eligible activities Electricity generation from coal and liquid fossil fuels Electricity generation from gas Electricity generation from nuclear energy Enel X (only activities not eligible) Trading activities (energy sales - wholesale) Market (gas sales to end customer) Services, Holding and Other I I I I S E T V T C A E L B G I L E T O N Y M O N O X A T . B Adjustments Ordinary EBITDA of taxonomy-non-eligible activities (B) 282 906 1.4 4.7 535 3.0 659 3.7 416 2.2 439 2.4 68 98 422 1,645 165 0.3 0.5 2.2 8.6 0.9 1 - 597 3.3 447 2.5 (83) 83 (0.5) 0.5 4,002 20.8 2,678 14.9 Total (A + B) 19,210 100.0 18,027 100.0 (1) Ordinary gross operating profit (EBITDA): Ordinary gross operating profit on each individual asset. If an activity is present in both A.1 and A.2 or B, the figure refers to the proportion of the activity that corresponds to A.1, A.2 or B. (2) Proportion of ordinary gross operating margin (ordinary EBITDA): percentage impact of EBITDA of each individual business on the Group’s total EBITDA. (3) Substantial contribution to climate change mitigation: refers to the portion of EBITDA of each individual business activity (indicated in the column Ordinary gross operating profit (EBITDA)) that contributes to climate change mitigation. This is the only objective of the EU taxonomy regulation alignment analysis shown in the table, as it is considered more relevant compared to the climate change adaptation objective, while the criteria for the other environmental objectives are not yet available. (4) DNSH: environmental objectives meeting the DNSH criteria are specified for each activity. (5) Minimum safeguards: indicates whether the minimum safeguards are respected for each individual activity. (6) Category: specifies whether the activity makes a direct contribution to climate mitigation or is an enabling or transitional activity. Performance of the Group 161 161 Value generated and distributed for stakeholders Millions of euro Economic value generated directly(1) (2) Economic value distributed directly Operating expenses(1) Personnel expenses and benefits Payments to providers of capital (shareholders and lenders) Payments to government(3) (4) Total economic value distributed(1) (4) Economic value retained(1) (2) (4) 2021 88,084 63,768 4,415 7,428 4,127 79,738 8,346 2020 66,100 42,634 3,956 7,082 4,260 57,932 8,168 (1) For comparative purposes only, €87 million in 2020 in respect of the component recognized through profit or loss deriving from the remeasurement at fair value of the financial assets connected with service concession arrangements involving distribution operations in Brazil falling within the scope of IFRIC 12 have been reclassified from financial income to revenue. The latter classification had an impact of the same amount on operating profit. For more informa- tion, please see note 7 to the consolidated financial statements. (2) The figures for 2020 have been adjusted, for comparative purposes only, to take account of the effects associated with the change in classification connect- ed with the fair value measurement of outstanding contracts at the end of the period for the purchase and sale of commodities with physical settlement. The change in classification had no impact on operating profit. For more details, please see note 7 to the consolidated financial statements. (3) The amount represents “total tax borne“, which is costs for taxes borne by the Group. For more information, see the 2021 Sustainability Report and the Consolidated Non-Financial Statement. (4) The figure for 2020 has been calculated more accurately. The economic value generated and distributed direct- ly by Enel, in accordance with the criteria established by GRI 201, provides a good indication of how the Group has created wealth for all stakeholders. The increase in value generated directly and in operating expenses reflects the sharp rise in commodity prices, especially gas. Payments to providers of capital increased in reflection of costs connected with the early redemption of a number of bond issues. 162 162 Integrated Annual Report 2021 Analysis of the Group’s financial position and structure €94,294 million NET CAPITAL EMPLOYED €51,952 million NET FINANCIAL DEBT 55.0% SUSTAINABLE FINANCING €87,772 million in 2020 +14.4% on 2020 out of €71,969 million in gross borrowing €13,108 million TOTAL CAPITAL EXPENDITURE of which 84.6% eligible and aligned with European taxonomy Net capital employed and funding Millions of euro Net non-current assets: - property, plant and equipment and intangible assets - goodwill - equity-accounted investments - other net non-current assets/(liabilities) Total net non-current assets Net working capital: - trade receivables - inventories - net receivables due from institutional market operators - other net current assets/(liabilities) - trade payables Total net working capital Gross capital employed Provisions: - employee benefits - provisions for risks and charges and net deferred taxes Total provisions Net assets held for sale Net capital employed Total equity Net financial debt at Dec. 31, 2021 at Dec. 31, 2020 Change 102,733 13,821 704 (4,496) 96,489 13,779 861 (6,807) 112,762 104,322 16,076 3,109 (762) (10,940) (16,959) (9,476) 103,286 (2,724) (6,548) (9,272) 280 94,294 42,342 51,952 12,046 2,401 (2,755) (6,977) (12,859) (8,144) 96,178 (2,964) (6,050) (9,014) 608 87,772 42,357 45,415 6,244 42 (157) 2,311 8,440 4,030 708 1,993 (3,963) (4,100) (1,332) 7,108 240 (498) (258) (328) 6,522 (15) 6,537 6.5% 0.3% -18.2% 34.0% 8.1% 33.5% 29.5% 72.3% -56.8% -31.9% -16.4% 7.4% 8.1% -8.2% -2.9% -53.9% 7.4% - 14.4% Property, plant and equipment and intangible assets in- creased, essentially reflecting capital expenditure during the period (€12,090 million) and changes in the consoli- dation scope (€395 million) related mainly to the acquisi- tion of a controlling interest in Enel Green Power Australia. These factors were partially offset mainly by depreciation, amortization and impairment losses recognized during the year in the amount of €8,695 million. Goodwill increased as a result of adjustments in exchange rates. Other net non-current assets increased in response to the fair value measurement of derivatives and an increase in financial assets related to service concessions for which IFRIC 12 has been applied. Analysis of the Group’s financial position and structure 163 163 Equity-accounted investments decreased due mainly to the write-down of the investment in Slovak Power Holding in response, primarily, to the reduction in the fair value of the cash flow hedge derivatives. Net assets held for sale refer mainly to a number of pro- jects in South Africa for which there is a binding offer for their future sale. The reduction is due to the sale of Open Fiber in 2021 and the sale of Enel Green Power Bulgaria. Net capital employed came to €94,294 million at Decem- ber 31, 2021, and was funded by €42,342 million in equity attributable to owners of the Parent and minority interests and €51,952 million in net financial debt. With regard to the latter, the debt/equity ratio at December 31, 2021 was 1.23 (compared with 1.07 at December 31, 2020). Net financial debt The Enel Group’s net financial debt and changes in the pe- riod are detailed in the table below. Millions of euro Long-term debt: - bank borrowings - bonds - other borrowings(1) Long-term debt Long-term financial assets and securities Net long-term debt Short-term debt Bank borrowings: - current portion of long-term bank borrowings - other short-term bank borrowings Short-term bank borrowings Bonds (current portion) Other borrowings (current portion) Commercial paper Cash collateral on derivatives and other financing Other short-term financial borrowings(2) Other short-term debt Long-term loan assets (short-term portion) Loan assets - cash collateral Other short-term financial assets Cash and cash equivalents with banks and short-term securities Cash and cash equivalents and short-term financial assets Net short-term debt NET FINANCIAL DEBT Net financial debt of “Assets held for sale“ at Dec. 31, 2021 at Dec. 31, 2020 Change 12,579 39,099 2,942 54,620 (2,692) 51,928 989 1,329 2,318 2,700 342 10,708 918 363 15,031 (1,538) (6,485) (356) (8,946) (17,325) 24 51,952 699 8,663 38,357 2,499 49,519 (2,745) 46,774 1,369 711 2,080 1,412 387 4,854 370 415 7,438 (1,428) (3,223) (253) (5,973) (10,877) (1,359) 45,415 646 3,916 742 443 5,101 53 5,154 (380) 618 238 1,288 (45) 5,854 548 (52) 7,593 (110) (3,262) (103) (2,973) (6,448) 1,383 6,537 53 45.2% 1.9% 17.7% 10.3% 1.9% 11.0% -27.8% 86.9% 11.4% 91.2% -11.6% - - -12.5% - -7.7% - -40.7% -49.8% -59.3% - 14.4% 8.2% (1) (2) Includes other non-current financial borrowings included under “Other non-current financial liabilities“. Includes current borrowings included under “Other current financial liabilities“. 164 164 Integrated Annual Report 2021 Net financial debt amounted to €51,952 million at De- cember 31, 2021, an increase of €6,537 million from the €45,415 million at December 31, 2020. This was due mainly to: (i) funding needs for investments in the peri- od (€13,108 million, including €111 million reclassified as available for sale), including contract assets; (ii) the payment of dividends totaling €5,041 million, including coupons paid to holders of hybrid bonds in the amount of €71 million; (iii) transactions in non-controlling inter- ests mainly related to the increase in the interest held in Enel Américas following the public tender offer issued on March 15, 2021 (€1,295 million); (iv) adverse exchange rate developments (€1,918 million); (v) an increase in lease lia- bilities (€479 million); (vi) the payments and consolidation of debt connected with business combinations in Aus- tralia, Spain and Italy (a total of €283 million). Cash flows generated by operating activities (€10,069 million), the issue of perpetual hybrid bonds (€2,214 mil- lion net of transaction costs), the conversion of hybrid bonds into perpetual hybrid bonds (€967 million net of transaction costs) and the liquidity generated by the sale of Open Fiber in the amount of €2,423 million partially offset these funding needs. Gross financial debt at December 31, 2020 came to €71,969 million, up €12,932 million from the previous year. Gross financial debt Millions of euro Gross financial debt of which: - sustainable financing Sustainable financing/Total gross debt (%) at Dec. 31, 2021 at Dec. 31, 2020 Gross long-term debt Gross short-term debt Gross debt Gross long-term debt Gross short-term debt Gross debt 58,651 13,318 71,969 52,687 6,350 59,037 28,973 10,474 39,447 55% 15,748 3,901 19,649 33% More specifically, gross long-term financial debt (including the short-term portion), in the amount of €58,651 million, includes €28,973 million in sustainable financing and is structured as follows: • bonds in the amount of €41,799 million, of which €18,003 million in sustainable bonds, up €2,030 mil- lion compared with December 31, 2020. The change in bonds is due mainly to the numerous sustainabili- ty-linked issues by Enel Finance International in 2021, which were only partially offset by redemptions of ma- turing bonds, early repurchases of conventional bonds by Enel Finance International, and a consent solicita- tion in the amount of €900 million by Enel SpA on a non-convertible subordinated hybrid bond converted into perpetual hybrid and, therefore, recognized as an equity instrument and no longer as a debt instrument; • bank borrowings in the amount of €13,568 million, €10,970 million of which related to sustainable financ- ing. These borrowings increased by €3,536 million com- pared with the previous year due mainly to the use of new financing and negative currency differences, which were only partially offset by repayments made during the period. Of note among new bank borrowings: – €1,508 million related to the use of three varia- ble-rate loans tied to sustainable development goals granted to Enel SpA; – €1,400 million related to the use of various loans tied to sustainable development goals granted to Endesa; – €300 million related to the use of two variable-rate loans tied to sustainable development goals granted to e-distribuzione by the European Investment Bank; • other borrowings in the amount of €3,284 million, an increase of €398 million from the previous year. Gross short-term financial debt increased by €6,968 mil- lion compared with December 31, 2020, to €13,318 million. It mainly includes commercial paper of €10,708 million, of which €10,343 connected with sustainability goals. Cash and cash equivalents and short-term financial assets, in the amount of €20,017 million, increased by €6,395 million compared with the end of 2020 due mainly to the increase in financial assets for cash collateral in the amount of €3,262 million and in cash and cash equivalents with banks and short-term securities for a total of €2,973 million. Analysis of the Group’s financial position and structure 165 165 Sustainable finance: private and public finance to mobilize capital at the service of climate objectives For Enel, “sustainable finance“ means the synergy between private and public finance. In particular, private finance conveys private capital towards sustainable investments or for the benefit of companies whose strategic action is directed at certain sustainability objectives, reflecting the economic and financial value of sustainability in a lower borrowing costs. Public finance, on the other hand, stim- ulates the creation of sustainable investments through grants and loans at subsidized interest rates. At Enel, sustainable finance plays a crucial role in support- ing the Group’s sustainable growth, representing, at the end of 2021, more than half of our gross debt and con- tributing to a progressive reduction in the cost of debt through the recognition of the value of sustainability. It is for this reason that during 2021 Enel extended this sus- tainability-linked approach to all its financial debt instru- ments, with the publication of the “Sustainability-Linked Financing Framework“, a comprehensive document with which Enel illustrated how sustainability can be integrated into its various types of financial transaction: credit lines, commercial paper, bond issues, guarantees and deriva- tives on interest rates and exchange rates. Enel was the first company to structure a framework with these characteristics. The framework establishes a set of KPIs, targets and principles that govern the development of sustainable finance throughout the Group with ambition and transparency, linking our financial strategy to our sus- tainability objectives. The Group’s financial instruments and financial transactions may therefore have an interest rate or other financial or structural terms linked to the achievement of objectives for the reduction of direct greenhouse gas emissions (SDG 13 “Climate Action“) or growth in installed renewables capacity (SDG 7 “Affordable and Clean Energy“). The Sustainability-Linked Financing Framework was up- dated in January 2022 following the presentation of the new Strategic Plan and in particular includes bringing for- ward achievement of the ambitious goal of eliminating direct greenhouse gas emissions (Scope 1) from 2050 to 2040. Direct greenhouse gas emissions (Scope 1) - specific Percentage of installed renewables capacity(1) Actual 2021 227 gCO2eq/kWh Target 2021 2022 2023 2024 2030 2040 148 gCO2eq/kWh 140 gCO2eq/kWh 82 gCO2eq/kWh 0 gCO2eq/kWh 57.5% 55% 60% 65% 66% 80% 100% (1) The calculation of the KPIs does not include 3.9 MW of capacity connected with generation plants acquired by the Group, in accordance with the contrac- tual terms of the individual instruments. Having achieved 57.5% of installed renewables capacity in 2021, Enel has achieved the target set in all the financial instruments in which the interest rate, or other financial or structural terms of the transaction, are linked to a per- centage of installed renewables capacity equal to or great- er than 55%. In particular, this includes the achievement of the targets contained in the first sustainability-linked bonds issued by Enel Finance International NV (EFI) in 2019 on the US and European markets. Furthermore, 2021 was an exciting year for the Group and its sustainable finance strategy, with structured transac- tions amounting to the equivalent of more than €30 billion. Starting with the exposures of the various industrial activ- ities, Enel has signed agreements with multiple financial counterparties for both derivatives and sustainable guar- antees, both of which are linked to the Group’s ability to achieve its sustainability objectives in subsequent years. Furthermore, in March 2021, Enel agreed a sustainabil- ity-linked revolving credit facility worth €10 billion, the largest sustainable credit line in the world at the time of signing, linked to SDG 13. In May 2021, Enel Finance Amer- ica LLC structured a $5 billion commercial paper program, again linked to the same sustainability goal. With regard to bond issues, between June and Septem- ber 2021, sustainability-linked bonds in euros and dollars were issued by EFI in a total amount equivalent to about €10 billion. These issues are linked to the achievement of Enel’s sus- tainability goal for the reduction of direct greenhouse gas emissions (Scope 1), in line with the Group’s Sustainabili- ty-Linked Financing Framework. At the same time, EFI re- purchased conventional bond in circulation, not linked to the pursuit of SDG objectives, in the total amount of some €8 billion, using voluntary purchase offers and the exercise of specific buyback options. This bond repurchase program, together with the new sus- tainability-linked bond issues, made it possible to achieve a ratio between sustainable funding sources and the Group’s total gross debt of about 55% at the end of 2021, 166 166 Integrated Annual Report 2021 while also enabling a reduction of the cost of the Group’s borrowing and providing an important mechanism for pro- tecting against potential increases in interest rates due to the acceleration of the economic recovery or the tighten- ing of monetary policies by central banks in response to the rise in inflation. In the area of public finance, the Group supports the eco- nomic recovery plan and intends to become a strategic partner in the implementation of the Green Deal and the Recovery Plan at both the European and national levels. The goal is to drive a sustainable, rapid and effective recovery through a broad pipeline of shovel-ready projects focused on decarbonization, electricity grids and electrification, aimed at accelerating the green and digital transition of the European economy with a significant impact in terms of GDP, employment and reduction of CO2 emissions, in full alignment with the European taxonomy. To this end, the Group has identified potential investments amounting to about €5.4 billion in 2022-2027 that will have a direct impact on the Group and are consistent with the National Recovery Plans in Italy, Spain and Romania. These initiatives focus on green hydrogen, renewables and stor- age, revitalization of the photovoltaic manufacturing in- dustry, smart grids, grid resilience and charging infrastruc- ture for electric mobility. These investments are expected to have a spill-over impact on GDP of around €13.2 billion, creating over 18,000 new jobs. The Group has also developed other projects with an indi- rect impact, aimed at promoting partnerships with public and private entities, both with a view to the decarboniza- tion and electrification of energy consumption through the expansion of electric bus fleets, the transition to green ports and the promotion of energy efficiency in public buildings. Furthermore, in the context of subsidized loans from inter- national and national financial institutions, the Group is lead- ing an innovation process aimed at accelerating the mobili- zation of capital to support sustainable growth through the use of sustainability-linked financial instruments. More specifically, in 2021, the Group received subsidized loans totaling €1.3 billion that, following the path taken in our private-sector financing, include sustainability-linked mechanisms connected with SDG 13. Among the main transactions, special mention goes to a €600 million sus- tainability-linked loan to e-distribuzione, a Group compa- ny, from the European Investment Bank (EIB), the first sus- tainability-linked loan agreement for the EIB. In the coming years, Enel will continue to make use of sus- tainable finance tools, with the aim of achieving a ratio be- tween sustainable borrowing and the Group’s total debt of about 65% by 2024 and over 70% by 2030. Sustainability-linked finance will therefore continue to rep- resent the perfect tool for linking ambitious climate objec- tives with funding sources and addressing the future chal- lenges of the energy transition. Cash flows Millions of euro Cash and cash equivalents at the beginning of the year(1) Cash flows from operating activities Cash flows from investing activities Cash flows from/(used in) financing activities Effect of exchange differences on cash and cash equivalents Cash and cash equivalents at the end of the year(2) 2021 6,002 10,069 (10,875) 3,777 17 8,990 2020 9,080 11,508 (10,117) (3,972) (497) 6,002 Change (3,078) (1,439) (758) 7,749 514 2,988 (1) Of which cash and cash equivalents in the amount of €5,906 million at January 1, 2021 (€9,029 million at January 1, 2020), short-term securities in the amount of €67 million at January 1, 2021 (€51 million at January 1, 2020), and cash and cash equivalents pertaining to assets held for sale in the amount of €29 million at January 1, 2021. (2) Of which, cash and cash equivalents in the amount of €8,858 million at December 31, 2021 (€5,906 million at December 31, 2020), short-term securities in the amount of €88 million at December 31, 2021 (€67 million at December 31, 2020), and cash and cash equivalents pertaining to assets held for sale in the amount of €44 million at December 31, 2021 (€29 million at December 31, 2020). Cash flows from operating activities for 2021 produced a net inflow of €10,069 million, down €1,439 million from the previous year, mainly reflecting an increase in financial ex- pense connected with the early extinguishment of a num- ber of loans replaced by new bond issues at more advanta- geous rates and higher taxes paid. Cash flows from investing activities for 2021 absorbed li- quidity in the amount of €10,875 million, compared with a net outflow of €10,117 million in 2020. In particular, investments in property, plant and equipment, intangible assets, investment property and contract assets totaled €13,108 million (including €111 million reclassified as available for sale), an increase on the previous year, as ana- lyzed in greater in the following section. Analysis of the Group’s financial position and structure 167 167 Investments in entities or business units, net of cash and cash equivalents acquired, totaled €283 million and main- ly concerned the acquisition of renewable energy assets in Spain for €79 million, the line-item consolidation of the net financial debt of a number of Australian companies that were equity-accounted until December 2020, and the ac- quisition of CityPoste Payment SpA for about €19 million. Disposals of entities or business units, net of cash and cash equivalents sold, amounted to €61 million, and mainly re- garded the sale of wind operations in Bulgaria. The liquidity generated by the decrease in other investing activities in 2021, equal to €2,455 million, mainly concerned the €2,423 million change in cash flows produced by the sale of Open Fiber. Cash flows from financing activities generated liquidity in the total amount of €3,777 million, compared with a net cash use of €3,972 million in 2020. The cash flow for 2021 essentially concerned: • the payment of dividends in the amount of €4,970 mil- lion, as well as €71 million paid to holders of perpetual hybrid bonds; • the cash requirement associated with transactions in non-controlling interests in the amount of €1,295 million, mainly regarding the increase in the interest held in Enel Américas following the tender offer launched on March 15, 2021; • the net increase of €7,913 million resulting from repay- ments, new financing and other changes in financial debt; • the €2,213 million in cash generated on the issue of a non-convertible perpetual subordinated hybrid bond net of transaction costs as well as ancillary costs related to the conversion of a number of bonds into perpetual hy- brid bonds. In 2021, cash flows for investing activities in the amount of €10,875 million absorbed the entirety of cash flows gen- erated on operating activities of €10,069 million. The dif- ference was covered by borrowing, which generated cash flows totaling €3,777 million. The difference is reflected in the increase in cash and cash equivalents, which at De- cember 31, 2021 amounted to €8,990 million, compared with €6,002 million at the end of 2020. This also reflect- ed the effects of favorable developments in the exchange rates of the various local currencies against the euro in the amount of €17 million. Capital expenditure Millions of euro Thermal Generation and Trading Enel Green Power Infrastructure and Networks End-user Markets Enel X Services Holding and other Total 2021 822 5,662(1) 5,296 643 367 139 68 2020 694 4,629 3,937 460 303 103 71 Change 128 1,033 1,359 183 64 36 (3) 12,997 10,197 2,800 18.4% 22.3% 34.5% 39.8% 21.1% 35.0% -4.2% 27.5% (1) The figure does not include €111 million regarding units classified as “held for sale“. Capital expenditure increased by €2,800 million on the previous year. In line with the Paris Agreement on the reduction of CO2 emissions and guided by energy efficiency and ener- gy-transition goals, the Enel Group has invested, above all, in renewable energy. More specifically, the increase pri- marily concerned the United States (€579 million), Iberia (€253 million), Colombia (€192 million), Italy (€123 million), India (€122 million), Russia (€68 million), Chile (€66 million), Peru (€26 million), Panama (€25 million), and Brazil (€30 million, net of the significant unfavorable impact of ex- change rate developments in the amount of €62 million). These increases were only partially offset by decreased capital expenditure in South Africa (€338 million), Mexico (€118 million) and Greece (€23 million). In response to increasingly volatile weather events and to invest in grid resilience, investment in electricity distribu- tion also increased. Capital expenditure for distribution increased in Italy (€588 million), Brazil (€335 million), Iberia (€243 million), for the Grid Blue Sky project and for quality and remote control, Argentina (€74 million), Chile (€38 million), Peru (€29 mil- 168 168 Integrated Annual Report 2021 lion), Colombia (€31 million) and Romania (€10 million). Capital expenditure increased in the End-user Markets Business Line, particularly in Italy (€117 million), Iberia (€57 million) and Romania (€9 million), attributable essentially to the digitalization of customer-management processes. Capital expenditure by Enel X increased mainly in Italy, in the amount of €63 million, in the e-Home business with the Vivi Meglio project as a result of the increase in vol- umes and for investments to develop global technology platforms for the digital management of this business, and in North America (€10 million) for the development of stor- age projects, as well as in Iberia in the e-Home business in response to the increase in volumes sold compared with 2020. These factors were partly offset by a decrease in capital expenditure in Latin America. The growth of capital expenditure in Thermal Generation and Trading, especially in Italy (€123 million), is attributable to the conversion of a number of plants from coal to gas with lower CO2 emissions. Finally, with regard to capital expenditure (capex), we re- port the results of the alignment of this indicator with the European taxonomy by reason of its substantial contribu- tion to climate change mitigation, in compliance with the principle of not doing harm to other environmental objec- tives (DNSH) and the minimum social safeguards, as dis- cussed in the sections “European Union taxonomy“ and “Statement on the alignment of Enel’s business with the European taxonomy“. Capital expenditure (capex) under the European taxonomy(1) CAPEX 2021 10.8% 4.6% €13.1 billion Considering all retail electricity sales as “non-eligible” 10.8% 5.5% €13.1 billion 83.7% 84.6% (1) Includes €111 million regarding units classified as “held for sale“. Eligible-aligned Eligible-not aligned Non-eligible In 2021, 84.6% of capital expenditure (capex) was gener- ated by business activities aligned with the EU taxonomy, compared with 84.7% in 2020. Considering all retail electricity sales as “non-eligible“, 83.7 % of capital expenditure was aligned. The percentage of the capital expenditure of taxonomy eli- gible-aligned activities in 2021 was in line with the previous year. The percentage of 2021 capital expenditure for eligi- ble-aligned activities was 1.9% lower than the value of cap- ital expenditure planned for 2021 in the 2021-2023 Strate- gic Plan for those activities. In absolute terms, the capital expenditure of taxonomy eligible-aligned activities was greater than planned, primarily attributable to the great- er-than-planned increase in expenditure to expand Group renewables capacity (an excess of €683 million). However, capital expenditure in eligible-not aligned activities and non-eligible activities was also greater (€412 million), no- tably for electricity transmission and distribution, the sale of energy not certified by guarantees of origin and thermal generation. Analysis of the Group’s financial position and structure 169 169 Performance by Business Line The representation of performance by Business Line pre- sented here is based on the approach used by manage- ment in monitoring Group performance for the two peri- ods under review, taking account of the operational model adopted as described above. With regard to disclosures for operating segments, as management reports on performance by Business Line, the Group has therefore adopted the following reporting sectors: • primary segment: Business Line; • secondary segment: geographical area. The Business Line is therefore the main discriminant in the analyses performed and decisions taken by the manage- ment of the Enel Group, and is fully consistent with the internal reporting prepared for these purposes since the results are measured and evaluated first and foremost for each Business Line and only thereafter are they broken down by country. The following chart outlines these organizational arrange- ments. HOLDING Global Business Lines Local businesses Thermal Generation Trading Enel Green Power Infrastructure and Networks Enel X End-user Markets Services Regions/ countries Italy Iberia Europe Africa, Asia and Oceania North America Latin America The organization continues to be based on matrix of Busi- ness Lines (Thermal Generation and Trading, Enel Green Power, Infrastructure and Networks, End-user Markets, Enel X, Services and Holding/Other) and geographical are- as (Italy, Iberia, Europe, Latin America, North America, Afri- ca, Asia and Oceania, Central/Holding). 170 170 Integrated Annual Report 2021 Performance by Business Line in 2021 and 2020 Results for 2021(1) Millions of euro Revenue and other income from third parties Revenue and other income from transactions with other segments Thermal Generation and Trading Enel Green Power Infrastructure and Networks End-user Markets Enel X Services Holding and other Reporting segment total Eliminations and adjustments Total 22,883 7,244 17,164 37,396 1,513 20 1,786 88,006 - 88,006 10,272 2,282 3,492 1,312 28 1,977 148 19,511 (19,511) - Total revenue 33,155 9,526 20,656 38,708 1,541 1,997 1,934 107,517 (19,511) 88,006 Net results from commodity contracts 535 (55) - 2,044 Gross operating profit/(loss) 899 4,761 7,210 2,990 Depreciation, amortization and impairment losses 3,485 1,679 2,862 1,333 Operating profit/(loss) (2,586) 3,082 4,348 1,657 Capital expenditure 822 5,662(2) 5,296 643 - 283 253 30 367 - (2) 2,522 (86) 1,510 17,567 237 38 9,887 (323) 1,472 7,680 139 68 12,997 - - - - - 2,522 17,567 9,887 7,680 12,997 (1) Segment revenue includes both revenue from third parties and revenue from transactions with other segments. (2) The figure does not include €111 million classified as available for sale. Results for 2020(1) (2) (3) (4) Millions of euro Revenue and other income from third parties Revenue and other income from transactions with other segments Thermal Generation and Trading Enel Green Power Infrastructure and Networks End-user Markets Enel X Services Holding and other Reporting segment total Eliminations and adjustments Total 14,332 5,852 15,919 28,793 1,097 2 9 66,004 - 66,004 7,404 1,840 3,510 715 24 1,868 145 15,506 (15,506) - Total revenue 21,736 7,692 19,429 29,508 1,121 1,870 154 81,510 (15,506) 66,004 Net results from commodity contracts (421) 68 - 264 - (6) (4) (99) Gross operating profit/(loss) 1,700 4,647 7,520 3,121 Depreciation, amortization and impairment losses 1,685 1,913 3,171 1,304 Operating profit/(loss) 15 2,734 4,349 1,817 Capital expenditure 694 4,629 3,937 460 152 168 (16) 303 (47) (190) 16,903 179 28 8,448 (226) (218) 8,455 103 71 10,197 - - - - - (99) 16,903 8,448 8,455 10,197 (1) Segment revenue includes both revenue from third parties and revenue from transactions with other segments. (2) The figures for revenue from third parties and intersegment transactions have been calculated more accurately. (3) The figures for 2020 have been adjusted, for comparative purposes only, to take account of the effects associated with the change in classification connect- ed with the fair value measurement of outstanding contracts at the end of the period for the purchase and sale of commodities with physical settlement. The change in classification had no impact on operating profit. For more details, please see note 7 to the consolidated financial statements. (4) For comparative purposes only, €87 million in 2020 in respect of the component recognized through profit or loss deriving from the remeasurement at fair value of the financial assets connected with service concession arrangements involving distribution operations in Brazil falling within the scope of IFRIC 12 have been reclassified from financial income to revenue. The latter classification had an impact of the same amount on operating profit. For more informa- tion, please see note 7 to the consolidated financial statements. In addition to the above, the Group also monitors perfor- mance by geographical area, classifying results by region/ country. In the table below, ordinary gross operating profit is shown for the two periods under review with the goal of providing a view of performance not only by Business Line, but also by region/country. It should be noted that ordinary gross operating profit ex- cludes non-recurring items. For a reconciliation with gross operating profit, please see the section “Group Perfor- mance“. Performance by Business Line 171 171 Ordinary gross operating margin(1) (2) Millions of euro Thermal Generation and Trading Enel Green Power Infrastructure and Networks End-user Markets Enel X Services Holding and other Total 2021 2020 Change 2021 2020 Change 2021 2020 Change 2021 2020 Change 2021 2020 Change 2021 2020 Change 2021 2020 Change 2021 2020 Change 464 488 (24) 1,184 1,362 (178) 3,836 3,861 (25) 2,311 2,372 (61) 131 (27) 7,982 8,204 (222) 844 1,258 (414) 840 436 404 1,877 2,114 (237) 547 530 Latin America 350 340 10 1,809 1,982 (173) 1,810 1,684 126 263 203 Italy Iberia Argentina Brazil Chile Colombia Peru Panama Other countries Europe Romania Russia Other countries North America United States and Canada Mexico Africa, Asia and Oceania South Africa India Other countries Other Total 17 60 19 29 19 (7) - - - 97 132 (49) 58 85 66 64 11 114 115 12 66 24 28 (4) 3 47 (44) 12 (7) 334 271 63 1,120 964 156 136 107 (113) 536 825 (289) 144 157 (13) 47 601 575 (1) (1) - 141 136 127 102 46 45 385 362 23 158 154 4 - - - - 44 49 22 - - 25 56 22 - - 26 5 25 1 15 3 12 - (2) - 81 (2) 83 - (39) (35) (4) - - - - 2 (1) - - 17 18 (1) - - - - 9 118 (37) 177 162 (2) - 120 (37) - 82 5 90 79 (7) 90 (56) 699 769 (70) (53) 627 695 (68) (3) 72 - - - - (7) 110 82 3 25 (4) 74 54 53 6 (5) (44) (2) 56 29 (3) 30 40 - - 96 96 - - - - - - - - - 136 (40) (41) 83 (124) 136 (40) (41) 83 (124) - - - - - - - - - - - - - - - - - - - - 6 - 6 - - - - - - - 9 - 9 - - - - - - - (3) - (3) - - - - - 44 6 38 (1) Ordinary gross operating profit excludes non-recurring items. For a reconciliation with gross operating profit, see the section “Group Performance“. (2) For comparative purposes only, €87 million in 2020 in respect of the component recognized through profit or loss deriving from the remeasurement at fair value of the financial assets connected with service concession arrangements involving distribution operations in Brazil falling within the scope of IFRIC 12 have been reclassified from financial income to revenue. The latter classification had an impact of the same amount on operating profit. For more informa- tion, please see note 7 to the consolidated financial statements. 172 172 Integrated Annual Report 2021 38 45 84 3 2 15 42 22 - - 9 10 (1) - (9) (9) - 2 2 - - 52 92 5 1 19 50 17 - - 17 11 - 6 22 22 - - - - - 93 7 8 2 (1) 4 8 (5) - - 8 1 1 6 31 31 - (2) (2) - - 56 31 (77) (3) (18) (55) - (1) - - 7 7 - - - - - - - - - 83 30 (86) (3) (19) (64) - - - - 4 4 - - - - - - - (3) (3) 66 94 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 1 1 - - - - - 4,191 4,413 (222) 4,247 4,207 138 153 1,705 1,391 639 1,022 (383) 1,143 1,046 451 125 46 337 153 88 96 687 613 74 110 82 3 25 449 101 45 512 310 112 90 781 699 82 56 55 6 (5) 40 (15) 314 97 2 24 1 (175) (157) (24) 6 (94) (86) (8) 54 27 (3) 30 (1) (1) (2) (2) (1) 1 9 - 1 9 - - - 3 3 - - 3 3 - - - - - (16) 298 (8) 161 (8) 137 62 79 (4) 1,568 (175) 1,743 1,656 (146) 1,802 1,702 2,230 (528) 4,815 4,721 94 7,663 7,801 (138) 3,086 3,197 (111) (15) 1,567 (177) 1,744 19,210 18,027 1,183 Ordinary gross operating margin(1) (2) Thermal Generation and Millions of euro Trading Enel Green Power Infrastructure and Networks End-user Markets Enel X Services Holding and other Total 2021 2020 Change 2021 2020 Change 2021 2020 Change 2021 2020 Change 2021 2020 Change 2021 2020 Change 2021 2020 Change 2021 2020 Change 464 488 (24) 1,184 1,362 (178) 3,836 3,861 (25) 2,311 2,372 (61) 131 52 92 5 1 19 50 17 - - 17 11 - 6 22 22 - - - - - 38 45 84 3 2 15 42 22 - - 9 10 (1) - (9) (9) - 2 2 - - 93 7 8 2 (1) 4 8 (5) - - 8 1 1 6 31 31 - (2) (2) - - 56 31 (77) (3) (18) (55) - (1) - - 7 7 - - - - - - - - - (7) (44) 44 6 38 1,702 2,230 (528) 4,815 4,721 94 7,663 7,801 (138) 3,086 3,197 (111) (16) 298 (8) 161 (8) 137 62 79 Italy Iberia Argentina Brazil Chile Colombia Peru Panama Europe Romania Russia Other countries Other countries North America Africa, Asia and Oceania South Africa Other countries India Other Total 844 1,258 (414) 840 436 404 1,877 2,114 (237) 547 530 Latin America 350 340 10 1,809 1,982 (173) 1,810 1,684 126 263 203 24 28 (4) 3 47 (44) 12 (7) 334 271 63 1,120 964 156 136 107 (113) 536 825 (289) 144 157 (13) 601 575 385 362 23 114 115 141 136 158 154 97 132 (49) 58 (2) - 81 (2) 83 - (39) (35) (4) - - - - 2 85 66 64 11 (1) - (2) - 17 18 (1) - - - - 9 12 66 47 (1) (1) - - - - - - - 118 (37) 177 162 136 (40) (41) 83 (124) 136 (40) (41) 83 (124) 120 (37) 26 5 25 1 15 3 12 - (2) 56 29 (3) 30 40 127 102 46 45 79 (7) 90 74 54 53 6 (5) 82 5 90 110 82 3 25 (4) 96 96 - - - - - - - - - - - - - - - - - - - - - - 44 49 22 - - - - 6 - 6 - - - - - 25 56 22 - - - - 9 - 9 - - - - - 4 - - - - - - - - - - - (56) 699 769 (70) United States and Canada (53) 627 695 (68) Mexico (3) 72 17 60 19 29 19 (7) - - - - - - - - - - - (3) (3) (1) Ordinary gross operating profit excludes non-recurring items. For a reconciliation with gross operating profit, see the section “Group Performance“. (2) For comparative purposes only, €87 million in 2020 in respect of the component recognized through profit or loss deriving from the remeasurement at fair value of the financial assets connected with service concession arrangements involving distribution operations in Brazil falling within the scope of IFRIC 12 have been reclassified from financial income to revenue. The latter classification had an impact of the same amount on operating profit. For more informa- tion, please see note 7 to the consolidated financial statements. 83 30 (86) (3) (19) (64) - - - - 4 4 - - (3) (3) - - - - - 66 94 (27) 1 9 - 1 9 - (1) - - 3 3 - - 3 3 - - - - - - - - - - - - - - - - - - - (1) (1) - - - - - - - - - - - - - - - - - - - (2) (2) - - - - - - - - - - - - - - - - - - - 1 1 - - - - - 7,982 8,204 (222) 4,191 4,413 (222) 4,247 4,207 138 153 1,705 1,391 40 (15) 314 639 1,022 (383) 1,143 1,046 451 125 46 337 153 88 96 687 613 74 110 82 3 25 449 101 45 512 310 112 90 781 699 82 56 55 6 (5) 97 2 24 1 (175) (157) (24) 6 (94) (86) (8) 54 27 (3) 30 (4) 1,568 (175) 1,743 1,656 (146) 1,802 (15) 1,567 (177) 1,744 19,210 18,027 1,183 Performance by Business Line 173 173 Thermal Generation and Trading 174 174 Integrated Annual Report 2021 Thermal Generation and Trading 37 GW NET EFFICIENT INSTALLED CAPACITY 113.8 TWh NET ELECTRICITY GENERATION -22.4% from coal-fired plants on 2020 +5.3% from coal-fired plants on 2020 2.2% COAL REVENUE as % of total Group revenue €1,702 million ORDINARY GROSS OPERATING PROFIT €2,230 million in 2020 Operations Net electricity generation Millions of kWh Coal-fired plants Fuel-oil and turbo-gas plants Combined-cycle plants Nuclear plants Total net generation - of which Italy - of which Iberia - of which Latin America - of which Europe 2021 13,858 22,709 51,718 25,504 2020 13,155 19,401 43,353 25,839 Change 703 3,308 8,365 (335) 113,789 101,748 12,041 23,808 44,799 23,934 21,248 19,044 42,853 21,764 18,087 4,764 1,946 2,170 3,161 5.3% 17.1% 19.3% -1.3% 11.8% 25.0% 4.5% 10.0% 17.5% The increase in thermal generation is essentially attributa- ble to an increase in generation both from combined-cycle plants (8,365 million kWh) and from fuel-oil and turbo-gas plants (3,308 million kWh). The increase for combined-cy- cle plants is attributable mainly to Italy (3,158 million kWh), Iberia (3,078 million kWh), and Latin America (1,905 mil- lion kWh), whereas the increase for fuel-oil and turbo-gas plants was seen mainly in Russia (2,938 million kWh). Net efficient generation capacity MW Coal-fired plants Fuel-oil and turbo-gas plants Combined-cycle plants Nuclear plants Total - of which Italy - of which Iberia - of which Latin America - of which Europe Compared with 2020, the 1,959 MW decrease in net effi- cient generation capacity was primarily due to the decom- missioning of coal-fired plants in Spain and Italy. 2021 6,910 11,715 15,039 3,328 36,992 11,569 12,751 7,396 5,276 2020 8,903 11,711 15,009 3,328 38,951 12,414 13,871 7,406 5,260 Change (1,993) -22.4% 4 30 - (1,959) (845) (1,120) (10) 16 - 0.2% - -5.0% -6.8% -8.1% -0.1% 0.3% Performance by Business Line 175175 Performance Millions of euro Revenue(1) Gross operating profit/(loss) Ordinary gross operating profit/(loss) Operating profit/(loss) Ordinary operating profit/(loss) Capital expenditure 2021 33,155 899 1,702 (2,586) 729 822 2020 21,736 1,700 2,230 15 1,456 694 Change 11,419 (801) (528) (2,601) (727) 128 52.5% -47.1% -23.7% - -49.9% 18.4% (1) The figures for 2020 have been adjusted, for comparative purposes only, to take account of the effects associated with the change in classification connect- ed with the fair value measurement of outstanding contracts at the end of the period for the purchase and sale of commodities with physical settlement. The change in classification had no impact on operating profit. For more details, please see note 7 to the consolidated financial statements. With regard to revenue, it should be noted that, in response to strategic decisions inspired by a sustainable business model under which we pursue the goals, inter alia, of com- bating climate change, the percentage of coal-related revenue experienced a progressive, generalized decline as shown in the following table: Revenue from thermal and nuclear generation Millions of euro Revenue(1) (2) Revenue from thermal generation - of which coal-fired generation Revenue from nuclear generation Revenue from thermal generation as a percentage of total revenue - of which: revenue from coal-fired generation as a percentage of total revenue Revenue from nuclear generation as a percentage of total revenue 2021 2020 13,501 1,904 1,403 15.3% 2.2% 1.6% 7,517 1,639 1,360 11.4% 2.5% 2.1% (1) Segment revenue includes both revenue from third parties and revenue from transactions with other segments. (2) The figures for 2020 have been adjusted, for comparative purposes only, to take account of the effects associated with the change in classification connect- ed with the fair value measurement of outstanding contracts at the end of the period for the purchase and sale of commodities with physical settlement. The change in classification had no impact on operating profit. For more details, please see note 7 to the consolidated financial statements. 176 176 Integrated Annual Report 2021 The following tables show a breakdown of performance by region/country in 2021. Revenue(1) Millions of euro Italy(1) Iberia(1) Latin America - of which Argentina - of which Brazil - of which Chile - of which Colombia - of which Peru North America Europe - of which Romania - of which Russia Other 2021 22,816 8,344 2,390 165 957 899 186 183 100 554 4 550 122 2020 14,965 5,125 1,304 148 182 627 183 164 12 539 - 539 130 Change 7,851 3,219 1,086 17 775 272 3 19 88 15 4 11 (8) Eliminations and adjustments Total (1,171) 33,155 (339) 21,736 (832) 11,419 52.5% 62.8% 83.3% 11.5% - 43.4% 1.6% 11.6% - 2.8% - 2.0% -6.2% - 52.5% (1) The figures for 2020 have been adjusted, for comparative purposes only, to take account of the effects associated with the change in classification connect- ed with the fair value measurement of outstanding contracts at the end of the period for the purchase and sale of commodities with physical settlement. The change in classification had no impact on operating profit. For more details, please see note 7 to the consolidated financial statements. Revenue for 2021 amounted to €33,155 million, an in- crease of €11,419 million over 2020. This change is mainly attributable to: • Italy, primarily due to an increase in sales of electricity and gas, reflecting the increase in commodity prices, gas in particular, and an increase in thermal generation; • Spain, reflecting an increase in revenue from the sale of electricity, largely connected with an increase in aver- age prices and the recognition of an indemnity associ- ated with CO2 emission allowances allocated under the “Plan Nacional de Asignación de Derechos de Emisión“ (PNA) in the amount of €186 million. Ordinary gross operating profit/(loss) Millions of euro Italy Iberia Latin America - of which Argentina - of which Brazil - of which Chile - of which Colombia - of which Peru - of which Panama North America Europe - of which Romania - of which Russia Other Total 2021 464 844 350 97 132 (49) 58 114 (2) (39) 81 (2) 83 2 2020 488 1,258 340 85 66 64 11 115 (1) 17 118 (2) 120 9 Change (24) (414) 10 12 66 (113) 47 (1) (1) (56) (37) - (37) (7) 1,702 2,230 (528) -4.9% -32.9% 2.9% 14.1% - - - -0.9% - - -31.4% - -30.8% -77.8% -23.7% Performance by Business Line 177 177 The €528 million decrease in ordinary gross operating profit in 2021 is due mainly to: • a reduction of €414 million in Iberia, essentially attrib- utable to: – greater costs related to the purchase of energy commodities and greater costs for the derivatives on those commodities, due mainly to fluctuations in market prices; – greater personnel expenses due mainly to the re- lease, in 2020, of the provision for the energy dis- count net of allocations for early-retirement incen- tives. These negative factors were only partly offset by the in- crease in revenue from the sale of electricity connect- ed, above all, to the increase in average prices and by the recognition of the indemnity connected with CO2 emission allowances allocated under the “Plan Nacional de Asignación de Derechos de Emisión“ (PNA) of €186 million; • a €56 million decrease in profit in North America due essentially to the weaker net performance on commod- ity contracts; • a €37 million decrease in profit in Russia mainly attrib- utable to the abolition of the capacity payment for the gas-fired plants; • a €113 million decrease in Chile due mainly to the rec- ognition of greater costs for commodity purchases, particularly for gas, as a result of increases in both price and volumes and in relation to the greater quantities generated by combined-cycled plants. This effect was only partially offset by an increase in revenue from the sale of electricity and improved net performance on commodity contracts. These effects were partially offset by a €66 million im- provement in profit in Brazil related mainly to the increase in sales revenue due to increases in volumes and in aver- age prices. Gross operating profit in the amount of €899 million (€1,700 million in 2020) reflects costs of €795 million relat- ed to the direct and indirect activities called for by person- nel conversion plans associated with the energy transition and digitalization, mainly in Italy, and €8 million in costs in- curred as a result of the COVID-19 pandemic for workplace sanitization activities, personal protective equipment and donations. 2021 2020 Change 265 271 180 27 120 (91) 41 86 (3) (39) 52 (2) 54 - 386 787 179 32 56 17 (6) 80 - 14 82 (2) 84 8 (121) (516) 1 (5) 64 (108) 47 6 (3) (53) (30) - (30) (8) -31.3% -65.6% 0.6% -15.6% - - - 7.5% - - -36.6% - -35.7% - 729 1,456 (727) -49.9% Ordinary operating profit/(loss) Millions of euro Italy Iberia Latin America - of which Argentina - of which Brazil - of which Chile - of which Colombia - of which Peru - of which other countries North America Europe - of which Romania - of which Russia Other Total 178 178 Integrated Annual Report 2021 The decrease in ordinary operating profit is tied both to the factors described above in relation to ordinary gross operating profit and to the increase in depreciation, amor- tization and impairment losses (totaling €199 million) recognized in 2021 as compared with the previous year, largely reflecting an increase in costs for retiring thermal generation plants, in particular coal-fired facilities. The operating loss of €2,586 million for 2021 (€15 million in 2020) reflects both the factors described in relation to or- dinary operating performance and the write-down of cer- tain plants in Spain in the amount of €1,488 million, charg- es related to restructuring plans for the energy transition and digitalization, mainly in Italy, in the amount of €1,819 million, and non-recurring costs incurred in response to the COVID-19 pandemic for workplace sanitization activ- ities, personal protective equipment and donations in the amount of €8 million. Capital expenditure Millions of euro Italy Iberia Latin America North America Europe Total 2021 2020 Change 303 334 143 8 34 822 180 331 120 7 56 694 123 3 23 1 (22) 128 68.3% 0.9% 19.2% 14.3% -39.3% 18.4% The €128 million increase in capital expenditure is mainly attributable to Italy. Capital expenditure in Italy in 2021 es- sentially concerned the reconversion of a number of plants as part of energy-transition projects, efforts to improve service quality and digitalization projects. Performance by Business Line 179 179 Enel Green Power 180 180 Integrated Annual Report 2021 Enel Green Power 50.1 GW NET EFFICIENT INSTALLED CAPACITY 108.8 TWh NET ELECTRICITY GENERATION 57.5% of total Group capacity +37.1% from solar plants on 2020 €4,815 million ORDINARY GROSS OPERATING PROFIT €4,721 million in 2020 €5,662 million(1) CAPITAL EXPENDITURE +22.3% on 2020 (1) Does not include €111 million regarding units classified as “held for sale“. Operations Net electricity generation Millions of kWh Hydroelectric Geothermal(1) Wind Solar Other sources(1) Total net generation - of which Italy - of which Iberia - of which Latin America - of which Europe - of which North America - of which Africa, Asia and Oceania 2021 57,001 6,086 37,791 7,899 40 2020 62,437 6,128 30,992 5,763 40 108,817 105,360 24,157 12,794 46,441 2,488 20,356 2,581 23,451 13,415 47,400 2,374 17,182 1,538 Change (5,436) (42) 6,799 2,136 - 3,457 706 (621) (959) 114 3,174 1,043 -8.7% -0.7% 21.9% 37.1% - 3.3% 3.0% -4.6% -2.0% 4.8% 18.5% 67.8% (1) The 2020 figures reflect a more accurate calculation of electricity generated. Net electricity generation in 2021 increased by 3.3% from 2020 due to increases in wind and solar production, which were partially offset by decreases in hydroelectric and geo- thermal generation. The most significant changes in wind generation were seen in Brazil (+3,138 million kWh), the United States (+1,916 mil- lion kWh), South Africa (+550 million kWh), Mexico (+497 million kWh), Iberia (+370 million kWh), Russia (+149 million kWh), and Canada (+104 million kWh). The 37.1% increase in solar generation is attributable mainly to Iberia (+569 million kWh), the United States (+580 million kWh), Australia (+477 million kWh), and Brazil (+402 million kWh). Hydroelectric generation decreased overall due to less fa- vorable water conditions in Latin America (-4,597 million kWh) and Iberia (-1,560 million kWh), which was to minimal extent offset by increased generation in Italy (+691 million kWh). Performance by Business Line 181181 Net efficient generation capacity MW Hydroelectric Geothermal Wind Solar Other sources Total net efficient generation capacity - of which Italy - of which Iberia - of which Latin America - of which Europe - of which North America - of which Africa, Asia and Oceania 2021 27,847 915 14,903 6,395 6 50,066 14,040 8,390 16,506 1,248 7,941 1,941 2020 27,820 882 12,412 3,897 5 45,016 13,986 7,781 14,554 1,141 6,643 911 Change 27 33 2,491 2,498 1 5,050 54 609 1,952 107 1,298 1,030 0.1% 3.7% 20.1% 64.1% 20.0% 11.2% 0.4% 7.8% 13.4% 9.4% 19.5% - The increase in net efficient capacity is mainly due to the start of operations of solar plants in the United States, Chile and Brazil and of wind farms in Brazil, the United States, and South Africa, as well as to the effect of the full con- solidation of a number of companies in Australia, which were measured using the equity method until December 31, 2020. 182 182 Integrated Annual Report 2021 Performance Millions of euro Revenue Gross operating profit/(loss) Ordinary gross operating profit/(loss) Operating profit/(loss) Ordinary operating profit/(loss) Capital expenditure (1) The figure does not include €111 million regarding units classified as “held for sale“. The following tables show a breakdown of performance by region/country in 2021. Revenue Millions of euro Italy Iberia Latin America - of which Argentina - of which Brazil - of which Chile - of which Colombia - of which Peru - of which Panama - of which other countries North America - of which United States and Canada - of which Mexico Europe - of which Romania - of which Russia - of which Greece - of which Bulgaria - of which other countries Africa, Asia and Oceania Other Eliminations and adjustments Total 2021 9,526 4,761 4,815 3,082 3,480 5,662(1) 2021 2,725 900 4,235 37 1,551 1,375 884 141 153 94 1,147 971 176 358 220 13 125 - - 175 264 (278) 9,526 2020 7,692 4,647 4,721 2,734 3,460 4,629 2020 2,154 771 3,234 39 837 1,209 814 132 136 67 1,156 1,018 138 323 198 - 114 9 2 99 226 (271) 7,692 Change 1,834 114 94 348 20 1,033 23.8% 2.5% 2.0% 12.7% 0.6% 22.3% Change 571 129 1,001 (2) 714 166 70 9 17 27 (9) (47) 38 35 22 13 11 (9) (2) 76 38 (7) 1,834 26.5% 16.7% 31.0% -5.1% 85.3% 13.7% 8.6% 6.8% 12.5% 40.3% -0.8% -4.6% 27.5% 10.8% 11.1% - 9.6% - - 76.8% 16.8% -2.6% 23.8% The increase in revenue over 2020 is mainly attributable to: • an increase in the sale of electricity in Brazil due to greater imports by Argentina and Uruguay and for the start-up of new plants; • an increase in revenue in Italy and Spain tied to greater average energy prices; • the line-by-line consolidation of a number of Australian companies that had been measured at equity until De- cember 31, 2020. Performance by Business Line 183 183 Ordinary gross operating profit/(loss) Millions of euro Italy Iberia Latin America - of which Argentina - of which Brazil - of which Chile - of which Colombia - of which Peru - of which Panama - of which other countries North America - of which United States and Canada - of which Mexico Europe - of which Romania - of which Russia - of which Greece - of which Bulgaria - of which other countries Africa, Asia and Oceania Other Total 2021 1,184 840 1,809 24 334 536 601 141 127 46 699 627 72 177 82 5 95 - (5) 110 (4) 4,815 2020 1,362 436 1,982 28 271 825 575 136 102 45 769 695 74 162 79 (7) 85 7 (2) 54 (44) 4,721 Change (178) 404 (173) (4) 63 (289) 26 5 25 1 (70) (68) (2) 15 3 12 10 (7) (3) 56 40 94 -13.1% 92.7% -8.7% -14.3% 23.2% -35.0% 4.5% 3.7% 24.5% 2.2% -9.1% -9.8% -2.7% 9.3% 3.8% - 11.8% - - - 90.9% 2.0% The improvement in ordinary gross operating profit is mainly attributable to: • an increase in gross operating profit in Spain due in particular to the reversal of provisions for hydroelectric fees following the favorable outcome of a dispute, to greater quantities produced and sold by wind and solar plants, and to higher average energy prices; • an increase in profit in Africa, Asia and Oceania due mainly to the line-by-line consolidation of a number of Australian companies that were measured using the equity method at December 31, 2020, as well as an in- crease in generation at new wind farms in South Africa; • a decrease in profit in Italy due mainly to a decrease in volumes on the spot markets, the lower performance of hydroelectric plants, and an increase in charges for commodity derivatives; • a decrease in profit in Latin America, particularly as a result of adverse exchange rate developments and decreased profit in Chile due mainly to a decline in hy- droelectric generation as a result of unfavorable water conditions in the country, which led to higher costs for the provisioning of commodities to supply the greater volumes sold under power purchase agreements (PPAs); this impact was partially offset by an increase in profit in Brazil due to the greater quantities of power generated and sold, the start-up of new plants, and the effect of prices on new PPAs, as well as by a greater energy mar- gin in Colombia as a result of price effects; • a reduction in profit in North America, mainly in the Unit- ed States and Canada, due to a worsening of the en- ergy margin and to the recognition in 2020 of greater gains from indemnities and disputes (€31 million) and the sale of the Haystack wind project by Tradewind (€45 million). These effects were partially offset by greater tax partnership gains (€42 million) recognized following the start-up of new plants by Enel North America, including Azure Blue Jay, Lily Solar, and Rochaven Ranchland. Gross operating profit amounted to €4,761 million (€4,647 million in 2020), reflecting provisions for charges in respect of the energy transition and digitalization (€47 million) and costs incurred in responding to the COVID-19 pandemic for workplace sanitization activities, personal protective equipment and donations (€7 million). 184 184 Integrated Annual Report 2021 Ordinary operating profit/(loss) Millions of euro Italy Iberia Latin America - of which Argentina - of which Brazil - of which Chile - of which Colombia - of which Peru - of which Panama - of which other countries North America - of which United States and Canada - of which Mexico Europe - of which Romania - of which Russia - of which Greece - of which Bulgaria - of which other countries Africa, Asia and Oceania Other Total 2021 902 609 1,448 18 253 378 553 107 112 27 382 334 48 114 61 (1) 61 - (7) 46 (21) 3,480 2020 1,072 237 1,605 22 208 660 523 99 83 10 487 444 43 93 58 (13) 47 4 (3) 21 (55) 3,460 Change (170) 372 (157) (4) 45 (282) 30 8 29 17 (105) (110) 5 21 3 12 14 (4) (4) 25 34 20 -15.9% - -9.8% -18.2% 21.6% -42.7% 5.7% 8.1% 34.9% - -21.6% -24.8% 11.6% 22.6% 5.2% 92.3% 29.8% - - - 61.8% 0.6% Ordinary operating profit in 2021 increased by €20 mil- lion over 2020 and included €1,335 million in deprecia- tion, amortization and impairment losses (€1,261 million in 2020). Depreciation in particular increased, by €59 mil- lion compared with 2020, reflecting new capital expendi- ture in recent years. Operating profit for 2021, in the amount of €3,082 mil- lion (€2,734 million in 2020), reflects the factors described above in relation to gross operating profit and ordinary op- erating profit, as well as the write-down of certain plants in Mexico and Australia in the amount of €185 million and other write-downs for a total of €159 million, mainly relat- ed to assets associated with the PH Chucas plant in Costa Rica, which is operated under a concession arrangement. Performance by Business Line 185 185 Capital expenditure Millions of euro Italy Iberia Latin America North America Europe Africa, Asia and Oceania Other Total 2021 406 713 1,864 2,238 204 207 30 2020 283 460 1,514 1,773 157 414 28 5,662(1) 4,629 Change 123 253 350 465 47 (207) 2 1,033 43.5% 55.0% 23.1% 26.2% 29.9% -50.0% 7.1% 22.3% (1) The figure does not include €111 million regarding units classified as “held for sale“. Capital expenditure increased by €1,033 million in 2021 compared with the same figure for the previous year. In particular, the change was attributable to: • an increase of €465 million in North America, mainly reflecting a rise in capital expenditure on solar plants (€378 million) and wind farms (€78 million) in the United States; • an increase of €350 million in capital expenditure in Latin America attributable mainly to wind farms (€361 million) and hydroelectric plants (€39 million), which was partially offset by a decrease in capital expenditure on photovoltaic (€67 million) and geothermal plants (€19 million). The increase in capital expenditure was mainly concentrated in Colombia, Chile and Brazil; • an increase of €253 million in capital expenditure in Ibe- ria attributable mainly to solar plants (€146 million), wind farms (€98 million), and hydroelectric plants (€8 million); • a €123 million increase in capital expenditure in Ita- ly attributable mainly to wind farms (€93 million), solar plants (€19 million), and hydroelectric plants (€23 mil- lion), which was to a minimal extent offset by a decrease at geothermal plants (€7 million); • a €47 million increase in capital expenditure in Europe, particularly at wind farms in Russia (€67 million). This ef- fect was partially offset by decreased capital expendi- ture in Greece in the amount of €23 million; • a decrease of €207 million in capital expenditure in Afri- ca, Asia and Oceania related mainly to wind farms (€292 million) concentrated in South Africa (€111 million was reclassified as held for sale), which was partially offset by increased capital expenditure for wind farms in India (€47 million) and for photovoltaic plants (€85 million), mainly in India and Australia. 186 186 Integrated Annual Report 2021 Performance by Business Line 187 187 Infrastructure and Networks 188 188 Integrated Annual Report 2021 Infrastructure and Networks 510.3 TWh ELECTRICITY TRANSPORTED ON ENEL´S DISTRIBUTION GRID 485.2 TWh in 2020 €7,663 million ORDINARY GROSS OPERATING PROFIT €7,801 million in 2020 €5,296 million CAPITAL EXPENDITURE 40.7% of total Group capital expenditure Operations Electricity distribution and transmission grids Millions of kWh Electricity transported on Enel’s distribution grid(1) - of which Italy - of which Iberia - of which Latin America - of which Europe 2021 510,257 226,715 131,090 136,407 16,045 2020 485,229 214,401 124,486 130,968 15,374 Change 25,028 12,314 6,604 5,439 671 End users with active smart meters (no.)(1) 44,968,974 44,293,483 675,491 (1) The figures for 2020 have been calculated more accurately. 5.2% 5.7% 5.3% 4.2% 4.4% 1.5% In 2021, electricity transported on the grid increased (by 5.2%) mainly due to developments in: • Italy (+5.7%), with an increase in the demand for electric- ity distributed to low-, medium-, high- and very-high- voltage customers, while electricity distributed to other distributors decreased slightly; • Iberia (+5.3%), where the increase was essentially due to the rise in electricity transported by Edistribución Redes Digitales SL, reflecting the effect of the lockdown im- posed in 2020 in response to the COVID-19 pandemic; • Latin America (+4.2%), reflecting the increase in volumes transported, mainly in Peru, Colombia and Argentina; • Europe (+4.4%), with an increase in electricity distributed in Romania, attributable to both business and residential customers. Performance by Business Line 189189 Average frequency of interruptions per customer SAIFI (average no.) Italy Iberia Argentina(1) Brazil Chile Colombia Peru Romania (1) The figures for 2020 reflect a more accurate calculation of average frequency. Average duration of interruptions per customer SAIDI (average minutes) Italy(1) Iberia(1) Argentina(1) Brazil Chile Colombia Peru(1) Romania 2021 2020 Change 1.8 1.4 4.9 4.8 1.5 5.2 2.3 2.9 1.7 1.4 4.4 5.4 1.5 5.6 2.6 3.4 0.1 - 0.5 (0.6) - (0.4) (0.3) (0.5) 2021 2020 Change 42.9 70.0 797.3 607.9 152.3 401.4 413.9 109.7 42.1 77.5 839.4 678.8 171.2 466.6 418.6 134.5 0.8 (7.5) (42.1) (70.9) (18.9) (65.2) (4.7) (24.8) 5.9% - 11.4% -11.1% - -7.1% -11.5% -14.7% 1.9% -9.7% -5.0% -10.4% -11.0% -14.0% -1.1% -18.4% (1) The figures for 2020 reflect a more accurate calculation of average duration. As shown in the tables above, service quality has improved in nearly all geographical areas, although the SAIDI in Ar- gentina remains high due, in particular, to failures in the high-voltage systems not managed by the Group. Grid losses Grid losses (average %) Italy Iberia(1) Argentina Brazil Chile Colombia Peru Romania (1) The figures for 2020 reflect a more accurate calculation of grid losses. 2021 2020 Change 4.7 7.1 18.0 13.1 5.2 7.5 8.5 8.7 4.9 7.3 18.9 13.4 5.2 7.6 8.8 9.2 (0.2) (0.2) (0.9) (0.3) - (0.1) (0.3) (0.5) -4.1% -2.7% -4.8% -2.2% - -1.3% -3.4% -5.4% 190 190 Integrated Annual Report 2021 Performance Millions of euro Revenue(1) Gross operating profit/(loss)(1) Ordinary gross operating profit/(loss)(1) Operating profit/(loss)(1) Ordinary operating profit/(loss)(1) Capital expenditure 2021 20,656 7,210 7,663 4,348 4,813 5,296 2020 19,429 7,520 7,801 4,349 4,846 3,937 Change 1,227 (310) (138) (1) (33) 1,359 6.3% -4.1% -1.8% - -0.7% 34.5% (1) For comparative purposes only, €87 million in 2020 in respect of the component recognized through profit or loss deriving from the remeasurement at fair value of the financial assets connected with service concession arrangements involving distribution operations in Brazil falling within the scope of IFRIC 12 have been reclassified from financial income to revenue. The latter classification had an impact of the same amount on operating profit. For more informa- tion, please see note 7 to the consolidated financial statements. The following tables show a breakdown of performance by region/country in 2021. Revenue Millions of euro Italy Iberia Latin America - of which Argentina - of which Brazil(1) - of which Chile - of which Colombia - of which Peru Europe Other Eliminations and adjustments Total(1) 2021 7,326 2,489 10,366 688 7,109 1,262 630 677 414 590 (529) 20,656 2020 7,488 2,617 8,908 647 5,736 1,229 601 695 396 393 (373) 19,429 Change (162) (128) 1,458 41 1,373 33 29 (18) 18 197 (156) 1,227 -2.2% -4.9% 16.4% 6.3% 23.9% 2.7% 4.8% -2.6% 4.5% 50.1% -41.8% 6.3% (1) For comparative purposes only, €87 million in 2020 in respect of the component recognized through profit or loss deriving from the remeasurement at fair value of the financial assets connected with service concession arrangements involving distribution operations in Brazil falling within the scope of IFRIC 12 have been reclassified from financial income to revenue. The latter classification had an impact of the same amount on operating profit. For more informa- tion, please see note 7 to the consolidated financial statements. The increase in revenue is mainly attributable to Brazil, re- flecting an increase in electricity distributed and rate ad- justments. This increase was partially mitigated by lower revenue in: • Italy, due essentially to the recognition in 2020 of the gain related to application of the Regulatory Authority for Energy, Networks and the Environment (ARERA) Res- olutions nos. 50/2018 and 461/2020; • Iberia, due mainly to the lower financial remuneration rate applied as of January 1, 2020, on power transmis- sion. Performance by Business Line 191 191 Ordinary gross operating profit/(loss) Millions of euro Italy Iberia Latin America - of which Argentina - of which Brazil(1) - of which Chile - of which Colombia - of which Peru Europe Other Total (1) 2021 3,836 1,877 1,810 3 1,120 144 385 158 96 44 2020 3,861 2,114 1,684 47 964 157 362 154 136 6 Change (25) (237) 126 (44) 156 (13) 23 4 (40) 38 7,663 7,801 (138) -0.6% -11.2% 7.5% -93.6% 16.2% -8.3% 6.4% 2.6% -29.4% - -1.8% (1) For comparative purposes only, €87 million in 2020 in respect of the component recognized through profit or loss deriving from the remeasurement at fair value of the financial assets connected with service concession arrangements involving distribution operations in Brazil falling within the scope of IFRIC 12 have been reclassified from financial income to revenue. The latter classification had an impact of the same amount on operating profit. For more informa- tion, please see note 7 to the consolidated financial statements. Ordinary gross operating profit decreased especially in Spain due to the reversal of the provision related to the energy discount recognized in 2020 (€269 million). This effect was partially offset by an increase in profit in Brazil as a result of an increase in wheeling volumes at rising average prices, reflecting rate adjustments for the year. Gross operating profit of €7,210 million (€7,520 million in 2020) reflects the factors impacting ordinary gross oper- ating profit and the following non-recurring items: Ordinary operating profit/(loss) Millions of euro • provisions recognized for costs connected with re- structuring plans for the energy transition and digitali- zation, mainly in Italy and Brazil (€389 million), and costs associated with the removal of certain meters involved in the replacement campaign (€34 million); • costs incurred for workplace sanitization activities, per- sonal protective equipment and donations in response to the COVID-19 pandemic (€30 million). Italy Iberia Latin America - of which Argentina - of which Brazil(1) - of which Chile - of which Colombia - of which Peru Europe Other Total (1) 2021 2,500 1,094 1,175 (25) 708 95 297 100 6 38 2020 2,407 1,364 1,018 31 527 110 261 89 54 3 4,813 4,846 Change 93 (270) 157 (56) 181 (15) 36 11 (48) 35 (33) 3.9% -19.8% 15.4% - 34.3% -13.6% 13.8% 12.4% -88.9% - -0.7% (1) For comparative purposes only, €87 million in 2020 in respect of the component recognized through profit or loss deriving from the remeasurement at fair value of the financial assets connected with service concession arrangements involving distribution operations in Brazil falling within the scope of IFRIC 12 have been reclassified from financial income to revenue. The latter classification had an impact of the same amount on operating profit. For more informa- tion, please see note 7 to the consolidated financial statements. 192 192 Integrated Annual Report 2021 The decrease in ordinary operating profit for 2021, includ- ing depreciation, amortization and impairment losses of €2,850 million (€2,955 million in 2020), is attributable to the factors described above in relation to ordinary gross operating profit. This effect was partially mitigated by an increase in Italy due mainly to a decline in impairment loss- es on trade receivables compared with the previous year (€225 million), partly offset by an increase of €57 million in depreciation as a result of the reduction of the useful life of first-generation digital meters. Operating profit for 2021, in the amount of €4,348 mil- lion (€4,349 million in 2020), reflects the factors described above in relation to ordinary operating profit. Capital expenditure Millions of euro Italy Iberia Latin America Europe Other Total 2021 2,554 874 1,663 192 13 2020 1,966 631 1,156 182 2 Change 588 243 507 10 11 5,296 3,937 1,359 29.9% 38.5% 43.9% 5.5% - 34.5% Capital expenditure increased year on year by €1,359 million. More specifically, this increase is attributable to: • Italy, for an increase in new customer connections and an increase in investment in service quality (e-grid and DSO 4.0 projects). In addition, capital expenditure on the latest generation digital meters also increased by €46 million compared with 2020 following the resumption of the mass-replacement program, which had slowed last year as a result of the COVID-19 emergency; • Spain, for increased capital expenditure on distribution lines and on substations, transformers, and metering equipment; • Latin America, and particularly Brazil, due to increased spending on distribution lines and substations, mainte- nance, and an increase in new connection. Performance by Business Line 193 193 End-user Markets 194 194 Integrated Annual Report 2021 End-user Markets 309.4 TWh ELECTRICITY SOLD €3,086 million GROSS OPERATING PROFIT 298.2 TWh in 2020 €3,197 million in 2020 69.3 million RETAIL CUSTOMERS of which 24.8 million on the free market Operations Electricity sales Millions of kWh Free market Regulated market Total - of which Italy - of which Iberia - of which Latin America - of which Europe 2021 175,958 133,467 2020 160,202 137,984 309,425 298,186 92,768 79,457 127,906 9,294 90,205 80,772 118,388 8,821 Change 15,756 (4,517) 11,239 2,563 (1,315) 9,518 473 9.8% -3.3% 3.8% 2.8% -1.6% 8.0% 5.4% The increase in the volume of electricity sold in 2021 came primarily on the free market for business-to-business (B2B) customers, mainly in Italy and Latin America. Conversely, the regulated market saw a decrease in volumes in both the busi- ness-to-consumer (B2C) and B2B segments due mainly to a decline in the number of customers compared with 2020. Natural gas sales Millions of m3 Business to consumer Business to business Total (1) - of which Italy - of which Iberia - of which Latin America - of which Europe(1) 2021 3,731 6,142 9,873 4,353 5,180 160 180 2020 3,637 6,071 9,708 4,429 5,022 155 102 Change 94 71 165 (76) 158 5 78 2.6% 1.2% 1.7% -1.7% 3.1% 3.2% 76.5% (1) The figures for 2020 reflect a more accurate calculation of volumes sold. The increase in volumes sold in Spain and Romania in 2021 was partly offset by the reduction in consumption in Italy in the B2B segment. The Group’s retail customers total 69,342,818, of which 24,839,600 in the free market, while at December 31, 2020 they numbered 69,517,932, of which 22,931,809 in the free market. Performance by Business Line 195195 Performance Millions of euro Revenue Gross operating profit/(loss) Ordinary gross operating profit/(loss) Operating profit/(loss) Ordinary operating profit/(loss) Capital expenditure The following tables show a breakdown of performance by region/country in 2021. Revenue Millions of euro Italy Iberia Latin America - of which Argentina - of which Brazil - of which Chile - of which Colombia - of which Peru North America Europe Other Total 2021 38,708 2,990 3,086 1,657 1,753 643 2021 19,818 16,177 1,393 2 349 93 760 189 7 1,309 4 2020 29,508 3,121 3,197 1,817 1,906 460 2020 14,869 11,987 1,492 - 299 271 705 217 10 1,150 - Change Change 9,200 (131) (111) (160) (153) 183 4,949 4,190 (99) 2 50 (178) 55 (28) (3) 159 4 38,708 29,508 9,200 31.2% -4.2% -3.5% -8.8% -8.0% 39.8% 33.3% 35.0% -6.6% - 16.7% -65.7% 7.8% -12.9% -30.0% 13.8% - 31.2% Revenue for 2021 increased by 31.2% over the previous year, due mainly to greater revenue from electricity sales (up €6,637 million) and gas sales (up €2,459 million) as a result of greater volumes and sales prices in Italy and Spain. Ordinary gross operating profit/(loss) Millions of euro Italy Iberia Latin America - of which Argentina - of which Brazil - of which Chile - of which Colombia - of which Peru North America Europe Total 196 196 Integrated Annual Report 2021 2021 2,311 547 263 12 136 44 49 22 6 (41) 2020 2,372 530 203 (7) 107 25 56 22 9 83 3,086 3,197 Change (61) 17 60 19 29 19 (7) - (3) (124) (111) -2.6% 3.2% 29.6% - 27.1% 76.0% -12.5% - -33.3% - -3.5% These adverse effects were only partially offset by a €60 million increase in profit in Latin America, particularly in Brazil due to adjustments to rates and to greater quanti- ties sold. Gross operating profit came to €2,990 million (€3,121 million in 2020). In addition to the factors discussed for ordinary gross operating profit, the figure also reflects non-recurring items connected with provisions for charg- es in respect of restructuring plans for the energy tran- sition and digitalization (€94 million) and non-recurring costs incurred in responding to the COVID-19 pandemic for workplace sanitization activities, personal protective equipment and donations (€2 million). The decrease in ordinary gross operating profit for 2021 is essentially attributable to: • a €124 million decrease in profit in Romania, which mainly reflects an increase in costs to purchase energy (€257 million), which was only partially offset by greater sales revenue (€120 million); • a €61 million decrease in profit in Italy, where the €120 million decline in profit on the regulated market due, mainly, to the reduction in revenue from marketing services was partly offset by a €59 million increase in profit on the free market due mainly to an increase in sales volumes thanks in part to an increased number of customers. The decline in profit also reflected low- er operating expenses in 2020 following the reversal of a provision connected with a dispute with a trader and the recognition of a fine of €27 million imposed by the Privacy Authority in 2021. Ordinary operating profit/(loss) Millions of euro Italy Iberia Latin America - of which Argentina - of which Brazil - of which Chile - of which Colombia - of which Peru North America Europe Total 2021 1,508 345 (41) 4 (113) 20 31 17 5 (64) 1,753 2020 1,548 304 (6) (44) (26) 11 41 12 9 51 1,906 Change (40) 41 (35) 48 (87) 9 (10) 5 (4) (115) (153) -2.6% 13.5% - - - 81.8% -24.4% 41.7% -44.4% - -8.0% Ordinary operating profit reflects the factors noted earlier for ordinary gross operating profit, as well as an increase in depreciation and amortization of €42 million, mainly re- garding amortization of intangibles in Italy and Spain. Operating profit for 2021, in the amount of €1,657 mil- lion (€1,817 million in 2020), reflects the factors described above in relation to gross operating profit and the increase in depreciation, amortization and impairment losses in Italy and Spain. Capital expenditure Millions of euro Italy Iberia Europe Total The increase in capital expenditure is mainly attributable to the greater capitalization of costs connected with the acquisition of new contracts with customers. 2021 427 196 20 643 2020 310 139 11 460 Change 117 57 9 183 37.7% 41.0% 81.8% 39.8% Performance by Business Line 197 197 Enel X 198 198 Integrated Annual Report 2021 Enel X Risultati del Gruppo 157,209 no. CHARGING POINTS 2,821 thousand LIGHTING POINTS 7.7 GW DEMAND RESPONSE 105,079 in 2020 2,794 in 2020 6.0 GW in 2020 €298 million ORDINARY GROSS OPERATING PROFIT €161 million in 2020 +21.1%. CAPITAL EXPENDITURE compared with 2020 for a total of €367 million Operations Demand response capacity (MW) Lighting points (thousands) Storage (MW) Charging points (no.)(1) (1) The figures for 2020 reflect more accurate calculations. 2021 7,713 2,821 375 2020 6,038 2,794 123 Change 1,675 27 252 157,209 105,079 52,130 27.7% 1.0% - 49.6% Private-sector charging points increased by 48,430, mainly in North America and Italy, while public charging points increased by 3,700, primarily in Italy and Spain. Performance Millions of euro Revenue Gross operating profit/(loss) Ordinary gross operating profit/(loss) Operating profit/(loss) Ordinary operating profit/(loss) Capital expenditure 2021 1,541 283 298 30 44 367 2020 1,121 152 161 (16) (7) 303 Change 420 131 137 46 51 64 37.5% 86.2% 85.1% - - 21.1% Performance by Business Line 199199 The following tables show a breakdown of performance by region/country in 2021. Revenue Millions of euro Italy Iberia Latin America - of which Argentina - of which Brazil - of which Chile - of which Colombia - of which Peru North America Europe Africa, Asia and Oceania Other Eliminations and adjustments Total 2021 536 271 275 12 23 66 127 47 274 88 67 164 (134) 1,541 2020 324 244 218 7 20 68 75 48 192 53 55 156 (121) 1,121 Change 212 27 57 5 3 (2) 52 (1) 82 35 12 8 (13) 420 65.4% 11.1% 26.1% 71.4% 15.0% -2.9% 69.3% -2.1% 42.7% 66.0% 21.8% 5.1% -10.7% 37.5% Revenue for 2021 increased by 37.5% year on year, with the greatest gains seen in: • Italy, due to increases in commercial efforts in seismic and energy upgrading in the e-Home and Vivi Meglio businesses; • Colombia, for activities related to the e-Bus project; • North America, for growth in demand response capacity. Ordinary gross operating profit/(loss) Millions of euro Italy Iberia Latin America - of which Argentina - of which Brazil - of which Chile - of which Colombia - of which Peru North America Europe Africa, Asia and Oceania Other Total 2021 2020 Change 131 52 92 5 1 19 50 17 22 17 - (16) 298 38 45 84 3 2 15 42 22 (9) 9 2 (8) 161 93 7 8 2 (1) 4 8 (5) 31 8 (2) (8) - 15.6% 9.5% 66.7% -50.0% 26.7% 19.0% -22.7% - 88.9% - - 137 85.1% Ordinary gross operating profit increased mainly in Italy and North America, due to increased profit on services as- sociated, respectively, with new commercial initiatives and to demand response activities. Gross operating profit came to €283 million (€152 million in 2020). The difference of €15 million in 2021 compared with ordinary gross operating profit concerns the provi- sions recognized for restructuring plans for the energy transition and digitalization. 200 200 Integrated Annual Report 2021 Ordinary operating profit/(loss) Millions of euro Italy Iberia Latin America - of which Argentina - of which Brazil - of which Chile - of which Colombia - of which Peru North America Europe Africa, Asia and Oceania Other Total 2021 17 4 72 5 1 17 39 10 (22) 13 (3) (37) 44 2020 (11) (1) 72 3 (2) 14 41 16 (52) 3 (1) (17) (7) Change 28 5 - 2 3 3 (2) (6) 30 10 (2) (20) 51 - - - 66.7% - 21.4% -4.9% -37.5% 57.7% - - - - Ordinary operating profit includes depreciation, amortiza- tion and impairment losses in the amount of €254 million (€168 million in 2020). The increase in depreciation, amor- tization and impairment losses is essentially attributable to increased amortization of intangibles recognized by Enel X Italia. Operating profit for 2021, in the amount of €30 million (a loss of €16 million in 2020), reflects the factors described above in relation to gross operating profit, the positive val- ue adjustment of the Cremzow storage plant (€1 million) and the increase in amortization recognized by Enel X Italia. Capital expenditure Millions of euro Italy Iberia Latin America North America Europe Africa, Asia and Oceania Other Total 2021 2020 Change 99 54 48 46 4 10 106 367 70 50 67 36 5 3 72 303 29 4 (19) 10 (1) 7 34 64 41.4% 8.0% -28.4% 27.8% -20.0% - 47.2% 21.1% Capital expenditure increased mainly in Italy within the Vivi Meglio business due to the increase in volumes handled, in North American as a result of an increase in storage ac- tivities, and in Iberia in the e-Home business following an increase in volumes sold compared with 2020. Enel X Srl also posted a significant increase in capital ex- penditure to develop global technology platforms for digi- tal business management. The reduction in capital expenditure in Latin America is due mainly to the execution, in 2020, of projects related to the e-Bus business in Colombia. This decrease was partial- ly offset by greater capital expenditure for smart lighting projects in Peru and distributed energy projects in Brazil. Performance by Business Line 201 201 Services, Holding and Other 202 202 Integrated Annual Report 2021 Performance Millions of euro Revenue(1) Gross operating profit/(loss) Ordinary gross operating profit/(loss) Operating profit/(loss) Ordinary operating profit/(loss) Capital expenditure 2021 3,931 1,424 1,646 1,149 1,416 207 2020 2,024 (237) (83) (444) (290) 174 Change 94.2% - - - - 19.0% 1,907 1,661 1,729 1,593 1,706 33 (1) For the sake of clarity, the Holding segment includes internal eliminations that were previously reported under intersegment eliminations and adjustments in the amount of €115 million in 2020. The tables below show a breakdown of performance by re- gion/country in 2021. Revenue Millions of euro Italy Iberia Latin America Europe Other(1) Eliminations and adjustments Total 2021 760 465 17 24 2,895 (230) 3,931 2020 749 480 13 24 988 (230) 2,024 Change 11 (15) 4 - 1,907 - 1,907 1.5% -3.1% 30.8% - - - 94.2% (1) For the sake of clarity, the Holding segment includes internal eliminations that were previously reported under intersegment eliminations and adjustments in the amount of €115 million in 2020. The increase in 2021 revenue is mainly attributable to the gain related to the sale of Open Fiber as part of the Stew- ardship business model in the amount of €1,763 million and to the increase in services provided to the other Busi- ness Lines. Performance by Business Line 203203 Ordinary gross operating profit/(loss) Millions of euro Italy Iberia Latin America North America Europe Other Total 2021 2020 Change 56 31 (77) (1) 7 1,630 1,646 83 30 (86) (5) 4 (109) (83) (27) -32.5% 1 9 4 3 1,739 1,729 3.3% 10.5% 80.0% 75.0% - - The increase in ordinary gross operating profit for 2021 is mainly attributable to the change in revenue described above, which was partially offset by an increase in service costs, particularly for information systems, and by greater provisions for disputes in Italy. Gross operating profit came to €1,424 million (€237 million in 2020). Extraordinary items in 2021 were almost entirely represented by provisions for restructuring plans and dig- italization totaling €216 million. Costs incurred in response to the COVID-19 pandemic for workplace sanitization ac- tivities, personal protective equipment and donations in the amount of €6 million decreased by €41 million com- pared with the same period of the previous year. Ordinary operating profit/(loss) Millions of euro Italy Iberia Latin America North America Europe Other Total 2021 2020 Change (16) (20) (79) (1) 5 1,527 1,416 14 (16) (88) (6) 3 (197) (290) (30) (4) 9 5 2 1,724 1,706 - -25.0% 10.2% 83.3% 66.7% - - Ordinary operating profit for 2021 is essentially in line with the increase in ordinary gross operating profit, taking ac- count of the €23 million increase in depreciation, amorti- zation and impairment losses. Operating profit for 2021, in the amount of €1,149 million (a loss of €444 million in 2020), reflects the factors de- scribed above in relation to gross operating profit and or- dinary operating profit and the €45 million impairment loss recognized on the Group’s head office in Rome following the partial demolition of the property for renovations. Capital expenditure Millions of euro Italy Iberia Latin America North America Europe Other Total The increase in capital expenditure in 2021 in Italy is mainly attributable to property renovation work and software de- velopment. 204 204 Integrated Annual Report 2021 2021 2020 Change 53 32 4 1 1 116 207 33 27 3 - - 111 174 20 5 1 1 1 5 33 60.6% 18.5% 33.3% - - 4.5% 19.0% Enel shares Enel and the financial markets Gross operating profit per share (euro)(1) Operating profit per share (euro)(1) Group profit per share (euro) Group ordinary profit per share (euro) Dividend per share (euro) Group 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)(2) No. of shares outstanding at December 31 (millions)(3) 2021 1.73 0.76 0.31 0.55 0.380 2.92 8.95 6.53 6.77 68,804 10,167 2020 1.66 0.83 0.26 0.51 0.358 2.79 8.57 5.23 8.17 83,110 10,167 (1) For comparative purposes only, €87 million in 2020 in respect of the component recognized through profit or loss deriving from the remeasurement at fair value of the financial assets connected with service concession arrangements involving distribution operations in Brazil falling within the scope of IFRIC 12 have been reclassified from financial income to revenue. The latter classification had an impact of the same amount on operating profit. For more details, please see note 7 to the consolidated financial statements. (2) Calculated on average share price in December. (3) The number of shares includes 4,889,152 treasury shares in 2021 and 3,269,152 treasury shares in 2020. Rating Standard & Poor’s Outlook Moody’s Fitch Medium/long-term Short-term Outlook Medium/long-term Short-term Outlook Medium/long-term Short-term Current(1) at Dec. 31, 2021 at Dec. 31, 2020 at Dec. 31, 2019 STABLE BBB+ A-2 STABLE Baa1 - STABLE BBB+ F2 STABLE BBB+ A-2 POSITIVE Baa1 - STABLE A- F2 STABLE BBB+ A-2 POSITIVE Baa2 - STABLE A- F2 STABLE BBB+ A-2 POSITIVE Baa2 - STABLE A- F2 (1) Figures updated to January 31, 2022. The world economy in 2021 was characterized by a gener- alized recovery, with estimated world GDP growth of about 5.8% on an annual basis. The rebound was made possible, especially in the more developed countries, by significant government fiscal support and the rapid and effective roll- out of vaccination campaigns. However, the reopening of economic activity at the begin- ning of 2021 generated sharp imbalances between supply and demand on a global scale, causing severe distortions in supply chains and, consequently, pushing up the prices of raw materials and intermediate and consumer goods, In the 2nd Half of 2021, US GDP, which increased by 5.7% year-on-year in the year as a whole, grew more slowly than anticipated at the beginning of the year. In the euro area, the real economy posted a clear recovery in both the 2nd and 3rd Quarters of 2021, with annual GDP grown by 5.2%. However, the economic recovery slowed in the 4th Quarter due to rapid increases in energy prices and a surge in Omicron-related COVID cases, which prompted many countries to reintroduce business closures and mo- bility restrictions. Enel shares 205 205 In Latin America, the reopening of national economies co- incided with a global increase in food and energy prices against a background of weak local currencies and peri- ods of severe drought in many large relevant areas of the continent. These developments pushed up inflation, which in many cases was well above the targets of local central banks. The economic recovery also impacted financial markets. The main European equity indices closed 2021 with gains. The Italian FTSE- MIB rose 23.0%, the Spanish Ibex35 gained 7.9%, the German DAX30 increased 15.8% and the French CAC40 jumped 28.9%. The euro-area utilities sector (EURO STOXX Utilities) closed the year with an increase of 3.6%. Finally, as regards the Enel stock, 2021 ended with a price of €7.046 per share, a decline of 14.9% on the previous year. On January 20, 2021 Enel paid an interim dividend of €0.175 per share from 2020 profits and on July 21, 2021 it paid the balance of the dividend for that year in the amount of €0.183. Total dividends distributed in 2021 amounted to €0.358 per share, about 9% higher than the €0.328 per share distributed in 2020. In relation to ordinary profit for 2021, on January 26, 2022 an interim dividend of €0.19 was paid, while the balance of the dividend is scheduled for payment on July 20, 2022. At December 31, 2021, institutional investors had reduced their position in Enel to 59.4% of share capital (compared with 62.3% at December 31, 2020), while the share of indi- vidual investors rose to 17.0% (as against 14.1% at Decem- ber 31, 2020). The interest of the Ministry for the Economy and Finance was unchanged at 23.6%. Socially responsible investors (SRIs) held about 14.6% of share capital (essential- ly unchanged on December 31, 2020) and represent 24.6% of institutional investors (23.4% at December 31, 2020). Investors who have signed the Principles for Responsible Investment represent 46.6% of share capital (47.8% at De- cember 31, 2020). For further information we invite you to visit the Investor Relations section of our corporate website (http://www. enel.com/investors/overview) and download the “Enel In- vestor“ app, which contains both economic and financial information (annual reports, semi-annual and quarterly reports, presentations to the financial community, analyst estimates and stock market trading trends involving the shares issued by Enel and its main listed subsidiaries, rat- ings and outlooks assigned by rating agencies) and up-to- date data and documentation of interest to shareholders and bondholders in general (price sensitive press releases, outstanding bonds, bond issue programs, composition of Enel’s corporate bodies, bylaws and regulations of Share- holders’ Meetings, information and documentation relat- ing to Shareholders’ Meetings, procedures and other doc- umentation concerning corporate governance, the Code of Ethics and organizational and management arrange- ments). We have also created contact centers for private investors (which can be reached by phone at +39-0683054000 or by e-mail at azionisti.retail@enel.com) and for institution- al investors (phone: +39-0683051; e-mail: investor.rela- tions@enel.com). 206 206 Integrated Annual Report 2021 Developments in ESG investors 134 132 150 160 10.3 10.5 7.7 8.0 11.3 8.6 8.6 5.9 244 252 19.1 19.1 14.6 14.6 169 13.7 182 14.1 10.5 10.8 2014 2015 2016 2017 2018 2019 2020 2021 Investors (no.) Float (%) Share capital (%) Performance of Enel share price and the EURO STOXX Utilities and FTSE-MIB indices from January 1, 2021 to January 31, 2022 130 120 110 100 90 80 70 60 50 01/01 01/02 01/03 01/04 01/05 01/06 01/07 01/08 01/09 01/10 01/11 01/12 01/01 2021 2022 Enel EURO STOXX Utilities FTSE-MIB Enel shares 207 207 Innovation and digitalization For Enel, innovation and digitalization are key pillars of its strategy to grow in a rapidly changing context while en- suring high safety standards, business continuity and op- erational efficiency, and thus enabling new uses of energy and new ways of managing it, making it accessible to an ever-larger number of people. Enel also operates through an Open Innovability® model, a consensus-based ecosystem that makes it possible to connect all areas of the Company with startups, industri- al partners, small and medium-sized enterprises, research centers and universities through a variety of system, such as crowdsourcing platforms and the Innovation Hub net- work. The Company has numerous innovation partnership agreements that, in addition to Enel’s traditional lines of business in the renewables and conventional generation sectors, have promoted the development of new solutions for e-mobility, microgrids, energy efficiency and the indus- trial Internet of Things (IoT). Enel’s innovation strategy leverages the online crowd- sourcing platform (openinnovability.com) and a global net- work of 10 Innovation Hubs (of which 3 are also Labs) and 22 Labs (of which 3 are dedicated to startups), which con- solidates the new model of collaboration with startups and SMEs. The latter offer innovative solutions and new busi- ness models, and Enel makes its skills, testing facilities and a global network of partners available to support their de- velopment and possible scale-up. The Hubs are located in the most important innovation ecosystems for the Group (Catania, Pisa, Milan, Silicon Valley, Boston, Rio de Janeiro, Madrid, Moscow, Santiago de Chile and Tel Aviv), they man- age relationships with all the players involved in innovation activities and are the main source of scouting for innova- tive startups and SMEs. The Labs (among which those in Milan, Pisa, Catania, São Paulo, Tel Aviv and Be’er Sheva are the most representative) allow startups to develop and test their solutions together with the Business Lines. In 2021, thanks to the Group’s stable positioning in innova- tive ecosystems and the extensive use of the Hub and Lab network, more than 90 scouting initiatives were launched (more than half of which in the form of virtual bootcamps) in various technological areas. This enabled Enel to meet more than 2,000 startups and to begin more than 100 new collaborative relationships. The community of 500,000 solvers gave Enel a global crowdsourcing presence in 2021 as well, with over 27 in- novation and sustainability challenges launched on open- innovability.com. In 2021, Enel reached a total of over 177 challenges launched since the platform was created, 44,000 users registered on the site (about 400,000 poten- 208 208 Integrated Annual Report 2021 tial solvers from partner platforms) and about €650,000 in monetary prizes paid to the winners. In 2021, the integration of Open Innovation Culture and Agile Transformation was launched at the Group level with the aim of providing the business with comprehensive support, from the generation of the idea to the implemen- tation of projects, using Innovation and Agile approaches as a key driver to create competitive advantage and opti- mize costs over time. Ever increasing importance is being taken on by activities to promote and develop the culture of innovation and en- trepreneurship within the Company, through multiple ini- tiatives such as the training of personnel in courses pro- vided through the Innovation Academy (many of which are run with internal instructors), the project involving In- novation Ambassadors, who are people passionate about innovation and creativity who voluntarily dedicate part of their working time to support activities in solving business challenges with a co-creative and innovative approach, and finally the “Make it Happen!“ entrepreneurship project, a company contest in which employees can propose in- novative business projects or process efficiency projects directly to Company top management. During 2021, Enel also continued to implement We4U, the World energy 4 Universities partnership program with na- tional and international universities and research centers, with the aim of maintaining a constant and multidisciplinary dialogue focused on the challenges of the energy transition. The activities of the innovation communities also contin- ued, involving different areas and skills within the Company. In addition to the existing communities addressing energy storage, blockchain, drones, augmented and virtual reality, additive manufacturing, artificial intelligence, wearables, robotics and green hydrogen, four other communities on sensors, materials, computer generative design and data monetization were added in 2021. While for the most cut- ting-edge technologies the role of the communities is ex- ploratory, researching possible use cases and applications, others play a role in sharing and disseminating best prac- tices that can enable technologies to scale and expand their impact on the business: this is the case of drones, with possibilities opened by regulatory developments con- cerning flights beyond the visual line of sight (BVLOS), ro- botic solutions, especially in the field of legged-robots and autonomous missions, virtual and augmented reality and artificial intelligence applications. In 2021, €130 million (including personnel expenses) were invested in innovation, research and development. In 2021, cyber security innovation work benefited from the network of Innovation Hubs, as well as from their startup portfolio and the partnerships agreed at the Group level. These interconnections have fostered the sharing of best practices and operating approaches, as well as the estab- lishment and expansion of info-sharing channels. In par- ticular, the services provided by more than 20 startups were analyzed and proof-of-concept activities were performed, some of which are still in progress while others have been internalized, addressing the issues summarized below. The following technological areas were investigated: • cyber protection and detection services in the field of micro-services, in particular for containers and server- less instances in the DevSecOps field; • specific solutions for the protection of industrial sys- tems (OT), which owing to their scope of applicability often have low computational capacity and are linked to legacy systems; • services for identifying vulnerabilities in third-party as- sets and services used by the organization that can un- dermine the security of the organization itself (external attack surface); • solutions that exploit the greater potential of artificial intelligence and machine learning, helping to enhance capabilities for the detection of cyber threats and the automation of analysis, correlation and response to in- cidents; • solutions to identify the vulnerabilities of assets and de- vices (mobile devices, IoT, web applications, etc) with the use of innovative techniques; • services that enable analysis of the firmware of IoT de- vices within a few hours and the rapid identification of key vulnerabilities, optimizing execution times com- pared with manual processes. Intellectual property Continuing the work done the previous year, in 2021 Enel redoubled its commitment to leveraging and developing its intellectual property portfolio to ensure it serves as a source of competitive advantage for the Group. The Open Innovability® ecosystem generates innovation through the creation and sharing of internal and external solutions that give life to ideas that enable the safe and sustainable propagation of the technological solutions through which electrification, platformization and stew- ardship programs are implemented, but which at the same time require appropriate forms of legal protection. This innovative impulse is also reflected in the Group’s investment in intangible assets, which show a significant increase, in line with the strategic direction delineated above, with particular regard to IT and digital applications. The investments focused on all the Group’s Global Busi- ness Lines and mainly concerned: • in the Global Thermal Generation Global Business Line, the development of innovative technical solutions in so- lar generation that seek, on the one hand, to create an innovative system for the rapid and automatable instal- lation of photovoltaic panels and, on the other hand, to increase the photovoltaic output of plants by increas- ing charge transfer mechanisms at the micro and na- nometric level in correspondence with different layers both in single and heterojunction cells and in tandem systems; • in the Global Infrastructure and Networks Global Busi- ness Line, the creation of platforms for the exploitation of network externalities in the service market, as well as for the automation of user management; • in the Enel X Global Business Line, the development of applications in the telemedicine business and platforms in urban livability field, with particular regard, respec- tively, to the Smart Axistance eWell App, designed and operated in collaboration with leading specialists at the Policlinico Gemelli Foundation, and to the 15 Minutes City Index platform, developed in collaboration with the University of Florence; • in the new e-Mobility Global Business Line, the defini- tion of forms of protection for its solutions in electric charging, including the community design to protect Juice Media, an innovative product which enables the simultaneous offer of electric charging and multimedia advertising services in a single structure. The Group is also investing resources in the development of innovative solutions for protecting its intellectual prop- erty, mainly in the forms of copyright protection and trade secrets, concerning climate models and advanced quan- titative models for the analysis of energy systems in order to support decarbonization and electrification in the main geographical areas in which we operate, using an integrat- ed and future-oriented vision. At December 31, 2021, the Group had applied for 892 for patents in 146 technological families. Of these, 749 have been granted and 143 are pending. The portfolio ensures protection in all the markets in which the Group is present. For a detailed analysis of the most significant intellectual property rights of each Global Business Line, please see the section on intellectual property in the Sustainability Re- port. The increase in the size of the entire portfolio of intel- Innovation and digitalization 209 209 lectual property rights held by the Enel Group corresponds to growing internal efforts to strengthen the information infrastructure necessary for the immediate identification of the innovation generated, its evaluation and protection, as well as the ongoing monitoring of the portfolio’s evolu- tion, with a view to ensuring continuous and close align- ment between technological and commercial trajectories and corresponding forms of safeguarding the competitive advantage provided by intellectual property rights. The Group also intends to continue to support and encourage the development of its innovation model through specific projects for internal dissemination by the Intellectual Prop- erty unit. In this regard, in 2021 a new Intellectual Property Management procedure was introduced and management reporting tools were developed to enhance the sharing of information on the value generated within Enel through the Open Innovability® model. For more information, please see the section on intellectual property in the Sus- tainability Report. The new Intellectual Property Management procedure The management of the Group’s intellectual property is governed by the new Intellectual Property Management procedure. It comprises all stages of the life of intellectu- al property, from the moment of conception of inventions to that of protecting and maintaining the portfolio and re- lationships with external counterparties. In particular, the procedure governs cases in which the intellectual property generated within Enel is transferred externally in circum- stances such as: (i) collaborative research; (ii) procurement; (iii) relations with startups; (iv) mergers, acquisitions and stewardship operations; and (v) the outright or licensed acquisitions of intangible assets of Enel and third parties. The methods for protecting intangible assets, monitoring their use, and metrics for measuring the Group’s perfor- mance in the management of intellectual property are regulated within this procedure, tracing information of use in the future planning and leveraging assets and mapping risks. The Intellectual Property Reporting project Starting in 2020, Enel has set itself the challenge – com- monly felt but not definitively absorbed into corporate practices in the various global technology companies – of accurately representing its intellectual assets in its non-financial reporting. This prompted us to first under- take a quantitative and qualitative survey of our existing assets, systematizing both legally protected assets (pat- ents, designs, utility models) and trade secrets. In 2021, Enel laid the foundations for the definition of an internal non-financial reporting process for intellectual property, based on a proprietary methodology designed to lend continuity from year to year to valuing and leveraging our intangible asset resources, partly with a view to future ex- ternal reporting. The process is applicable to all internal Enel projects that are intended to generate intellectual property and is based on the necessary and preventive identification of the various components which a project may generate, such as, among other things, documentation, technol- ogy, algorithms, processes, products, layouts, schemes and dashboards. Each identified intangible element is matched with one or more forms of intellectual prop- erty right in order to measure the intensity of the pro- ject’s output in terms of intellectual content. The internal 210 210 Integrated Annual Report 2021 methodology also envisages an exercise to evaluate the intellectual property generated internally, which, while not intending in any way to replace other valuation methods adopted within the Enel Group for determining fair value based on income methods, makes it possible to assess the intrinsic value of these intangibles on the basis of fi- nancial factors and providing an indication of the invest- ment that would be necessary to replicate the technolog- ical solution being evaluated. At an experimental level, a number of projects that have contributed to the generation of intellectual proper- ty within the Enel Group were selected from within the Global Business Lines, the Global Service Functions and the staff functions for a more detailed analysis of the problems arising from the application of this qual- itative-quantitative methodology. The methodology was tested and perfected with these projects on the basis of empirical experience and taking account of the specific technical and organizational features of the various areas. More specifically, the most interesting practical applica- tions of the Intellectual Property Reporting methodology include Grid Blue Sky, a flagship project of the Global In- frastructure and Networks Business Line (mentioned in the 2020 Sustainability Report), and the intangibles of the 3SUN factory, which is involved in the manufacture of bi-facial heterojunction solar panels based on proprietary Enel technology. The Grid Blue Sky project seeks to re-engineer the oper- ating model used for grids with a view to the integrated management of all operations, from design and planning to operation and maintenance, interaction with custom- ers and the support of new business models adopted by distributors, all in such a way that the various functions are natively compatible with the various aspects of the operating environment, including the regulatory factors typical of energy markets. Grid Blue Sky is based on an innovative development paradigm, which makes its archi- tecture scalable, sustainable and resilient, being based on the idea that all the activities of an operator take place through access to a single integrated platform on which the data converge. This avoids the need to devel- op redundant vertical solutions, because the database is shared and opens up the possibility of developing count- less services or integrating third-party solutions. The platform includes the following components: • the asset owner, which concerns everything related to the planning and development of the power grid; • the asset operator, which concerns the management of grid operation and maintenance processes; • customer engagement, which handles interaction with customers, who will thus benefit from a single platform for interaction and relationship management; and • the system operator, which looks to the future of elec- tricity distribution, examining as yet unregulated per- spectives concerning the use of the flexibility offered by grid-connected resources to solve congestion and voltage regulation issues. The examination of the project using the Intellectu- al Property Reporting methodology made it possible to identify the various intangible components that combine to form the platform and confirmed the considerable in- tellectual property density of Grid Blue Sky. The search for a correspondence between intangible components and forms of protection – which is part of the methodology inaugurated by Enel – reveals the presence of a copy- right on all the source code underpinning the platform and on all aspects of conceptual design and the infor- mation flows at the basis of the operating model, as well as copyright over all the original graphic elements (user interfaces and data access dashboards). Furthermore, in application of the internal procedure governing the pro- tection of trade secrets, all the confidential components underlying Enel’s great know-how in managing the grid and which are expressed in technological, organization- al, economic, financial and marketing aspects have been identified, isolated and codified. Similarly, the exercise of codifying intangible assets and identifying forms of protection was conducted for Enel Green Power’s 3SUN factory, which conceives and de- velops new-generation photovoltaic applications. Enel has long been at the forefront in the design of bi-facial heterojunction solar panels, which increase the efficiency of systems thanks to their greater capacity for capturing solar radiation. 3SUN’s know-how in this area does not only involve the panel as such, but also the innovative materials used, the assembly methods, as well as all the industrial knowledge behind the construction and auto- mated management (from an Industry 4.0 perspective) of production lines. The codification of intellectual property for 3SUN identified all the technological components and related forms of protection, which involve a broad group of patent families for the processes implemented, the materials used and the heterojunction techniques used to manufacture panels, as well as a considerable volume of confidential knowledge, adequately identified and pro- tected, necessary to make the panels, and specific pro- duction know-how that directly concerns the realization of all the components of the Gigafactory. The cases of Grid Blue Sky and 3SUN are emblematic of the assiduous work that Enel has been pursuing for some years now to make it increasingly visible to the outside world how intellectual property is instrumental to the generation and preservation of the Company’s com- petitive advantage, both in cases of direct and internal exploitation of technological solutions (as in the case of 3SUN) or where proprietary oversight is instrumental to sharing knowledge in a context of open innovation and enabling new business models (as in the case of Grid Blue Sky). Innovation and digitalization 211 211 People centricity People management and development at Enel The Enel Group workforce at December 31, 2021 numbered 66,279 (66,717 at December 31, 2020). The contraction of 438 in the Group workforce in 2021 reflects the impact of the balance between new hires and terminations during the period (-461) and the change in the consolidation scope (a total of +23), which included the disposal of the Enel Green Power Bulgaria companies and the acquisition of CityPoste Payment SpA in Italy. The following tables analyze the number and variation in employees by gender, age group, job classification and ge- ographical area. An analysis by Business Line is also provid- ed for the number of employees only. no. no. % no. % no. no. % no. % no. % no. % % % % no. no. % no. % no. % no. % no. % no. % 2021 66,279 51,341 77.5 14,938 22.5 66,279 7,761 11.7 38,024 57.4 20,494 30.9 2020 66,717 52,346 78.5 14,371 21.5 66,717 7,289 10.9 36,355 54.5 23,073 34.6 66,279 66,717 2.1 18.5 53.6 25.8 66,279 30,276 45.7 9,518 14.4 18,763 28.3 4,994 7.5 1,914 2.9 814 1.2 2.1 17.4 53.8 26.7 66,717 29,800 44.7 9,781 14.7 19,838 29.7 4,966 7.4 1,639 2.5 693 1.0 Change (438) (1,005) -1.0 567 1.0 (438) 472 0.8 1,669 2.9 (2,579) -3.7 (438) - 1.1 -0.2 -0.9 (438) 476 1.0 (263) -0.3 (1,075) -1.4 28 0.1 275 0.4 121 0.2 -0.7% -1.9% -1.3% 3.9% 4.7% -0.7% 6.5% 7.3% 4.6% 5.3% -11.2% -10.7% -0.7% - 6.3% -0.4% -3.4% -0.7% 1.6% 2.2% -2.7% -2.0% -5.4% -4.7% 0.6% 1.4% 16.8% 16.0% 17.5% 20.0% Year-end workforce Employees by gender: - of which men - of which women Employees by age group: - <30 - 30-50 - >50 Employees by level: - senior manager - middle manager - office staff - blue collar Employees by geographical area Italy Iberia Latin America Europe North America Africa, Asia and Oceania 212 212 Integrated Annual Report 2021 Workforce by Business Line No. Thermal Generation and Trading Enel Green Power Infrastructure and Networks End-user Markets Enel X Services Holding and other Total Change in workforce Balance at December 31, 2020 Hirings Terminations Change in consolidation scope Balance at December 31, 2021 Breakdown of changes in workforce Hiring rate New hires by gender: - of which men - of which women New hires by age group: - <30 - 30-50 - >50 New hires by geographical area Italy Iberia Latin America Europe North America Africa, Asia and Oceania at Dec. 31, 2021 at Dec. 31, 2020 Percentage of total at Dec. 31, 2021 Percentage of total at Dec. 31, 2020 7,847 8,989 33,263 6,148 3,352 5,734 946 66,279 % no. no. % no. % no. no. % no. % no. % no. no. % no. % no. % no. % no. % no. % 8,142 8,298 34,332 6,324 2,989 5,731 901 66,717 2021 8.1 5,401 3,764 69.7 1,637 30.3 5,401 2,579 47.8 2,653 49.1 169 3.1 5,401 1,697 31.5 693 12.8 1,704 31.5 439 8.1 636 11.8 232 4.3 11.8% 13.5% 50.2% 9.3% 5.1% 8.7% 1.4% 12.2% 12.4% 51.5% 9.5% 4.5% 8.6% 1.3% 100.0% 100.0% 66,717 5,401 (5,862) 23 66,279 72.3% 72.5% 70.9% -1.0% 76.4% 2.4% 72.5% 89.2% 9.9% 56.1% -9.6% - 40.9% 72.5% 62.5% -5.4% - 56.1% 71.9% -0.6% 56.8% -9.0% 75.7% 1.7% 17.8% -31.7% Change 3.4 2,270.0 1,561 -0.7 709 0.7 2,270 1,216 4.3 953 -5.2 101 0.9 2,270 653 -1.8 436 4.6 713 -0.2 159 -0.8 274 0.2 35 -2.0 2020 4.7 3,131 2,203 70.4 928 29.6 3,131 1,363 43.5 1,700 54.3 68 2.2 3,131 1,044 33.3 257 8.2 991 31.7 280 8.9 362 11.6 197 6.3 People centricity 213 213 Turnover rate Terminations by gender: - of which men - of which women Terminations by age group: - <30 - 30-50 - >50 Terminations by geographical area Italy Iberia Latin America Europe North America Africa, Asia and Oceania Training and development As the COVID-19 emergency evolved, personnel safety was guaranteed by continuing to adopt the flexible working meas- ures implemented in 2020. In 2021, remote working was used by more than 39 thousand employees in the countries in which the Group operates. This capacity for flexibility and resilience leverages our consolidated experience with flexible working, which began in Italy as early as 2016 and then grad- ually spread throughout the Group, and the technological and digital transformation of corporate strategy that has made Enel the first public utility completely resident in the cloud. The new approach to work has benefited from the numer- ous tools and support services made available to our people, an essential prerequisite for working from home, ensuring the circulation and sharing of information and the effective organization of activities. Training and awareness-raising in- itiatives continue to accompany the adoption of fully digital working methods and the promotion of a work culture based on independence, delegation and trust, and attention to the well-being of our people and their families. In this context, the targeted reskilling and upskilling programs 214 214 Integrated Annual Report 2021 % no. no. % no. % no. no. % no. % no. % no. no. % no. % no. % no. % no. % no. % 2021 8.8 5,862 4,779 81.5 1,083 18.5 5,862 702 12.0 2,275 38.8 2,885 49.2 5,862 1,249 21.3 956 16.3 2,779 47.4 406 6.9 361 6.2 111 1.9 2020 6.0 3,696 3,001 81.2 695 18.8 Change 2.8 2,166 1,778 0.3 388 -0.3 3,696 2,166 547 14.8 1,273 34.4 1,876 50.8 3,696 1,011 27.3 599 16.2 155 -2.8 1,002 4.4 1,009 -1.6 2,166 238 -6.0 357 0.1 1,393 1,386 37.7 299 8.1 313 8.5 81 2.2 9.7 107 -1.2 48 -2.3 30 -0.3 46.7% 58.6% 59.2% 0.4% 55.8% -1.6% 58.6% 28.3% -18.9% 78.7% 12.8% 53.8% -3.1% 58.6% 23.5% -22.0% 59.6% 0.6% 99.5% 25.7% 35.8% -14.8% 15.3% -27.1% 37.0% -13.6% have therefore been strengthened, the former to learn skills and expertise that enable people to fill new positions and roles, while the latter involve the development of training and empowerment courses that enable employees to improve their performance in their job, increasing the skills available to them in their current position. During 2021, dissemination efforts concerning upskilling and reskilling issues were launched with the involvement of all the Group’s countries and Business Lines: these included a global challenge and 36 interviews with senior executives on current and future skills. A working group was also formed to draft guidelines and map projects, adopting a common taxonomy in which upskilling, reskilling and external skilling are consid- ered as an integrated set of initiatives that include training, development and the Enel ecosystem as a whole. European networking on upskilling and reskilling issues was expanded by joining the Upskill4the future initiative of CSR Europe with the People Business Partner R-evolution project of e-distribuzione, targeted at People Business Partners, the first facilitators of the energy transition in accompanying peo- ple along their professional growth path, who contributed to the drafting of the Joint Statement on the Just Transition, of the European social partners, signed in November. Enel promotes training activities for its people as a key ele- ment in ensuring their constant development. We have de- veloped career paths to foster the evolution of our talent, the valorization of passions and personal aptitude and the de- velopment of new languages, also promoting the formation of internal trainers (“train the trainer“). In 2021, some 3 million hours of training were provided, an increase compared with the previous year, with 20% provided in person and the re- mainder delivered remotely. This was made possible by the upgrading of digital tools and the E-Ducation platform, which ensured broad access to content and expanded the culture of digitalization for learning. The training courses covered is- sues related to conduct, technical issues, safety, new skills and digital culture. Total Group training costs in 2021 amounted to €23 million.(18) Average training hours per employee Average number of training hours Average number of training hours by level: - senior manager - middle manager - office staff - blue collar Average number of training hours by gender: - men - women hrs/person hrs/person hrs/person hrs/person hrs/person hrs/person hrs/person 2021 44.6 29.6 41.9 38.4 60.3 46.5 37.7 2020 40.9 31.9 41.4 35.7 51.4 40.4 42.7 Change 3.7 9.0% (2.3) 0.5 2.7 8.9 6.1 (5.0) -7.2% 1.2% 7.6% 17.3% 15.1% -11.7% In a rapidly changing work environment, accelerated by the pandemic crisis, the Group has set itself the ambi- tious goal of promoting digital sustainability in the coming years through a series of training initiatives that illustrate all those technologies that enable our people to work and coexist sustainably with the surrounding environment. With regard to people development initiatives, in 2021 a new performance appraisal model was developed and ex- tended to the entire Group: the Open Feedback Evaluation (OFE). The program, which involves 100% of the Group’s eligible employees, has significant distinctive features compared with past iterations. More specifically, in order to forge a constant dialogue between and with people, the evaluation has been made continuous and omni-com- prehensive, with three moments of communication be- tween managers and personnel during the year. The new OFE model consists of three interdependent dimensions: “Talent“, which consists in highlighting a worker’s individual skills based on the 15 Soft Skills Model linked to the 4 Open Power values of Trust, Responsibility, Innovation and Pro- activity; “Generosity“, understood as an aptitude to enter into relationships with others, dedicating time to recog- nizing the talents of colleagues and in turn getting involved by requesting feedback on one’s own performance, gen- erating a mechanism for individual and collective growth; and, finally, “Action“, i.e., the ability of employees to achieve professional goals, as assessed by their managers. Listening and improvement of organizational well-being Following earlier initiatives conducted by Enel to ensure we are constantly listening to our people, which over the years have led to the development of specific action plans for individual holding functions, Business Lines and ge- ographical areas, producing answers to the main needs that emerged from the process (meritocracy, personal development, work-life balance, etc.), at the end of 2020 a global “Open Listening - interview to build our future“ program was launched. This global initiative, which saw the active participation of 70% of employees, provided impor- tant feedback on the internal climate but also on working conditions, asking our people to imagine the future in the “Next Normal“ era: from remote working methods to spac- es, innovative technologies and the new leadership models of the future. Furthermore, during 2021 Enel and our people also de- veloped a global well-being model based on eight pillars that impact general satisfaction: psychological, physical, (18) The cost calculation takes account of the specific training account in the New Primo system. This includes all external training costs and is currently the only form of certified information on training costs available. People centricity 215 215 social, ethical, economic and cultural well-being, work-life harmony and a feeling of protection. To measure well-be- ing and identify the most important initiatives for people, a global well-being survey was conducted. The findings of the survey will enable the development of a Global Well- ness Program in 2022, with the involvement of an interna- tional, diverse and multicultural team. Finally, 2021 saw another important listening moment aimed at identifying, among other things, the aspects of the work environment that our personnel recognize as most valuable and distinctive of the Group: the “Employer Value Proposition Survey“. Thanks to this project, which in- volved employees from around the world, a Net Promoter Score – an indicator measuring the employee satisfaction – was also analyzed, assessing the main attributes associ- ated with the Enel brand in its position as an “employer of choice“. Sustainability, innovation, safety at work and work- life balance are the main attributes that emerged, factors that also match the main preferences declared by people when they choose where they want to work. Diversity in Enel The inclusion of diversity and the valorization of people’s multiple and unique talents are essential factors of Enel’s approach for creating long-term sustainable value for all stakeholders. Enel’s commitment to promoting diversity and inclusion is a process that started in 2013 with the adoption of our Hu- man Rights Policy, followed in 2015 by our global Diversity and Inclusion Policy, published in conjunction with Enel’s adoption of the Women’s Empowerment Principles (WEP) promoted by the UN Global Compact and UN Women and in line with the United Nations Sustainable Development Goals. In 2019, the Global Workplace Harassment Policy was published. It sets out the principle of respect for the integrity and dignity of the individual in the workplace and addresses the issue of sexual harassment and harassment connected with discrimination in the workplace. In 2020, these principles were delineated in the Statement against Harassment. Finally, with a focus on the inclusion of every- one and with a view to ensuring equal opportunities for access to information and digital systems, a global digital accessibility policy was issued in 2021. Our approach to diversity and inclusion is based on the principles of non-discrimination, equal opportunities, dig- nity and inclusion of every person regardless of differenc- es, and work-life balance. It is embodied in a comprehen- sive set of actions that promote the care and expression of the uniqueness of each person, an inclusive and prej- udice-free organizational culture, and a coherent mix of skills, qualities and experiences that create value for peo- ple and the business. Among the most important initiatives pursued in 2021 are dedicated actions to systematically impact the various as- pects of the gender gap and the inclusion of disability, the specific listening and support services made available to people in the context of the pandemic emergency, projects dedicated to people with vulnerabilities, awareness-raising initiatives on LGBTQ+ issues and cultural diversity. In recent years, an intense awareness-raising effort has 216 216 Integrated Annual Report 2021 helped spread and strengthen the culture of inclusion at every level and in every organizational context, using com- munication campaigns and dedicated global and local events. In 2021, two global awareness campaigns on work- place bias and harassment were launched for all employ- ees. The progress of D&I policies is monitored periodically through a global reporting process that measures the per- formance of an extensive set of KPIs on all dimensions for internal and external purposes. In particular, with regard to gender, Enel has set itself two public objectives: to ensure equal balance of the two genders in the initial stages of the selection processes and to increase the representation of women in senior and middle management. In 2021, women represented 52.1% of people involved in the selection pro- cess, an increase on 2020 (44%), while women accounted for 23.6% of senior managers (21.6% in 2020) and 31.4% of middle managers (30.4% in 2020). With this in mind, a new performance target in the 2021 Long-Term Incentive Plan has been introduced, with a weight equal to 5% of the total, represented by the “per- centage of women in management succession plans“ at the end of 2023. This represents an objective for all managers of Enel and/ or its subsidiaries, including the General Manager (as well as Chief Executive Officer) of Enel, who hold top positions and/or positions of strategic interest for the Group. It also underscores the strong commitment of the Enel Group to ensuring equal representation of women in the areas that feed management succession plans and emphasizes the increasing attention being paid to the issue of gender equality. As part of the Value for Disability project, the actions en- visaged in the associated action plan continued with the issuance of a global policy on digital accessibility and nu- merous awareness-raising initiatives aimed at spreading a new approach to the inclusion of colleagues with disa- bilities and promoting their effective participation. In Italy, the roll out of new services for people with chronic disease and the vulnerable also continues. For the purposes of monitoring pay equality, in 2021 a 2% increase in the percentage of female managers (from 21.6% to 23.6%) produced a slight decrease in the Equal Remu- neration Ratio (ERR), which slipped from 83.3% to 81.1%. All the actions taken to valorize the presence of women in the Group continued, whether for those in top positions or Diversity and inclusion Disabled personnel or personnel belonging the protected categories Women senior and middle managers Ratio of base salary to remuneration Ratio of base salary women/men: - senior manager - middle manager - office staff - blue collar Ratio of base remuneration women/men: - senior manager - middle manager - office staff - blue collar otherwise, the effects of which will be fully appreciable in the medium/long term, taking due account of generation- al dynamics. The following table demonstrates Enel’s commitment to diversity and inclusion, showing the proportion of disa- bled personnel, the number of women in senior or middle management positions and the ratio of the average basic remuneration of women to that for men. % no. % % % % % % % % % % 2021 3.2 4,163 104.8 84.6 94.2 88.4 111.2 105.1 81.1 93.2 88.4 112.0 2020 3.3 3,825 108.1 86.7 96.5 90.2 77.0 108.3 83.3 95.7 90.3 77.8 Change -0.1 338 -3.3 -2.1 -2.3 -1.8 34.2 -3.2 -2.2 -2.5 -1.9 34.2 -3.0% 8.8% -3.1% -2.4% -2.4% -2.0% 44.4% -3.0% -2.6% -2.6% -2.1% 44.0% Workplace health and safety Enel considers employee health, safety and general well-be- ing to be its most valuable asset, one to be preserved both at work and at home. We are therefore committed to de- veloping and promoting a strong culture of safety that ensures a healthy work environment and protection for all those working with and for the Group. Safeguarding our own health and safety and that of the people with whom we interact is the responsibility of everyone who works for Enel. For this reason, as provided for in the Group “Stop Work Policy“, everyone is required to promptly report and halt any situation of risk or unsafe behavior. The constant commit- ment of us all, the integration of safety both in corporate processes and training, the reporting and detailed analysis of all information, near misses, safety warnings, non-com- pliance, controls, rigor in the selection and management of contractors, the sharing of experience and best practices throughout the Group as well as benchmarking against the leading international players are all cornerstones of Enel’s culture of safety. During 2021, the “Data Driven Safety“ ap- proach was further developed. It seeks to develop “selective prevention“ safety indicators that help identify the country, technology and area at greatest risk of fatal events in order to direct prevention and protection interventions for inter- nal employees and contractors. The Group’s approach to suppliers is to consider each of them as a partner with whom the key principles of safety and the environment are to be shared. These include the Zero Accidents goal and the importance of the Stop Work Policy, tools that make it possible to promptly report and halt any situation of risk that could harm people or the environ- ment. At all stages, from qualification to contract award, the Group has adopted specific tools to monitor the manage- ment of Health, Safety and Environmental requirements. Ac- curate monitoring is associated with a continuous process of on-site inspections and consequence management, de- fined on the basis of the supplier’s safety and environmental risk profile, with a view to improving performance. In addition, during 2021 the Contractor Safety Partnership program continued. It is based on sharing Enel’s core values for safety. In particular, the Safety Support process proposes lines of improvement and internal experience is made avail- able to suppliers to support the training of contractor staff, while keeping the responsibilities of the contractor well separated from Enel. Enel is committed to increasing safety and environmental skills both in terms of technical know-how and cultural ap- proach, all with a view to promoting a new way of working that is safer for people and more sustainable for the envi- People centricity 217 217 ronment. To this end, in 2021 the SHE Factory unit expand- ed its effort in the production, distribution and provision of courses and training material for Enel staff and contractors. The following table reports the main workplace safety indi- cators. Hours worked Enel Contractors(1) Total injuries (TRI) Enel Contractors Injury frequency rate (TRI)(2) Enel Contractors Fatal injuries Enel Contractors Fatal injury frequency rate Enel Contractors “Life changing“ injuries(3) Enel Contractors “Life changing“ injury frequency rate Enel Contractors millions of hours millions of hours millions of hours 2021 423.362 123.421 299.940 2020 403.333 125.264 278.069 no. no. no. i i i no. no. no. i i i no. no. no. i i i 1,212 156 1,056 2.863 1.264 3.521 9 3 6 0.021 0.024 0.020 4 1 3 0.009 0.008 0.010 1,308 196 1,112 3.243 1.565 3.999 9 1 8 0.022 0.008 0.029 - - - - - - Change 20.028 (1.843) 21.871 (96) (40) (56) (0.380) (0.301) (0.478) - 2 (2) (0.001) 0.016 (0.009) 4 1 3 0.009 0.008 0.010 5.0% -1.5% 7.9% -7.3% -20.4% -5.0% -11.7% -19.2% -12.0% - - -25.0% -3.4% - -31.0% - - - - - - (1) The 2020 figures reflect a more accurate calculation. (2) This index is calculated as the ratio between the number of injuries (all injury events including those with three or fewer missed days of work) and hours worked/1,000,000. Injuries whose consequences caused permanent changes in the life of the individual (amputation of a limb, paralysis, neurological damage, etc.). (3) In 2021, the total recordable injury (TRI) declined by 7.3% compared with 2020. The decline was found for both Enel employees (-20.4%) and contractor employees (-5.0%). In 2021, there were: • 9 fatal accidents, of which 3 involving Enel Group em- ployees (2 in Italy and 1 in Brazil), and 6 fatal accidents involving contractors (2 in Brazil, 2 in Chile, 1 in Italy and 1 in Spain); • 4 “life changing“ accidents, of which 1 involving an Enel employee in Brazil and 3 involving contractors (1 each in Brazil, Colombia and Spain). The causes of these fatal accidents were mainly associated with electrical (7), mechanical (5) and chemical (1) incidents. The Enel Group has established a structured health man- agement system, based on prevention measures to de- velop a corporate culture that promotes psycho-physical health, organizational well-being and a balance between personal and professional life. With this in mind, the Group conducts global and local awareness campaigns to pro- mote healthy lifestyles, sponsors screening programs aimed at preventing the onset of diseases and guarantees the provision of medical services. The Enel Group has a sys- tematic and ongoing process for identifying and assessing work-related stress risks, in accordance with the Stress at Work Prevention and Well-being at Work Promotion pol- icy, for the prevention, identification and management of stress in work situations, also providing recommendations aimed at promoting a culture of organizational well-being. In 2021, the Enel Group focused on strengthening the measures and programs targeting well-being issues, which are increasingly vital in ensuring not only the well-being of its workers in the context of a pandemic but also looking to the future and to new ways of working. The Group also constantly monitors epidemiological and health developments in order to implement preventive and protective measures for the health of employees and those who work with the Group, both locally and globally. Since the outset of the COVID-19 emergency in February 2020, Enel has taken steps to protect the health of all workers and en- sure the continuity of electricity supply to the communities in which it operates, primarily by setting up specific global and country task forces and, subsequently, establishing a 218 218 Integrated Annual Report 2021 unit responsible for overseeing this process. The purpose of this Pandemic Emergency Management unit is to monitor of emergencies, define strategy and global policies and their adoption in every area of the Group and direct, integrate and monitor all prevention, protection, safe- guard and response actions intended to protect the health of its employees and contractors, also in relation to external health risk factors not strictly related to work. Responsible relations with communities Establishing solid and lasting relationships with local communities in the countries in which Enel operates is a fundamental pillar of the Group’s strategy. This, together with devoting unswerving attention to social and environ- mental factors, has enabled Enel, on the one hand, to im- plement a new balanced model of equitable development that leaves no one behind and, on the other, to create long-term shared value for all stakeholders. This model has been incorporated along the entire value chain: from proactive analysis of the needs of communi- ties right from the development phases of new business to the establishment of sustainable worksites and plants, managing assets and plants to make them sustainable development platforms to the benefit of the territories in which they are located. A further evolution is the ex- tension of this approach to the design, development and supply of energy services and products, as well as pro- cess innovation, leveraging new technologies and help- ing to build increasingly circular, inclusive and sustainable communities. In line with the Sustainable Development Goals (SDGs), Enel makes a concrete contribution to the sustainable progress of the territories in which it operates. This com- mitment is fully integrated into our purpose and corpo- rate values, from the expansion of infrastructure to ed- ucation and vocational training programs, and projects to support cultural and economic activities. Specific in- itiatives have been designed to promote access to en- ergy and rural and suburban electrification, addressing energy poverty and promoting social inclusion for the most vulnerable segments of the population, also using new technologies and circular economy approaches and adopting a strategy that fully incorporates sustainability into our business model and activities. Various initiatives have been developed globally for the protection of biodi- versity, in line with the Group’s decarbonization strategy. There are two major challenges in particular: the equita- ble and sustainable energy transition and the post-pan- demic recovery. The energy transition represents an important accelera- tor of growth and modernization of industry, thanks to the potential it offers in terms of economic development, well-being, quality of life and equality. Far-sighted poli- cies are necessary to seize these opportunities, ensuring a just and inclusive transition and taking particular ac- count of the needs of the social categories most exposed to change. Enel is convinced that, in order to generate lasting profit, value must be shared with the entire envi- ronment in which it operates. With the continuation of the COVID-19 pandemic, our commitment to support communities has also contin- ued, with the activation of specific initiatives to sustain socio-economic recovery through the development of local marketplaces, facilitating access to credit and pro- moting inclusive business models to support the weaker segments of the population, with particular attention to people in physically, socially and economically vulnera- ble positions. Many digitalization projects have also been undertaken to support connectivity in rural areas, com- puter literacy, the participation of women in STEM fields, e-commerce platforms and online or offline solutions with a positive impact on local economies. In 2021, Enel developed over 2,400 sustainability projects involving more than 7.5 million beneficiaries in the coun- tries in which it operates. Projects to ensure access to affordable, reliable, sustainable and modern energy (SDG 7) have involved 13.2 million people to date,(19) those to foster the economic and social development of commu- nities (SDG 8) have reached 3.7 million beneficiaries,(20) while initiatives to promote quality education (SDG 4) have benefited 3 million people.(21) In order to identify the best ideas for each area, the pro- cess involves sharing with local communities and listen- ing to stakeholders, leading to the identification of effec- tive measures to respond to local needs in synergy with company objectives. (19) Cumulative 2015-2021 figures for total number of SDG 7 beneficiaries to date. (20) Cumulative 2015-2021 figures for total number of SDG 8 beneficiaries to date. (21) Cumulative 2015-2021 figures for total number of SDG 4 beneficiaries to date. People centricity 219 219 The ideas that emerged from stakeholder engagement and constant dialogue with communities represent the basis for the construction of long-term partnerships with the active involvement of non-governmental organiza- tions and startups, companies and institutions rooted in the territory. An approach that leads to the implementa- tion of a wide range of projects in different areas, thanks in part to the activation of virtuous ecosystems such as the Open Innovability® platform, which is based on openness and sharing, facilitating and promoting the identification of innovative social ideas and solutions. In 2021, over 580 partnerships were active at an interna- tional level, fostered in part by a range of tools such as, for example, crowdsourcing platforms (openinnovability. com) and the Innovation Hub network. Sustainable supply chain In addition to meeting certain quality standards, the ser- vices of our vendors must also go hand in hand with the adoption of best practices in terms of human rights and working conditions, health and safety and environmental and ethical responsibility. Our procurement procedures are designed to guarantee service quality in full respect of the principles of economy, effectiveness, timeliness, fair- ness and transparency. The procurement process plays a central role in value creation in its various forms (safety, savings, timeliness, quality, earnings, revenue, flexibility) as a result of ever-greater interaction and integration with the outside world and the different parts of the company organization. About 6,900 qualified suppliers had an active contract in place at the end of 2021. Vendor management involves three essential stages, which integrate social, environmental and governance issues: the qualification system, the definition of general terms and conditions of contract, and the Supplier Per- formance Management (SPM) system in the evaluation process. Enel’s global vendor qualification system (with about 14,000 active qualifications at December 31, 2021) enables us to accurately assess businesses that intend to participate in tender processes through the analysis of compliance with technical, financial, legal, environmental, health and safety, human and ethical rights and integrity requirements, representing a guarantee for the Compa- ny. As regards the tendering and bargaining process, Enel continued to introduce aspects related to sustainability in tendering processes, not only with the introduction of a specific “K for sustainability“ factor, but also through the use of mandatory sustainability requirements that take ac- count of the environmental, social and safety characteris- tics of suppliers. To facilitate the application and monitor- ing of these requirements, in 2021 the first version of the sustainability requirements library was implemented on the WeBUY purchasing portal, a coded list of sustainability actions that buyers can apply as mandatory requirements in the tender phase. In the early months of 2021, all the standards (Product Category Rules) necessary to obtain the “Environmental Product Declaration“ were published. This certification seeks to quantify, certify and communi- cate the impacts generated during the entire life cycle of a supply relationship (in terms of CO2 emissions, water con- sumption, impact on the soil, recycled material, etc.). This process enables us to obtain a sector benchmark and de- fine improvement plans with the suppliers involved (more than 200 in 13 strategic product categories that account for some 50% of the Group’s annual spending on supplies). Furthermore, specific contractual clauses regarding sus- tainability are also envisaged in all contracts for works, ser- vices and supplies, including respect for and protection of human rights and compliance with ethical and social ob- ligations. The SPM system is designed to monitor vendor services in terms of the quality, timeliness and sustainabil- ity of contract execution. We also continued working on those activities that enable the ever-greater integration of environmental, social and governance issues in the supply chain strategy, creating shared value with vendors. These include meetings and information initiatives with contractors on sustainability is- sues, with specific regard to safeguarding health and safety. 220 220 Integrated Annual Report 2021 The circular economy For Enel, the circular economy represents a strategic driver in rethinking the existing development model by combining innovation, competitiveness and sustainability in order to re- spond to today’s great environmental and social challenges. The Group’s vision is based on five pillars that act through three main levers: design (i.e., planning, materials used), meth- ods of use (i.e., the extension of useful life, sharing, product as a service) and the closure of cycles (i.e., reuse, remanufactur- ing, recycling). NEW LIFE CYCLES All solutions designed to preserve the value of an asset at the end of its life cycle thanks to reuse, regeneration, upcycling or recycling, in synergy with other pillars. cycling % reuse p % u % recycle % wast e I n c r e a s e i n u s e f u l l i f e EXTENDING USEFUL LIFE Approach to the design and operation of an asset or product intended to extend its useful life, such as modular design, facilitated repair or predictive maintenance. % efficiency % renewable % reuse % recycle % not rene w a ble t e r i a l s and energy M a CirculAbility Model Use CIRCULAR INPUTS Model of production and use based in renewable inputs or inputs from previous life cycles (reuse and recycling). r o t c a f d a o e in l s a Incre Increase in loa d f a c t o r SHARING PLATFORMS Systems for joint management by multiple users of products, goods or skills. PRODUCT AS SERVICE A business model in which the customer purchases a service for a specified period of time, while the company retains ownership of the product, maximizing usage and useful life. For the result to be effectively transformative, the circular approach must inevitably embrace the entire value chain. For this reason, it has been implemented in all the Group’s activities, acting both through the Business Lines, as re- gards technologies and business models, and through the countries, as regards cross-sectoral synergies, collabora- tions and ecosystems. Since 2018, a global project has been operational with suppliers to measure the circularity of what we purchase, reward the most virtuous and co-innovate to rethink assets and products together. The generation and distribution areas have been innovating in order to rethink the value chain of new installed assets, such as smart me- ters, photovoltaics and wind power, from a circular point of view and leveraging their assets during operations. The Global Energy and Commodity Management Business Line is supporting this transition by extending its skills to the ar- People centricity 221 221 eas of new materials and secondary raw materials. Enel X is marketing itself as an accelerator of the circularity of its customers, both by continuously measuring and improving its products and services and by providing measurement and consulting services to customers to increase their cir- cularity. Since the initial stages of adopting a circular approach, Enel has placed a strong focus on measuring the envi- ronmental and economic benefits of circularity, with the awareness that a model that exceeds and, ideally, elimi- nates the consumption of non-renewable resources must be measurable in order to be not only sustainable but also economically competitive. Since the 2020 Capital Markets Day, for example, the Group has introduced a new circular- ity indicator for generation assets, supplementing existing indicators on direct emissions. This additional indicator photographs the evolution over the years of the consump- tion of materials per MWh generated on a whole life basis, measuring the consumption of materials throughout the life cycle: from production to installation, to decommis- sioning of generation assets. A business model based on circularity requires maximum collaboration between all key players: this is why Enel con- siders it essential to open lines of communication and col- laboration with those who share this vision, involving sup- ply chains and promoting common initiatives (including training) to safeguard natural resources and increase the competitiveness of a country. Finally, in the belief that the transition to a circular econ- omy will generate multiple economic, social and environ- mental benefits, we believe that Group finance can play a key role in accelerating this transition by providing finan- cial assistance to companies and projects that implement circular business models, supporting the development of the new innovative technologies necessary to enable the functioning of new circular business models. 222 222 Integrated Annual Report 2021 Significant events in 2021 Enel closes Unit I of Bocamina coal-fired plant three years ahead of date set in Chile’s National Decarbonization Plan On January 4, 2021, the Enel Group disconnected and ceased operations at Unit I of the Bocamina coal-fired power plant, which is located in the Chilean municipality of Coronel. The 128 MW Unit I was disconnected three years before the date set in Chile’s National Decarboni- zation Plan. With this milestone, coupled with the closure of Tarapacá coal plant on December 31, 2019 and the ex- pected closure of Enel’s last coal facility in the country, Bocamina’s Unit II, by May 2022, steady progress is being made towards the decarbonization of Enel’s Chilean gen- eration mix. Moody’s upgrades Enel’s long-term rating to “Baa1“ On January 15, 2021, Moody’s Investors Service (Moody’s) announced that it had upgraded its long-term rating of Enel SpA to “Baa1“ from the previous level of “Baa2“. Among the rating drivers prompting the upgrade, Moody’s cited: • low earnings volatility driven by large scale and geo- graphical diversification; • stable earnings stemming from regulated networks and contracted generation, which account for 80% of the Group’s EBITDA; • solid financial profile, with funds from operations/net debt in excess of 20%. Enel issues hybrid bonds On February 25, 2021, the Board of Directors of Enel SpA authorized the issue, by December 31, 2021, of one or more non-convertible subordinated hybrid bonds, includ- ing perpetual bonds, for up to a maximum of €3 billion. The bonds are to be placed exclusively with European and non-European institutional investors, including through private placements. In execution of that resolution, on March 4, 2021 Enel issued a new perpetual hybrid bond of €2.25 billion. Enel agrees the largest ever sustainability- linked revolving credit facility On March 5, 2021, Enel and its Dutch subsidiary Enel Fi- nance International NV (EFI) signed the largest ever sus- tainability-linked revolving credit facility in the amount of €10 billion, with a term of five years. The facility, which will be used to meet the Group’s finan- cial requirements, is linked to a key performance indicator consisting of direct greenhouse gas emissions (i.e., Group Scope 1 CO2 equivalent emissions from the production of electricity and heat), contributing to the achievement of the United Nations Sustainable Development Goal (SDG) 13 “Climate Action“ and in line with the Group’s Sustain- ability-Linked Financing Framework, for which Vigeo Eiris provided a second-party opinion. The facility replaces the previous €10 billion revolving credit line obtained by Enel and EFI in December 2017 and has a lower all-in cost than the earlier facility. Voluntary partial public tender offer for the shares and American Depositary Shares of Enel Américas SA As part of the process of corporate reorganization aimed at integrating the non-conventional renewable energy business of the Enel Group in Central and South Ameri- ca (excluding Chile) into the listed Chilean subsidiary Enel Américas SA, on March 15, 2021, Enel SpA, as previous- ly announced to investors, launched a voluntary partial public tender offer for Enel Américas common stock and American Depositary Shares (ADSs) up to a maximum over- all amount of 7,608,631,104 shares (including the shares represented by ADSs), equal to 10% of the company’s out- standing share capital at that date (the Offer). The Offer was structured as a voluntary public tender offer in the United States and a voluntary public tender offer in Chile. The Of- fer period ran from March 15 to April 13, 2021. The Offer was conditional upon the effectiveness of the merger of EGP Américas SpA into Enel Américas SA, which occurred on April 1, 2021. The total outlay of 1,065.2 billion Chilean pesos (equal to around €1.3 billion, calculated at the ex- change rate prevailing on April 15, 2021 of 847.87 Chilean pesos for 1 euro) was funded through internally generat- ed cash flows and existing borrowing capacity. Following completion of the voluntary partial public tender offer and the merger of EGP Américas, Enel holds about 82.3% of Enel Américas’ currently outstanding share capital. Significant events in 2021 223 223 Sale of 50% of Open Fiber On April 30, 2021, the Board of Directors of Enel SpA re- solved to initiate the procedures for the sale of 10% of the share capital of Open Fiber SpA to CDP Equity SpA (CDPE), subject to the simultaneous completion of the sale, exam- ined and favorably evaluated by the Board of Directors of Enel at its meeting of December 17, 2020, of 40% of Open Fiber to Macquarie Asset Management as well as the pay- ment to Open Fiber, in line with the commitments of the shareholders already envisaged in the relative current in- dustrial plan, of a capital injection totaling up to €194 mil- lion, of which €97 million pertaining to Enel. The contracts for the sale of the entire equity investment, equal to 50% of the share capital, in Open Fiber, of which 40% to Macquarie Asset Management and 10% to CDPE, were concluded on August 5, 2021. The contract for the sale to Macquarie Asset Management of 40% of the share capital of Open Fiber provided for a price of €2,120 mil- lion, including the transfer of 80% of the Enel portion of the shareholders’ loan granted to Open Fiber, including accrued interest. The contract for the sale to CDPE of 10% of the share capital of Open Fiber provided in turn for a price of €530 million, including the transfer to CDPE of 20% of the Enel portion of the shareholders’ loan grant- ed to Open Fiber, including accrued interest. These con- tracts also provided for the payment to Enel of the earn- outs linked to future and uncertain events detailed in the press releases of December 17, 2020 and April 30, 2021. On December 3, 2021, Enel SpA finalized the sale of its entire investment in Open Fiber SpA, equal to 50% of that company’s share capital, to Macquarie Asset Manage- ment and CDPE, following satisfaction of all the condi- tions set out in the contracts agreed with them, 40% to Macquarie Asset Management for about €2,199 million and 10% to CDPE for about €534 million. The total proceeds received by Enel therefore amounted to about €2,733 million, and resulted in the recognition of income at the Group level of around €1,763 million. Enel updates its US commercial paper program under SDG 13, the first of its kind in the United States On May 11, 2021, Enel, acting through its US subsidiary Enel Finance America LLC, updated its $3 billion com- mercial paper program established in 2019, expanding it to $5 billion and connecting it to the UN Sustainable Development Goal (SDG) 13 “Climate Action“. In line with Enel’s Sustainability-Linked Financing Framework, the program reflects the Enel Group’s objectives for reducing direct greenhouse gas emissions for 2023 and 2030. The program is part of Enel’s sustainable finance strategy, in line with the objective to achieve a share of sustainable 224 224 Integrated Annual Report 2021 finance sources as a proportion of the Group’s total gross debt equal to 48% in 2023 and more than 70% in 2030. Enel successfully places a triple-tranche €3.25 billion sustainability-linked bond on the eurobond market, also launching a tender offer for conventional bonds at the same time On June 8, 2021, Enel Finance International NV (EFI) launched a triple-tranche sustainability-linked bond for institutional investors on the eurobond market totaling €3.25 billion. The bond is linked to the achievement of Enel’s sustainable objective related to the reduction of di- rect greenhouse gas emissions (Scope 1), contributing to the United Nations Sustainable Development Goal (SDG) 13 “Climate Action“ and in line with the Group’s Sustain- ability-Linked Financing Framework. At the same time, EFI launched a non-binding voluntary tender offer for the repurchase of four outstanding series of conventional bonds, which was completed on June 15, 2021. Accord- ingly, the company will purchase in cash conventional euro-denominated bonds with a total nominal value of €1,069,426,000. The success of the transaction will make it possible to accelerate the Group’s goals for increasing the ratio of sustainable finance sources as a proportion of the Group’s total gross debt. Enel Green Power starts commercial operation of South America’s largest wind farm, Lagoa dos Ventos in Brazil On June 10, 2021, the Enel Group’s Brazilian renewable energy subsidiary Enel Green Power Brasil Participações Ltda began commercial operation of the 716 MW Lagoa dos Ventos wind farm, the largest wind facility currently in operation in South America and Enel Green Power’s larg- est wind farm worldwide. The construction of the 716 MW facility involved an investment of around 3 billion Brazilian reals, equivalent to about €620 million. Enel is also invest- ing around €360 million in a 396 MW wind project, which will bring the total capacity of Lagoa dos Ventos to about 1.1 GW. Purchase of treasury shares serving the 2021 Long-Term Incentive Plan and completion of buyback program On June 17, 2021, the Board of Directors of Enel SpA, im- plementing the authorization granted by the Sharehold- ers’ Meeting held on May 20, 2021, approved the launch of a share buyback program for 1.62 million shares (the Program), equivalent to about 0.016% of Enel’s share cap- ital. The Program was introduced to serve the 2021 Long- Term Incentive Plan for the management of Enel and/or of its subsidiaries pursuant to Article 2359 of the Italian Civil Code (2021 LTI Plan) which was also approved by Enel’s Shareholders’ Meeting of May 20, 2021. In order to implement the Program, the Company appointed an au- thorized intermediary to make the purchases. In line with Enel’s commitment to sustainable development, the pur- chase price of the shares acquired by the intermediary was linked to the achievement of the performance objec- tive of the 2021 LTI Plan represented by the direct green- house gas emissions (Scope 1 GHG) per kWh equivalent produced by the Enel Group in 2023. Over the course of the Program, a total of 1,620,000 Enel shares (equal to 0.015934% of share capital) were ac- quired at a volume-weighted average price of €7.8737 per share, for a total of €12,755,458.734. Considering the treasury shares already owned, as of December 31, 2021 Enel held 4,889,152 treasury shares, equal to 0.048090% of share capital. First sustainability-linked EIB loan of €600 million to e-distribuzione On July 1, 2021, e-distribuzione and the European Invest- ment Bank (EIB) signed the first €300 million tranche of a €600 million sustainability-linked loan agreement. The transaction is the EIB’s first sustainability-linked loan, linked to Enel’s ability to achieve its target for direct greenhouse gas emissions (Scope 1), in line with the Unit- ed Nations’ Sustainable Development Goal (SDG) 13 “Cli- mate Action“ and with the Group’s Sustainability-Linked Financing Framework. Criminal proceeding against e-distribuzione concerning an accident - Italy On July 1, 2021, e-distribuzione SpA was notified of a pro- ceeding against a number of its employees and managers and e-distribuzione SpA itself pursuant to Legislative De- cree 231/2001, initiated by the Public Prosecutor’s Office of Taranto, following the accident that occurred on the night between June 27 and 28, 2021 in which an employ- ee of a contractor was harmed. The proceeding is in an entirely initial phase and the identification of the persons under investigation suspects is provisional and has been done, in the investigation phase, to enable participation in the non-repeatable technical assessment ordered by the Public Prosecutor. The December 15, 2021 report of the Public Prosecutor’s technical expert has been filed and included in the case documentation. Enel places a $4 billion multi-tranche sustainability-linked bond on the US and international markets, further accelerating the achievement of its sustainable finance targets On July 8, 2021, Enel Finance International NV (EFI) placed a $4 billion multi-tranche sustainability-linked bond linked to the achievement of Enel’s sustainability objec- tive related to the reduction of direct greenhouse gas emissions (Scope 1), contributing to the United Nations Sustainable Development Goal (SDG) 13 “Climate Action“, in line with the Group’s Sustainability-Linked Financing Framework. The issue was intended to finance the re- demption (which took place on July 20, 2021) of four con- ventional EFI bonds with an aggregate nominal value of $6 billion. The transaction is part of the Group’s strategy to further accelerate the achievement of the Group’s tar- gets for sustainable finance sources as a proportion of the Group’s total gross debt. Enel signs an agreement with ERG to acquire 527 MW of hydro plants On August 2, 2021, the subsidiary Enel Produzione SpA signed an agreement for the acquisition of the entire share capital of ERG Hydro Srl (wholly owned by ERG SpA), which holds a portfolio of hydroelectric plants with an in- stalled capacity of 527 MW and has an enterprise value of €1,000 million, for €1,039 million. On January 3, 2022, Enel Produzione SpA finalized the ac- quisition of the entire share capital of ERG Hydro Srl from ERG Power Generation SpA. Enel Produzione paid around €1,039 million, to which was added at closing an initial price adjustment of around €226 million concerning the mark-to-market valuation of certain hedging derivatives of ERG Power Generation relating to part of the electricity to be generated in the future by ERG Hydro’s plants. The sale agreement also envisages a further adjustment of the price in the coming months, which will mainly be based on changes in ERG Hydro’s net working capital and net financial position, as well as water reserves in certain basins included in the sale. The plants owned by ERG Hydro, located in the Umbria, Lazio, and Marche re- gions, have an installed capacity of 527 MW and an aver- age annual output of around 1.5 TWh. Significant events in 2021 225 225 Enel successfully places a €3.5 billion triple-tranche sustainability-linked bond on the eurobond market, while launching a tender offer for conventional bonds denominated in US dollars On September 21, 2021, Enel Finance International NV (EFI) launched a €3.5 billion triple-tranche sustainabili- ty-linked bond for institutional investors on the eurobond market. The bond is linked to the achievement of Enel’s sustainability objective related to the reduction of direct greenhouse gas emissions (Scope 1), contributing to the United Nations Sustainable Development Goal (SDG) 13 “Climate Action“, in line with the Group’s Sustainabil- ity-Linked Financing Framework. At the same time, EFI launched a non-binding voluntary tender offer for the partial repurchase of three series of outstanding conven- tional bonds, which was completed on October 4, 2021 in the overall amount of about $1.47 billion, thereby accel- erating the achievement of the Group’s targets for sus- tainable finance sources as a proportion of the Group’s total gross debt. On October 5, 2021, following the results at the Early Ex- piry Date of the Tender Offer launched on September 21, EFI repurchased and canceled conventional bonds in the total amount of $1.47 billion. Enel unveils Gridspertise, the company dedicated to the digital transformation of power grids On September 23, 2021, the Enel Group presented Grid- spertise, wholly owned by Enel through the subsidiary Enel Global Infrastructure and Networks. The company will leverage Enel’s skills in the testing, assessment and large-scale implementation of advanced technologies of the operation of smart grids around the world to provide DSOs with proven solutions. Penalty proceedings initiated by the Energy Directorate General of the government of the Canary Islands - Spain On October 6, 2021, the Directorate General of Energy of the government of the Canary Islands (Energy Direc- torate General) notified Edistribución Redes Digitales SLU (EDRD) of three resolutions initiating an equal num- ber of disciplinary proceedings (ES.AE.LP 006/2019ES, AE.LP 007/2019ES and AE.LP 008/2019), respectively, for alleged violations consisting in the unjustified refus- al or alteration of the permit for connection to a point on the grid and failure to comply with the operation and proper functioning obligations of a contact service for 226 226 Integrated Annual Report 2021 complaints and accidents. On October 29, 2021, EDRD filed written briefs in each proceeding. The penalties that could be imposed in the three proceedings amount to €11 million, €18 million and €28 million respectively. On January 24, 2022, the Energy Directorate General noti- fied EDRD of a new resolution, dated November 18, 2021, with which a further disciplinary procedure was being in- itiated for the alleged commission of five infringements classified as continuous and serious and of two infringe- ments classified as very serious and not continuous, in- dicating a possible fine of up to €94 million. The alleged infringements again refer to applications for access and connection to the grid, the execution of connections, the processing of customer requests, the information pro- vided, the systems implemented and delays in execution. At present, no penalties have been imposed. Consent solicitation for hybrid bond holders On October 28, 2021, Enel SpA launched a consent so- licitation aimed at holders of a non-convertible subordi- nated hybrid bond issued by the Company in the amount of €900 million, seeking to align its terms and conditions with those of the non-convertible subordinated hybrid perpetual bonds issued by Enel in 2020 and 2021. On December 9, 2021, the Noteholders’ Meeting ap- proved the proposed changes to the terms and condi- tions of the bond. More specifically, the approved chang- es establish, inter alia, that: • the bond, initially issued with a specified long-term maturity date, will become due and payable and hence will have to be repaid by Enel only in the event of the winding up or liquidation of the Company; • the events of default previously envisaged in the terms and conditions and additional documentation that govern the bond are eliminated. Funac and ICMS tax relief - Brazil With Law 20416 of February 5, 2019, the state of Goiás shortened from January 27, 2015 to April 24, 2012 the period of operation of the Funac fund (established with Law 17555 of January 20, 2012) and the tax benefit sys- tem (established with Law 19473 of November 3, 2016) that allowed Celg Distribuição SA (Celg-D) to obtain reim- bursement of payments of certain amounts by offsetting against payment obligations in respect of the ICMS - Im- posto sobre Circulação de Mercadorias e Serviços (tax on the circulation of goods and services). On February 25, 2019, Celg-D appealed the provisions of Law 20416 before the Court of the state of Goiás, fil- ing a writ of mandamus and an accompanying petition for a precautionary suspension, which was denied on a preliminary basis on February 26, 2019. Celg-D appealed this ruling and the Court of the state of Goiás allowed the appeal on June 11, 2019. On October 1, 2019, the Court of the state of Goiás issued an order revoking the pre- cautionary measure previously granted in favor of Celg-D and, accordingly, the effects of the law were restored as from that date. Celg-D filed an appeal against this deci- sion, claiming that the right to guarantee tax credits has both a legal and contractual basis and that, therefore, the actions that the state of Goiás has taken in order to fully suspend the application of these laws are patently un- founded. On October 2, 2019, the appeal filed by Celg-D was denied. On November 21, 2019, Celg-D challenged this decision before the Superior Tribunal de Justiça (STJ). On February 27, 2020, the Tribunal de Justiça (TJ) declared inadmissible the appeal by Celg-D, which on May 5, 2020 appealed this decision before the STJ. These proceedings are under way. As part of the proceedings on the mer- its (writ of mandamus), on July 14, 2021, the Court of the state of Goiás raised a question of constitutional legiti- macy before a specialized section of the same Court. On October 5, 2021, the Public Prosecutor concluded that the question of constitutionality was inadmissible. On November 9, 2021, the specialized section of the TJ accepted the position of the Public Prosecutor and re- jected the constitutionality issue, ordering the referral of the case to the trial judge. It is important to note that the coverage of the Funac fund is provided for in the agreement for the acquisition of Celg-D by Enel Brasil SA. On April 26, 2019, Law 20468 was promulgated. With the law, the state of Goiás fully revoked the tax relief referred to above. On May 5, 2019, Celg-D filed an ordinary peti- tion and a request for a precautionary suspension against the state of Goiás to contest this law. On September 16, 2019, the Court of the state of Goiás denied the petition for precautionary relief, citing the absence of any danger in delay, a requirement for the granting of precautionary relief. On September 26, 2019, Celg-D filed an appeal (agravo de instrumento) before the Court of the state of Goiás against the decision denying the precautionary suspension, claiming that the repeal of the tax credit law is unconstitutional to the extent that these credits were established in accordance with applicable law and con- stitute acquired rights. On September 7, 2020, the state of Goiás submitted its reply to the precautionary petition filed with the appeal. With measure issued at the hearing of July 20, 2021, and subsequently confirmed on Septem- ber 17, 2021, the Court of the state of Goiás denied the precautionary relief requested by Celg-D. Moreover, the Brazilian association of electricity distribu- tion companies (ABRADEE) had filed an action for a ruling on constitutionality with the Constitutional Court of Bra- zil (Supremo Tribunal Federal) with regard to Laws 20416 and 20468. This was denied on June 3, 2020 with an in- dividual Decision by the judge-rapporteur for lack of for- mal requirements. On June 24, 2020, the ABRADEE filed an appeal (agravo regimental) against that decision. On September 21, 2020, the Supreme Court of Brazil, with- out going into the merits of the case, rejected ABRADEE’s appeal for formal reasons and the proceeding was con- cluded. On October 15, 2020, ABRADEE filed an appeal against this decision. On March 8, 2021, the Brazilian Su- preme Court denied ABRADEE’s appeal and the decision became final on April 5, 2021. Closure of La Spezia coal-fired plant On December 2, 2021, Enel received final authorization from Italy’s Ministry for the Ecological Transition for the definitive closure of the coal-fired plant at the “Eugenio Montale“ thermoelectric power facility of La Spezia. Hybrid bonds On December 16, 2021, the Board of Directors of Enel SpA authorized Enel to issue, by December 31, 2022, one or more non-convertible subordinated hybrid bonds, in- cluding perpetual bonds, in the maximum amount of up to €3 billion. These bonds are to be placed exclusively with European and non-European institutional investors, including through private placements. The Board of Di- rectors also revoked the previous resolution of February 25, 2021, concerning the issue of one or more bonds by the Company, for the portion not yet implemented, amounting to about €0.75 billion, without prejudice to all effects arising from issues already carried out. Criminal proceedings connected with Pietrafitta plant - Italy With regard to the Pietrafitta thermal generation plant, the Perugia Public Prosecutor had started an investiga- tion involving a number of officers of Enel Produzione SpA, as well as certain third parties who are today owners of the land adjacent to the plant – formerly Enel’s – on which ash was found. The alleged offenses are as follows: failure to restore the site (Article 452-terdecies of the Italian Criminal Code) for a number of areas affected by the spillage of ash pro- duced up to the 1980s by the Pietrafitta power plant and ash from other company plants, and other areas where contamination with polychlorinated biphenyls (“PCBs“) was found associated with decommissioned mining equipment; environmental pollution (Article 452-bis of the Criminal Code) connected with the PCB contamina- Significant events in 2021 227 227 tion, with respect to which Enel Produzione SpA was also charged with administrative liability pursuant to Legisla- tive Decree 231/2001. In the summer of 2019, Enel Produzione SpA filed a peti- tion for dismissal, which was accepted by the prosecutor for the crime of environmental pollution, with consequent dismissal of the charge pursuant to Legislative Decree 231/2001. A number of environmental associations filed an objec- tion to the dismissal, and on February 21, 2020 a hearing was held before the investigating magistrate, which end- ed with dismissal of the charges (May 28, 2020), which, in brief, accepted all of Enel’s defenses and confirmed the dismissal of any other possible charges – even if not brought by the Prosecutor’s Office – relating to the pos- sible health effects caused by the presence of the ash. Accordingly, the criminal proceedings are continuing with sole regard to the crime of failure to restore the site, with respect to which in December 2019 the Enel Pro- duzione SpA employees presented an application for a stay of proceedings with probation, consisting in the im- plementation of a program agreed with the Prosecutor’s Office for proportionate and fair restoration with respect to the complaints filed against the defendants. The pro- bation hearing was held on October 29, 2020, when the investigating magistrate of the Court of Perugia granted the request for probation. The hearing was then post- poned to February 18, 2021, when the program proposed by Enel Produzione was approved, setting a deadline of nine months for its execution. At a hearing on December 16, 2021, the judge, after con- siderable discussion, verified the compliance of the pro- gram and dismissed the charges as a consequence of the positive outcome of the probationary activities. EIB and Enel agree a €120 million sustainability-linked loan for the energy transition in Italy On December 20, 2021, Enel and the European Invest- ment Bank (EIB) agreed a sustainability-linked loan of €120 million to support the energy transition in Italy. The EIB loan to Enel Italia is part of the bank’s sustainability-linked loan program connected with Enel’s achievement of the objective of reducing direct greenhouse gas emissions (Scope 1), in line with the United Nations Sustainable De- velopment Goal (SDG) 13 “Climate Action“ and with the Group’s Sustainability-Linked Financing Framework. 228 228 Integrated Annual Report 2021 Enel renews partnership with Cinven in Ufinet Latam On December 21, 2021, Enel SpA, acting through Enel X International Srl, a wholly-owned subsidiary of Enel X Srl, signed a new agreement with a holding company con- trolled by Sixth Cinven Fund and a holding company con- trolled by Seventh Cinven Fund – both funds managed by the international private equity company Cinven – for the indirect purchase, through a holding company, of about 79% of the capital of Ufinet Latam SLU by Sixth Cinven Fund for €1,320 million and the simultaneous sale of 80.5% of the company’s capital to Seventh Cinven Fund for around €1,240 million, in order to renew the existing partnership in Ufinet. Enel X International will simulta- neously receive some €140 million through the Ufinet’s available reserves, a figure subject to potential adjust- ments at closing. Under this agreement, Enel X International will therefore retain an indirect investment of 19.5% in Ufinet, while the Seventh Cinven Fund will hold the remaining 80.5%. Hydroelectric concessions - Italy Italian regulations governing large-scale hydroelectric concessions were most recently modified by the “Simpli- fications Decree“ (Decree Law 135 of 2018 ratified with Law 12 of February 11, 2019), which introduced a series of innovations regarding the granting of such conces- sions upon their expiry and the valorization of the assets and works connected to them to be transferred to the new concession holder. This legislation also introduced a number of changes in the matter of concession fees, establishing a fixed and variable component of fees, as well as an obligation to provide free power to public bod- ies (220 kWh of power for each kW of average nominal capacity of the facilities covered by the concession). In implementation of this national law and under specific enabling authority, various regions (Lombardy, Piedmont, Emilia-Romagna, Friuli-Venezia Giulia, the Province of Trento, Calabria and Basilicata) enacted regional laws. In the view of Enel Green Power Italy and Enel Produzione, both the national law and the regional implementing leg- islation violate Community principles and constitutional principles such as property rights, the principle of legal certainty, the principle of proportionality and legitimate expectations and the freedom of enterprise. In particu- lar, the rules do not expressly provide for the transfer of the business unit from the outgoing to the successor concession holder, and also establish inadequate criteria for the valorization of the works to be transferred, which threatens to create what is essentially a mechanism for expropriation, in violation of constitutional principles. The provision for the payment of the new dual-compo- nent fee and the obligation to supply free electricity for the existing holders of current concessions entails the introduction in the concession relationships of an unex- pected and unreasonable element of significant financial imbalance, in clear violation of the principle of reasona- bleness and proportionality of the fee that constitutional case law has established must be respected in the event that changes worsening the position of a party are intro- duced in the context of long-term relationships. Enel Green Power Italy and Enel Produzione challenged the first implementing acts issued under the individu- al regional laws and the subsequent payment notices of fees and the monetization of free electricity supplies before the competent judicial authorities (Regional Ad- ministrative Court and Regional Water Resources Court) asking that they be declared void and raising the question of constitutional illegitimacy of both the national law and the regional laws. The Piedmont Regional Administrative Court with ruling no. 1085 of November 25, 2021, and the Lombardy Regional Administrative Court with ruling no. 2900 of December 23, 2021, in the cases brought by Enel Green Power Italy against the respective regions, deferred their jurisdiction in favor of the Superior Water Resources Court, before which Enel Green Power Italy will have to refile its dispute for the proceeding to continue. The government challenged a number of the regional im- plementing laws before the Constitutional Court, claiming the violation of various constitutional principles. Enel Green Power Italy participated in the aforementioned proceedings concerning constitutional legitimacy under- taken by the government before the Constitutional Court against the Province of Trento and the Regions of Lom- bardy, Piedmont and Basilicata. The trade associations (Utilitalia and Elettricità Futura) also presented briefs in the context of the proceedings brought before the Constitutional Court by the govern- ment. In addition, other sector operators have proposed legal actions against the implementing measures issued under the individual regional laws, requesting that they be declared void. With regard to the constitutionality proceeding before the Constitutional Court against the Regional Law of Lombardy, the Council of Ministers decided to abandon its appeal of Lombardy Regional Law 5/2020, “as the Lombardy Region, with a subsequent regional law, has amended the provisions involved in the challenge that en- able us to consider the complaint of illegitimacy to have been superseded“. However, these changes did not affect the constitutionality issues raised by Enel in its accom- panying appeal. It is reasonable to believe that, following the formal acceptance by the Region of the government’s withdrawal of its action, the Constitutional Court will de- clare the proceeding extinct, with the consequent forfei- ture of Enel’s action as well. Enel joins forces with Intesa Sanpaolo to acquire Mooney and create a European fintech company On December 23, 2021, Enel SpA, acting through its wholly-owned subsidiary Enel X Srl, and Intesa Sanpaolo SpA, acting through its subsidiary Banca 5 SpA, signed an agreement with Schumann Investments SA, a company controlled by the international private equity fund CVC Capital Partners Fund VI, to acquire 70% of Mooney Group SpA, a fintech company operating in proximity banking and payments. Specifically, Enel X will acquire 50% of Mooney’s share capital, while Banca 5, which currently holds a 30% stake in Mooney, will increase its interest to 50%, putting the payments company under the joint con- trol of both parties. The agreement, based on an enterprise value for 100% of Mooney of €1,385 million, provides for Enel X to pay be- tween €334 million and €361 million at closing. The price consists of €220 million for the equity and a variable com- ponent linked to a price adjustment mechanism at clos- ing. At the same time, Intesa Sanpaolo will pay between €88 million and €94 million at closing. That price consists of €88 million for the equity and a variable component linked to a price adjustment mechanism at closing. Enel X Italia and tax credit fraud - Italy As one part of its Vivi Meglio business, Enel X Italia sup- plies energy efficiency devices to companies involved in the energy upgrading and/or seismic improvement of condominiums and/or individual dwellings. In these activities, in conjunction with the service/prod- uct supply contract, Enel X Italia (as assignee) signs a framework agreement for the purchase of tax credits ac- quired by a company (as assignor) – under the provisions of the various types of building/energy upgrade incentive available under law (such as the superbonus 110%, the fa- cades bonus, the ecobonus, the sismabonus or the reno- vation bonus) –for the redevelopment of buildings owned by third parties (customers), with whom Enel X Italia has no contractual relationship. Beginning in October/November 2021, following requests Significant events in 2021 229 229 for information from the Finance Police (Guardia di Finan- za) regarding the alleged fraudulent nature of certain tax credits, Enel X Italia performed an audit and found a num- ber of irregularities in relation to some of the tax credits acquired, promptly reporting them to the Public Prosecu- tor’s Office of Rome. In light of the findings of the audits and under the pro- visions of the new regulations issued in November 2021 with the publication of Decree Law 157/2021 (the “An- ti-fraud Decree“) containing urgent measures to com- bat fraud in the sector of tax and economic benefits“), the purchase of tax credits was temporarily suspended before being resumed in December 2021 with the imple- mentation of new oversight methods. Between December 23, 2021 and January 31, 2022, as part of a number of investigations into alleged fraud in relation to legislation on energy redevelopment projects, three preventive seizure orders were notified to Enel X Italia (pursuant to Article 31 of the Code of Criminal Pro- cedure), issued by the Public Prosecutors of the Courts of Rome and Naples, in relation to tax credits purchased by Enel X Italia from companies for some €45 million. The seizures involved the imposition of a block on the “Credit assignment platform“ portal of the Revenue Agency and a corresponding reduction in the ceiling on offsetable tax credits in the tax account of the company and the asso- ciated assignees. In consideration of the fact that at the time of the seizure these credits had in turn already been assigned by Enel X Italia to financial institutions, the precautionary measures were not imposed directly against the company, which however promptly informed the assignees of the sei- zures, inviting them to comply with the provisions of the judicial authorities. From the seizure orders notified it was possible to ascertain that other operators in the sector had also received such notices. 230 230 Integrated Annual Report 2021 Regulatory and rate issues The European regulatory framework Sustainable finance (taxonomy) The taxonomy is a classification system that establishes a list of eco-sustainable assets to guide institutional inves- tors in making informed decisions and then redirect capital flows to those assets. The first delegated act establishing the technical screening criteria for around 60 economic activities, including the generation of electricity from pho- tovoltaic, wind, hydroelectric and geothermal resources and distribution, was published by the European Commis- sion in June 2021 and entered force in January 2022. On December 31, 2021, the Commission sent Member States a draft complementary delegated act for consul- tation, setting out a number of conditions for fossil gas and nuclear power to be classified as transitional activities aligned with the taxonomy. Some activities in which Enel is engaged, such as retail and trading, are not covered by the taxonomy so far. Proposed legislation in consultation with financial impacts in 2021 On July 14, 2021, the European Commission published the “Fit for 55“ (FF55) package, which is a series of proposals that seek to reduce net emissions within the European Un- ion by 55% by 2030 compared with their 1990 levels. Renewable Energy Directive (RED II) Among the proposed changes to current EU energy legis- lation, the revision of the Renewable Energy Directive plays a leading role, given that a much larger share of renewable energy sources in the energy mix of the Member States will also be necessary to achieve the new climate objec- tives. The European Commission proposal establishes a framework for the deployment of renewables in all sectors of the economy, with particular attention to sectors where progress has been slow (transport, buildings and industry). Among the key points of the revision is an increase in the minimum binding share of renewables in final energy con- sumption in the EU to 40% by 2030, effectively doubling the share of RES in the energy mix over the course of just one decade (2021-2030). This 40% target is significantly higher than that agreed in the previous revision of the di- rective in 2018 (32%) and is supported by higher EU and national targets, including: a new target of 49% for re- newable energy used in European buildings; a mandatory minimum increase in RES in industry of 1.1% per year; the transformation into a binding target of the existing goal of increasing the use of RES in heating and cooling by 1.1% per year; the introduction of new minimum targets for the use of green hydrogen in industry and transport (50% and 2.6% per year respectively). Finally, another noteworthy aspect of the European Com- mission proposal would be the creation of a new cred- it mechanism aimed at promoting the use of renewable electricity in transport and a commitment to remove barri- ers in the authorization process for new RES plants. EU Emissions Trading System (ETS) The European Commission is also proposing a reform of the EU ETS in order to strengthen it and increase its ambi- tion in line with the EU climate commitments set out in the FF55 package. The proposed revision confirms the central role of the EU ETS as one of the main climate policy tools of the European Union, increasing the resilience of the mar- ket to economic shocks. A greater contribution to decar- bonization is also requested from the sectors already cov- ered by the EU ETS, while a proposal to extend the mech- anism to new sectors (e.g., maritime, hydrogen production via electrolyzers) has also been put out for consultation, as has the possibility of creating a separate ETS market for the road transport and buildings sectors. Although the EU ETS reform is still in consultation, its pub- lication alone has had an impact on supply and demand in the ETS market, having changed the expectations of oper- ators and therefore prices on the market itself. Regulatory and rate issues 231 231 Carbon Border Adjustment Mechanism (CBAM) Energy Taxation Directive (ETD) The European Commission believes that Directive 2003/96/EC is now obsolete and does not adequately reflect the revised EU climate and energy policy. The pro- posed revision of Directive 2003/96/EC addresses two main areas of reform: the provision of a new structure for the tax rates and the broadening of the tax base with the abolition of some subsidies. • The proposal delineates a new structure of minimum tax rates based on the actual energy content and en- vironmental performance of fuels and electricity, rath- er than volume as is currently the case. The minimum rates will be expressed in €/GJ for each product, also in order to allow a direct comparison between fuels and between emerging uses of electricity. In particular, the proposal groups energy products and electricity into general categories, which are classified according to energy content and environmental performance: the new system will therefore ensure that the most pollut- ing fuels are taxed at the highest rate. Member States will have to ensure that this ranking is replicated at the national level. • Under this new structure, conventional fossil fuels (e.g., diesel and gasoline) and unsustainable biofuels will be subject to the higher minimum rate of €10.75/GJ when used as motor fuel and €0.9/GJ when used for heating. • To take account of their potential role in supporting de- carbonization in the medium term, despite being fossil based, fuels such as natural gas, LPG and non-renew- able fuels of non-biological origin shall be subject to a minimum rate of €7.17/GJ when used as motor fuel and €0.6/GJ when used for heating for a transitional peri- od of 10 years before being taxed at the same rate as conventional fossil fuels. In order to reflect the potential of sustainable but non-advanced biofuels in supporting decarbonization, they would be subject to tax at half the reference rate, i.e., a minimum of €5.38/GJ when used as motor fuel and €0.45/GJ when used for heating. • The lowest minimum tax rate (€0.15/GJ) will apply to electricity (regardless of use), sustainable biofuels and biogas and renewable fuels of non-biological origin (such as, for example, renewable hydrogen). Low-car- bon hydrogen and related fuels will also benefit from the same rate for a transitional period of 10 years. The rate applicable to this group is set significantly below the reference rate, as electricity and these fuels can significantly support the EU’s clean energy transition towards achieving the EU Green Deal targets and, ulti- mately, climate neutrality by 2050. One of the most innovative elements the FF55 package, one that is likely to spark debate, is the CBAM, a tariff to be applied to imported goods produced in countries with lower environmental standards than those in the EU. The objective of the CBAM mechanism is to reduce the risk of carbon leakage. This is to ensure that imported products are treated no less favorably than domestic products man- ufactured in facilities subject to the EU ETS mechanism. As installations covered by the EU ETS are subject to a carbon price assessed on the basis of their actual emissions, im- ported products included in the CBAM scope should also be assessed on the basis of their actual greenhouse gas emissions. However, in order to enable companies to adapt to this system, the proposal envisages a transitional pe- riod without financial adjustment. This mechanism will be phased in and would initially apply only to a select number of goods at high risk of carbon leakage: iron and steel, ce- ment, fertilizers, aluminum and electricity generation. Energy efficiency and buildings The proposed revision of the Energy Efficiency Directive aims to establish more ambitious binding European tar- gets for 2030 (+36% compared with the previous +32.5%), in line with the objective of reducing greenhouse gases by 55% by 2030. The directive introduces a system for calcu- lating the indicative contributions that each Member State must establish in order to achieve the EU target and, among the measures, proposes a doubling of the annual energy saving obligation for end uses. The public sector is called upon to make an even larger energy saving contribution, equal to 1.7% per year, in addition to the 3% renovation ob- ligation for the public building stock. The directive impos- es measures on the Member States designed to alleviate energy poverty, increasing energy efficiency measures for vulnerable customers through ad hoc financing. In December 2021, the European Commission published the proposed revision of the directive on the energy per- formance of buildings, aimed at reducing their energy con- sumption in order to achieve zero emissions by 2050 for buildings as well. The measures seek in particular to increase the rate of renovation for buildings with the worst energy performance by introducing minimum performance stand- ards and strengthening energy performance certificates. The targets also envisage the achievement of progressively higher standards starting from 2030 for the entire residen- tial sector. In order to beef up measures for electric mobility as well, the changes envisage measures to increase charg- ing points and pre-cabling in the residential sector. 232 232 Integrated Annual Report 2021 Sustainable mobility The main initiatives with a focus on the transport sector concern: • a proposal to revise the regulation on CO2 emission per- formance levels for new passenger cars and light com- mercial vehicles, requiring passenger car emissions to decrease by 55% and van emissions to fall by 50% by 2030 compared with 2021 levels and by 100% by 2035; • a proposed revision of the alternative fuels infrastruc- ture directive to give drivers access to a reliable network across Europe for recharging or refueling vehicles. The proposal requires Member States to increase charg- ing capacity in line with zero-emission passenger car registrations and to install public, interoperable and user-friendly charging points at regular intervals along major European motorway corridors. In addition, objec- tives are set for the development of the infrastructure necessary to supply electricity to ships and airplanes while they are in ports and airports respectively; • in addition to these measures, the European Commis- sion’s proposal for two new legislative initiatives, “ReFu- elEU Aviation“ and “FuelEU Maritime“, targeted at reduc- ing greenhouse gas emissions for aviation and maritime transport, setting increasingly stringent emission limits for ships and planes, and envisaging measures to pro- mote renewable or low-carbon fuels. To complement the measures contained in the “Fit for 55“ package, in December 2021 the European Commission completed the issue of a new package of transport ini- tiatives. The main proposals contained in the December package concern: • a revision of the TEN-T regulation in which, among other aspects, the role of zero-emission transport and the related infrastructure is reinforced as one of the priorities for the completion of the European trans- port network and the structure of the TEN-T network is modified; • the issue of the “EU Urban Mobility Framework“ com- munication encouraging the transition towards ze- ro-emission mobility at the local level (cities and re- gions), with the adoption of Sustainable Urban Mobility Plans (SUMPs) and Sustainable Urban Logistics Plans (SULPs), as well as facilitating access to and sharing of mobility data to support decision-making processes and establishing new funding programs for new pro- jects (such as Horizon Europe 2021-2023). At the end of 2021, the proposals in the first and second packages are being discussed both within the European Council and the European Parliament. Talks are expected to continue throughout much of 2022. Decarbonization package for the hydrogen and gas market On December 15, 2021, the European Commission pub- lished proposals to decarbonize the gas market through the uptake of renewable and low-carbon gases, including hydrogen. In particular, the proposal sets out a new regulatory frame- work for the hydrogen sector, including infrastructure, and standards for the certification of low-carbon gases that ensure a 70% reduction in greenhouse gas emissions. Among the salient points of the package are rules on ver- tical and horizontal unbundling and on third-party access in the hydrogen sector, with less stringent provisions until 2030 and exemptions for existing and new geographically confined hydrogen networks. The gas package provides for separate remuneration mechanisms for gas and hy- drogen infrastructures, but allows financial transfers to develop the hydrogen network and tariff discounts. Finally, under the provisions of the gas package, 5% blending of hydrogen and natural gas should be accepted by TSOs at the border. Digital technology During 2021, in addition to the publication of the com- munication “European digital decade: digital targets for 2030“, which illustrates the objectives and methods of Eu- rope’s digital transformation by 2030, the implementation activities for the European Green Deal and the strategies for data and artificial intelligence published by the Euro- pean Commission in 2019 and 2020, respectively, guided the debate on the digitization and use of data. A number of legislative and non-legislative initiatives have been pro- posed with the aim of making Europe digitally sovereign and creating a fair and competitive digital economy. The proposed measures range from the concept of data sov- ereignty to the creation of a single market for data and in- itiatives involving artificial intelligence and cyber security. The main proposals regarded: • the artificial intelligence regulation, published in April 2021, as the world’s first attempt to govern artificial in- telligence (AI). The European Commission proposes an ex-ante list of “AI“ products considered to be high risk, such as the safety components of critical infrastruc- tures, which must undergo testing before obtaining certification; • a proposed EU Data Act governing data access and in- teroperability aimed at establishing a platform for each country (interoperable with the others) in which con- sumers can easily share energy data with third parties; Regulatory and rate issues 233 233 • a proposed Digital Services Act, which would establish a common set of obligations and responsibilities of inter- mediaries within the single market regarding the offer of cross-border digital services, while ensuring a high level of protection for all users, regardless of where they reside in the EU. Furthermore, during the course of 2021 discussion re- sumed on a proposal to revise the e-privacy regulation, published by the European Commission in 2017. Negotia- tions between institutions began in February 2021 and are still ongoing. Batteries In December 2020, the European Commission present- ed a proposal to revise the regulation on batteries and waste batteries, which would replace the current direc- State aid Revision of State aid guidelines On January 7, 2021, the response to the public consultation on the State aid guidelines for climate, environment and energy (CEEAG) was published. On June 7, the European Commission published a draft revision of the CEEAG, which was issued for a final pub- lic consultation lasting until August 2. The CEEAG are of considerable importance for the energy sector and for the Enel Group, as they will guide investment support for de- carbonization in the coming years. The draft text includes a new section dedicated to aid for the reduction of green- house gas emissions, including aid for the production of renewable and low-carbon energy, aid for energy efficien- cy, including high-efficiency cogeneration, aid for hydro- gen, aid for storage and batteries and aid for the reduction or prevention of emissions from industrial processes. An entire chapter has been dedicated to sustainable mobility, which governs aid for electric mobility and charging infra- structure, including the maritime sector. Energy efficiency measures for buildings are also regulated, including bat- teries and charging of electric vehicles. The proposed rules also officially recognize that financing for natural or legal monopoly power grids does not represent State aid. Final- ly, aid to nuclear technologies and fossil fuels are excluded from the scope of the guidelines. The document prepared and issued on August 2 incorporated the new proposals of the European Commission, underscoring the need to explicitly include all types of storage, including stand-alone systems, among the technologies allowed in the section dedicated to aid for the reduction of greenhouse gas 234 234 Integrated Annual Report 2021 tive. The proposal pursues three objectives: to enhance the operation of the internal market (including products, processes, waste batteries and recycled materials) by en- suring a level playing field through a common set of rules; to promote the circular economy; and to reduce environ- mental and social impacts at all stages of the battery life cycle. Key elements of the proposal include mandatory requirements for all batteries placed on the EU market, requirements for end-of-life management of batteries, as well as new collection targets for portable waste batteries and requirements to facilitate the reuse of industrial ve- hicle and electric vehicle batteries as stationary storage batteries. Throughout 2021, both the European Council and the European Parliament continued the analysis of the proposal: once their positions have been finalized, in- formal negotiations (trilogues) will begin on reaching an agreement. emissions. This suggestion was successfully incorporated in the final text of the guidelines published on December 21, 2021, which entered force on January 1, 2022. On October 6, the European Commission published the draft revision of the General Block Exemption Regulation (GBER) with important changes to the sections relating to climate, environmental protection and energy, including an update of the notification thresholds. The GBER defines specific categories of State aid that, under certain condi- tions, are compatible with the Treaty on the Functioning of the European Union (TFEU) and exempts these categories from the obligation of prior notification to the Commission and its approval. The draft regulation proposes to expand the scope for Member States to finance different types of green projects, such as those to reduce CO2 emissions, sustainable mobility and charging infrastructure. It also introduces new green conditions that large energy-inten- sive businesses must meet to receive aid in the form of re- duced tax rates, as well as provisions on storage, hydrogen and building renovation projects that improve their energy performance and renewable energy communities. At the same time, the European Commission launched a public consultation ending on December 8, the date by which the contribution of the Enel Group was submitted. The doc- ument prepared commented positively on the revision of the GBER but called for a more ambitious commitment to storage, proposing to include all types and suggesting that Member States be given flexibility for measures to support the electrification of the system. On November 25, the European Commission adopted the revised rules on State aid in favor of major important projects of common European interest (IPCEI), which are to enter force from January 1, 2022. The communication sets out the criteria for the Commission’s evaluation of the aid that Member States grant to cross-border IPCEIs that remedy market failures and enable cutting-edge innova- tions in key sectors and investments in technologies and infrastructures, with positive spillovers for the entire EU economy. On December 2 for Italy and December 20 for Romania, the European Commission approved the map for granting regional aid from January 1, 2022 to December 31, 2027 within the framework of the revised regional aid guidelines. Cases of State aid In June, the European Commission approved State aid schemes financed by the Recovery and Resilience Facility (RRF) for a number of Member States. Italy’s €191.5 bil- lion recovery and resilience plan (of which €68.9 billion in grants and €122.6 billion in loans) will allocate 37% of to- tal spending to support measures for climate objectives, including large-scale restructuring investments aimed at improving the energy efficiency of buildings, interven- tions to promote the use of renewable energy sources, including hydrogen, and the reduction of greenhouse gas emissions from transport, with investments in sustainable urban mobility. Plans were also approved for Spain (€69.5 billion), Greece (€30.5 billion) and Romania (€14.2 billion). On July 9, the European Commission approved Italian plans to partially compensate energy-intensive business- es for higher electricity prices resulting from indirect costs of emissions allowances under the EU Emissions Trading System (ETS). The scheme will cover the indirect costs of emissions incurred in the 2020-2030 period, with a provisional budget of about €1.49 billion. On November 27, the European Commission approved a €2.27 billion Greek aid scheme to support renewable electricity generation and high-efficiency cogeneration. On December 9, the European Commission approved a €3 billion scheme under the Spanish RRF to support research, development, innovation, environmental pro- tection and energy efficiency in the automotive industry value chain. On December 21, the European Commission approved a €1.4 billion scheme for the development of renewable energy in the non-interconnected islands of Greece, in particular for hybrid power plants that generate and store both solar and wind power. Regulatory and rate issues 235 235 Regulatory framework by Business Line Thermal Generation and Trading Italy Generation and the wholesale market For 2021, the Brindisi Sud, Sulcis, Portoferraio and As- semini plants were declared eligible for the cost reim- bursement scheme. The Sulcis, Portoferraio and Assemini plants were declared eligible for the cost reimbursement scheme for 2022. The Porto Empedocle plant is eligible for long-term cost reimbursement until 2025, while plants located on the smaller islands are automatically eligible for cost reim- bursement for all years in which they are declared essen- tial, including 2021 and 2022. Admission to the cost reim- bursement scheme guarantees coverage of the operat- ing costs of the aforementioned plants, including a return on capital invested. Generation cost reimbursement, net of plant revenue, is granted by the Regulatory Authority for Energy, Networks and the Environment (ARERA) with measures authorizing payments on account and a final balance payment based on applications submitted by op- erators. For 2021 and 2022, the remainder of essential capacity was contracted under alternative contracts which pro- vide for the obligation, on the Ancillary Services Market (ASM), to offer to go up/down to prices no higher/lower than the values identified using methods established by ARERA for a fixed premium. With Resolution no. 43/2021/R/eel ARERA rejected the requests submitted by Enel Produzione for the recalcula- tion of the notional revenue for the costs of compliance with the ETS for the Brindisi Sud plant for years from 2017 to 2020, with a consequent reduction in the reimburse- ments due to the plant for those years. With the subse- quent Resolution no. 67/2021/R/eel ARERA redetermined the payment on account for the Brindisi reimbursement valid for 2019 in order to align the calculation criteria of the notional revenue with Resolution no. 43/2021/R/eel. In April 2021, Enel Produzione filed an appeal against Res- olution no. 43/2021/R/eel before the Lombardy Region- al Administrative Court, for which the ruling is currently pending. In December 2021, a supplementary appeal was filed against Resolution no. 476/2021/R/eel, which ap- plied the same criteria as those adopted in Resolution no. 43/2021/R/eel to determine the payment on account for the Brindisi Sud plant reimbursement for 2020. On June 28, 2019, the Minister for Economic Develop- ment issued a decree approving the definitive rules gov- 236 236 Integrated Annual Report 2021 erning the capacity remuneration mechanism (the ca- pacity market). On November 6 and November 28, 2019 two auctions were held with delivery in 2022 and 2023 respectively: Enel was awarded capacity for both years. A number of operators and a sectoral trade association contested the decree and the results of the two auctions before the Lombardy Regional Administrative Court. Two operators also challenged the European Commission decision approving the Italian mechanism before the EU Court, for which the ruling is currently pending. In April 2021, the Lombardy Regional Administrative Court sus- pended its ruling pending a ruling of the EU court, having found grounds to request a preliminary finding concern- ing those proceedings. ARERA has confirmed the transitional capacity payment mechanism for 2020 and 2021 in order to ensure conti- nuity with the new capacity market, which will produce a financial impact starting from 2022. With the Decree of the Minister for the Ecological Transi- tion of October 28, 2021, the new capacity market regu- lation was approved. It will apply to auctions with delivery from 2024. In execution of the decree, Terna has launched the auction procedures for 2024, which will take place on February 21, 2022. Pursuant to the decree, the results of the 2024 auction will be used as the basis for assessing whether to hold an auction for the 2025 delivery year. Legislative Decree 210 of 8 November 2021 transposing Directive (EU) 2019/944 on common rules for the internal market for electricity provided for the establishment of a forward mechanism for Terna to use competitive tenders to procure new electricity storage systems to support the integration of renewables and grid security. The amount of capacity to be procured will be deter- mined on the basis of a development program for new storage systems defined on the basis of a proposal devel- oped by Terna in coordination with distributors. The procured storage capacity will be made available to market operators through a centralized platform man- aged by the Energy Markets Operator (EMO). The procurement mechanism will be approved by the Minister for the Ecological Transition on the basis of a proposal formulated by the grid operator drawn up in accordance with criteria established by ARERA. Imple- mentation of the measure is subject to approval by the European Commission. At the end of November 2021, Legislative Decree 199/2021 implementing Directive 2018/2001 on the pro- motion of the use of energy from renewable sources was published in the Gazzetta Ufficiale. The decree also con- tains provisions on the configuration of self-consumption and renewable energy communities, which are already governed in Italy by the experimental regulations intro- duced with Law 8/2020 (ratifying Decree Law 162/2019, the “Milleproroghe“ omnibus extension act) and subse- quent implementation measures (ARERA Resolution no. 318/2020/R/eel and Ministerial Decree of September 16, 2020 of the Ministry for Economic Development). Legis- lative Decree 199/2021 establishes that within 90 days of the date of entry into force of the decree ARERA shall adopt one or more measures specifying the implementa- tion rules and, within 180 days, the Ministry for the Eco- logical Transition shall update the incentive mechanisms for renewable resource plants included in the collective self-consumption arrangements or renewable energy communities referred to in the experimental regulations. The latter shall continue to apply pending the issue of these measures. Iberia Urgent measures to mitigate the impact of rising natural gas prices on the retail gas and electricity markets, consumer protection and the introduction of transparency in the wholesale and retail electricity and natural gas markets On September 16, 2021, Royal Decree Law (RDL) 17/2021 of September 14 containing urgent measures to mitigate the impact of the increase in natural gas prices on the retail gas and electricity markets came into force. The legislation requires a reduction in the remuneration re- ceived for electricity generated by non-emitting plants that are in peninsular areas and do not receive regulated remuneration. This reduction is a function of the monthly gas price and will be in effect until March 31, 2022. RDL 23/2021 of October 26, 2021, containing urgent measures in the field of energy for the protection of consumers and the introduction of transparency in the wholesale and retail markets for electricity and natural gas, clarified that the power generated by the plants concerned already sold using forward hedging instru- ments with a fixed price will be excluded. Renewable energy auctions January 20, 2021 saw the first renewable energy auction held as part of the new remuneration scheme envisaged under Royal Decree 960/2020, based on the provisions of Order TED/1161/2020. A total of 2,993 MW were awarded, of which 1,995 MW of photovoltaic power and 998 MW of wind power at an average price of €24.73/ MWh. The second renewable energy auction took place on October 19, 2021, held under the economic regime for renewable energy. A total of 3,124 MW were awarded, of which 2,258 MW of wind power and 866 MW of photo- voltaic power at an average price of €30.59/MWh. On December 30, 2021, the procedure for adjudicating the third auction, scheduled for April 6, 2022, began for 500 MW of solar thermoelectric, biomass, photovoltaic and other technologies, and a further 140 MW for small- scale photovoltaic projects with local participation. Proposal for a ministerial decree on the price of natural gas in the Canary Islands and Melilla In November 2021, work began on a proposal for an or- der approving the price of natural gas for the genera- tion of electricity in the Canary Islands and Melilla. It es- tablishes the reference unit values of the remuneration scheme and addresses a number of technical issues. The order will allow the use of natural gas in the Non-Penin- sular Territories of the Canary Islands and Melilla and sets the price to be paid for the generation units of these ter- ritories for the use of this fuel. Order to revise fuel prices in Non-Peninsular Territories (NPT) Order TEC/1260/2019 of December 26, 2019 revised the technical and financial parameters for the remunera- tion of generation units in the electrical systems of the Non-Peninsular Territories (NPT) for the second regula- tory period (2020-2025). With regard to fuel prices, the order established that within three months the prices of energy products and logistics would be revised with a ministerial order with effect from January 1, 2020. On August 7, 2020, Order TED/776/2020 of August 4 was published in Spain’s Official Journal, revising these prices. On November 16, 2021 the Supreme Court issued ruling no. 1337/2021 on the appeal lodged by Endesa against this order, requesting the publication of a new ministe- rial order by the government (Ministry for the Ecological Transition and the Demographic Challenge) to regulate fuel auctions. Proposed capacity market ordinance In April 2021, the Ministry for the Ecological Transition and the Demographic Challenge (MITECO) began the preparation of a proposal for an order creating a capacity market in the peninsular electrical system. The propos- al provides for an auction system (“pay as bid“) that will be used to auction the fixed power requirements (MW) identified in a demand coverage analysis performed by the system operator, Red Eléctrica de España SAU (REE). The auction system is open to existing and new genera- Regulatory and rate issues 237 237 tion, storage and demand management facilities, setting certain requirements regarding the maximum CO2 emis- sion rights of participating plants. The draft order also governs aspects relating to the var- ious types of auction envisaged, the rights and obliga- tions of the capacity service providers, including their remuneration and the penalties applicable in the event of non-compliance by the providers. • a number of changes are introduced in the rules gov- erning access and connection permits, extending the deadlines provided for in Royal Decree Law 23/2021 in order to facilitate the development of projects and allowing the voluntary restitution of access and con- nection permits obtained or in force before the entry into force of this royal decree law, with the return of guarantees. Royal Decree Law 12/2021 of June 24 adopting urgent measures in the field of energy taxation On June 25, 2021, the Royal Decree Law 12/2021 of June 24 was published in Spain’s Official Journal. It adopted urgent measures in tax matters in order to reduce the impact of the increase in the price of electricity on cus- tomers. In particular, the legislation contains the follow- ing measures: • a reduction of value added tax from 21% to 10%, effec- tive until 31 December 2021, for the supply of electric- ity with contracted power equal to or less than 10 kW, provided that the arithmetic average price of the daily market of the last calendar month preceding the last day of the billing period exceeds €45/MWh, and in any case for the beneficiaries of the Social Bonus who are seriously vulnerable or at risk of social exclusion. This VAT reduction was subsequently extended until April 30, 2022 with Royal Decree Law 29/2021 of December 21, which adopts urgent measures in the energy field for the promotion of electric mobility, self-consump- tion and the expansion of renewable energy; • a temporary suspension of the tax on the value of electricity generation during the 3rd Quarter of 2021, which was extended until December 31, 2021 with Royal Decree 17/2021 of September 14 and then until March 31, 2022 with Royal Decree Law 29/2021. The royal decree law also establishes that if a surplus of income is generated by the electricity sector in 2020, it will be used in its entirety to cover the temporary imbal- ances in the 2021 tax year. Royal Decree Law 29/2021 of December 21 adopting urgent measures in the energy field for the promotion of electric mobility, self-consumption and the expansion of renewable energy On December 22, 2021, Royal Decree Law 29/2021 was published in Spain’s Official Journal. It adopts urgent measures in the energy field for the promotion of elec- tric mobility, self-consumption and the expansion of re- newable energy. Among other provisions, the legislation envisages the following measures: • with regard to taxation, the reduction of the special excise duty on electricity and value added tax is ex- tended until April 30, 2022, as noted above, and the suspension of the tax on the value of electricity gen- eration is extended until March 31, 2022; 238 238 Integrated Annual Report 2021 Europe Russia Electricity and capacity markets Government Decree 1977 of December 1, 2020 provid- ed for an indexation rate of 11.4% for regulated capacity rates for generators that begin selling capacity through long-term capacity auctions (KOM) from January 1, 2021 after the termination of the long-term capacity supply contract period (DPM). The Federal Antitrust Service defined the regulated rates for 2021 (Order 1227/20 of December 17, 2020). More specifically, the rates for the 1st Half of 2021 were not changed from their level in the 2nd Half of 2020. Con- versely, the rates for Enel Russia plants in the 2nd Half of 2021 were modified as follows: KGRES: electricity +2.9%, capacity +4.4%; NGRES: electricity +2.5%, capacity +28%; SGRES: electricity +1.8%, capacity +3.4% The Federal Antitrust Service has set regulated rates for 2022, with an increase of 3% compared with the 2nd Half of 2021. Latin America Chile Rate revision - Introduction of the temporary electricity price stabilization mechanism On November 2, 2019, Law 21.185 of the Ministry of En- ergy was published, introducing a temporary electricity price stabilization mechanism for customers subject to rate regulation. Consequently, the prices to be applied to regulated customers in the 2nd Half of 2019 were lowered to those applied in the 1st Half of 2019 (Decree 20T/2018) and were defined as “stabilized prices for reg- ulated customers“ (PEC). Between January 1, 2021 and the expiry of this mecha- nism, the prices to be applied will be those set every six months on the basis of Article 158 of the Electricity Law and may not exceed the level of the PECs noted above adjusted for consumer price inflation. Any differences between the amount invoiced by ap- plying the stabilization mechanism and the theoretical amount that could be invoiced considering the price that would have been applied in accordance with the contractual terms and conditions agreed with the vari- ous electricity distribution companies will be accounted for as receivables for invoices to be issued to generation companies up to a maximum of $1,350 million until 2023. These differences will be recognized in US dollars and will not accrue interest until the end of 2025. Any imbalances in favor of the generation companies must be recovered no later than December 31, 2027. Argentina Rate revision - New resolutions The generation companies sell the energy they produce and their capacity on the market at a price set by the market regulator, CAMMESA, which is also responsible for any subsequent rate adjustments or discounting. The latest rate adjustment establishing new remunera- tion for generation companies was established with Res- olution no. 440 published on May 21, 2021, which resulted in an increase of 29%. This rate adjustment was applied retroactively starting from February 2021, when the rates established with Resolution no. 31 of 2020 were applied. On November 2, 2021, Resolution no. 1.037/21 was pub- lished, establishing the application of another tax in ad- dition to the provisions of Resolution no. 440 for invoices issued by generation companies that export energy pro- duced using thermal and hydro power plant technologies to neighboring interconnected countries for all services performed in the period between September 1, 2021 and February 28, 2022. The revenue raised collected by CAMMESA with this new tax will be allocated to a stabilization fund for the whole- sale electricity market, whose ultimate purpose will be to finance new energy infrastructure and which will be allo- cated on the basis of a decision of the Energy Secretariat. Enel Green Power Italy The Ministerial Decree of July 4, 2019 provided for com- petitive procedures based on Dutch auctions (selection of projects on the basis of price) and registers (selection of projects on the basis of an environmental criterion), depending on the installed capacity and by technology groups, including photovoltaic systems. In particular, up to October 2021, seven procedures will be held with: • Dutch auctions for plants with a capacity of more than 1 MW; • registers for plants with a capacity of less than 1 MW. Unlike previous decrees, the Ministerial Decree of July 4, 2019 provides for a new method for supporting renewa- ble sources through two-way contracts for differences under which the successful tenderer returns any posi- tive differences between the zonal price and the auction price. At September 30, 2021 the indicative annual cumulative cost was around €2.7 billion, compared with a ceiling of €5.8 billion for termination of the incentive mechanism. On November 30, 2021, Legislative Decree 199 of No- vember 8, 2021 transposing Directive (EU) 2018/2001 on the promotion of the use of energy from renewable sources (the RED II Decree) was published in the Gazzetta Ufficiale. The decree provides that capacity not assigned in the auction procedures referred to in the Ministerial Decree of July 4, 2019 shall be put up for auction in subsequent procedures in 2022, until the publication of the new auc- tion schedule for the next five years. In addition, the measure confirmed the same Dutch auc- tion mechanisms for plants with a capacity greater than 1 MW, providing for an exception for plants with a ca- pacity greater than 10 MW, which will be able to use the mechanism even though they have not completed the authorization process. Plants with a capacity of less than 1 MW, on the other hand, will have direct access to incentives, with the ex- ception of innovative technology plants, which will be able to access the subsidies through specific tenders. Iberia In the 1st Half of 2021, the preparation of all the regula- tions for access and connection to the grids for the new generation of renewables was completed. In December 2021, Royal Decree 1183/2020 on access and connec- tion to grids was published. In January 2021, Circular 1/2021 of the Access and Competition Commission was approved and in May 2021 the detailed specifications for access to the grid were established with the Resolution of the National Commission for Markets and Competi- tion. Until July 1, 2021 no requests for access and con- nection to the grids can be made for new renewable generation projects (a situation that has continued since July 2020). Starting on July 1, applications may be sub- mitted in accordance with the new rules. In general, the Regulatory and rate issues 239 239 new technical criteria will open up a significant volume of grid access capacity. Effective measures are being incor- porated to curb grid access speculation. The legislation provides for the possibility of launching calls for tenders to grant grid access capacity at both the Just Transition nodes and the rest of the network nodes, with variations depending on circumstances. On January 26, 2021, auctions for 3,000 MW of renew- ables generation capacity took place, governed by the Resolution of December 10, 2020, of the State Secre- tariat for Energy. Enel Green Power España was awarded 50 MW of photovoltaic solar capacity. In total, 2,036 MW of photovoltaic capacity and 998 MW of wind capacity were auctioned. In June 2021, work began on a bill reducing the remu- neration of non-GHG emitting generation plants placed in service before the entry into force of the Law 1/2005 (ETS) in proportion to the increased revenue obtained from the incorporation into the wholesale electrici- ty market price of the value of emission allowances for marginal technologies. In November 2021, a ministerial order was published to govern the basis for the Access Capacity Contest in the Fair Transition Hub of Teruel organized in response to the closure of a large coal-fired power plant owned by Endesa. In the auction, for which proposal must be submitted in January 2022, 1,200 MW of grid access capacity will be awarded to the best proposals for renewables genera- tion and storage projects with a high degree of technical maturity and environmental and socio-economic impact. On September 14, 2021, the Council of Ministers ap- proved a royal decree law containing reform measures for the electricity system to reduce the increase in electrici- ty bills for consumers. The main feature of the legislation is a temporary reduction in revenue from generation in consideration of the increase in the cost of gas from en- try into force of the measure until March 31, 2022. In October 2021, Royal Decree 23/2021 clarified various aspects of this reduction, including the exclusion from the reduction mechanism of power produced by gener- ation plants covered by hedging instruments that meet certain characteristics. Each month, producers must make a responsible statement certifying the existence of these contracts. Most of the power generated by Endesa is sold under forward contracts. On October 19, 2021, a second auction was held under the new remuneration scheme for renewables estab- lished with Order TED/1161/2020. The auction concluded with a weighted average price of €31.65/MWh for pho- tovoltaic power and €30.18/MWh for wind power. Europe Greece Following approval by the European Commission, the Minister of Energy extended the remuneration mech- anism for interruptibility services until September 30, 2021. Interruptibility is a demand response service in which willing industrial consumers will interrupt their consumption when required in exchange for a fee fixed by auction. The scheme is financed by all generators op- erating on the mainland, including EGPH, through the transfer of a percentage of their revenue. The percent- age applied differs depending on the generation tech- nology used: wind = 1.8% (previously 2%), small hydro = 0.8% (previously 1%), PV = 3.6% (no change). The decision of the Regulatory Authority for Energy (RAE) no. 988/2021 published in December 2020 set the UOCC contribution for 2022 at €0.581/MWh (in 2021 it was €0.325/MWh). This rate applies to monthly revenue from electricity generation for all renewable and cogeneration units in operation and serves to cover the operating and investment costs of DAPEEP, the Greek operator respon- sible for managing renewable generation incentives and the issue of guarantees of origin. Romania Law 259/2021 approved a series of measures to pro- tect consumers and businesses, with the introduction of a claw-back mechanism on the revenue of renewable and low carbon energy generators in consideration of the high price of power. For the period November 2021 - March 2022, sales from renewable electricity, hydroe- lectric and nuclear power at prices above €90/MWh will be taxed in arrears at 80%. 240 240 Integrated Annual Report 2021 Latin America Colombia Energy-transition law On July 10, 2021, Law 2099 was promulgated. It seeks to modernize current legislation and establishes specific provisions for the energy transition in order to boost the promotion, development and use of non-convention- al sources of energy, partly with a view to accelerating the country’s economic recovery process and strength- ening companies supplying electricity and gas. The law establishes tax benefits for investments in non-conven- tional sources of energy, efficient energy management, the development of hydrogen, the development of in- frastructure projects to improve the electricity supply service, electric mobility and the smart measurement of consumption. North America United States Renewables incentives In June 2021, the United States Department of the Treas- ury amended the administrative guidelines for section 45 of the Production Tax Credit (PTC) for investments in wind plants and for section 48 of the Investment Tax Credit (ITC) for investments in solar plants, giving pro- jects additional time to be put into service on the condi- tion that they meet the “continuity requirements“ within the “continuity safe harbor“ mechanism. The guidelines also clarified how to meet the continuity requirements. Specifically, the guidelines: • extend the period for entering service to six years for plants that started construction in 2016, 2017, 2018 or 2019; • extend the period for entering service to five years for plants that started construction in 2020; and • provide taxpayers who do not rely on the continuity safe harbor to demonstrate continuity using the “con- tinuous efforts“ standard rather than the more restric- tive “continuous construction“ standard, regardless of whether the project has begun construction. Forced labor in the solar supply chain In June 2021, US customs authorities responded to re- ports by issuing a “withhold release order“ (WRO) on silicon-based products manufactured by the company Hoshine Silicon Industry Co. Ltd (Hoshine) and its subsid- iaries, since they have been accused of exploiting their workforce. The WRO restricts the import into the United States of polysilicon products made by Hoshine. The effect on the US solar industry was the halt of ship- ments of photovoltaic modules by US customs, resulting in a delay in the delivery of solar equipment to end users, including Enel. All photovoltaic equipment manufacturers had to pro- duce clear documentation of their supply chain to meet US customs requirements. The documentation had to prove the specific origin of metallurgical grade silicon in imported photovoltaic products and demonstrate the absence of any Hoshine product in any part of the mining or manufacturing process. Enel’s Code of Ethics and corporate procedures do not permit the exploitation of workers by any Group supplier or subcontractor. Nevertheless, Enel is strengthening its controls, reviewing its supply chain and monitoring the implementation of the WRO by customs officials. In a separate but connected development, in December 2021, President Biden signed the Uyghur Forced Labor Prevention Act (UFLPA). UFLPA requires US customs au- thorities to apply a presumption that goods “mined, pro- duced, or manufactured in whole or in part“ in the Xin- jiang Uyghur Autonomous Region are made with forced labor and, therefore, are prohibited from being imported into United States. Goods covered by this presumption shall not be allowed to enter unless the importer proves that it has: • fully complied with government guidelines and regu- lations; • responded fully and substantially to all US customs in- quiries; and • determined “with clear and convincing evidence“ that the goods were not produced using forced labor. Polysilicon is one of the three industries on which appli- cation of the WRO is focused, and this focus extends to photovoltaic equipment that could contain raw materials mined in the Xinjiang Uyghur Autonomous Region. Implementation of the law will be guided by an admin- istrative regulation process under way since February 2022, which is expected to be completed by June 2022. As stated in Enel’s Human Rights Policy, the Group con- demns any violation of human rights and imposes the same standard on its partners and suppliers. The Code of Ethics and Enel’s corporate procedures therefore do not permit the exploitation of workers by any supplier or subcontractor of the Group. More specifically, all companies that intend to participate in an Enel Group tender and, therefore, who wish to be- Regulatory and rate issues 241 241 come part of the Company’s group of qualified suppliers, must recognize the company policies, in particular those relating to the management of their business in compli- ance with internationally recognized human rights, in- cluding the prohibition on the use of forced labor. This requirement is included in the contracts that suppliers sign. In addition, Enel’s supplier qualification system ensures the careful selection and evaluation of companies wish- ing to participate in procurement procedures. The sys- tem evaluates compliance with technical, financial, le- gal, environmental, health and safety, human rights and ethical integrity requirements in order to guarantee the quality and reliability of the contracts awarded. In addition to the regular supplier qualification process, Enel conducts factory assessments, focused on evalu- ating and monitoring the quality, production, risk man- agement and logistics of each plant. Since 2021, Enel has implemented a chapter on supply chain sustainabil- ity, which addresses the key aspects of forced labor and ethical practices. The “In Broad Daylight: Uyghur Forced Labor and Glob- al Solar Supply Chains“ report includes four suppliers with whom Enel has contractual relationships in the list of companies allegedly exposed to forced labor through their supply chains. Accordingly, the Group intensified its human rights controls: • requiring suppliers to provide detailed traceability in- formation on their supply chain; • requesting in-person visits to the sites of suppliers and sub-suppliers in order to verify compliance with the terms and conditions contained in their contracts with Enel; • sharing best practices in relation to the content of the ethical codes (or similar documents) of Enel’s suppliers. As of February 2022, no evidence has been found that Enel’s suppliers and subcontractors produce goods and materials in conditions that do not respect human rights. Enel has also adopted an ecosystem approach, working together with other utilities, suppliers and sector asso- ciations, to promote international industry statements aimed at guaranteeing full respect for human rights. In this context and in a global effort to ensure that the so- lar industry supply chain is free from forced labor, Enel Green Power North America, based in the United States, has signed the Solar Industry Forced Labor Prevention Pledge and has undertaken to support the development of a supply chain traceability protocol by the Solar Ener- gy Industries Association. In Europe, Enel Green Power has also signed SolarPower Europe’s public declaration on forced labor in the Xinjiang region of China. 242 242 Integrated Annual Report 2021 Bipartisan Infrastructure Law In November 2021, President Biden signed a $1 trillion Bipartisan Infrastructure Law, unlocking funds for new spending on roads, bridges, aqueducts, broadband and other projects in fiscal years 2022-2026. The new law also contains provisions to incentivize the expansion of the country’s electricity grid and support existing and new clean energy technologies. It also con- tains provisions to support existing nuclear power plants and hydroelectric plants, clean up abandoned mining lands and facilitate access to critical minerals needed for clean energy production. Of potential interest to Enel, the bipartisan infrastructure law includes the following provisions: • EV charger infrastructure: the United States Depart- ment of Energy (DOE) and the United States Depart- ment of Transportation (DOT), through the Federal Highway Administration, will spend $5 billion on the National EV Formula Program to create a national net- work of EV chargers along interstate highways. The funds will be split over five years between the states. The plan is geared towards fostering confidence in electric vehicles by ensuring that drivers always have a place to recharge. The two departments will also work with states to spend $2.5 billion over five years on al- ternative fuel infrastructure subsidies; • electric buses: the DOT, through the Federal Transit Administration, will spend $5.3 billion over five years in grants to transportation agencies for the Low or No Emission Vehicle Program. The program supports transport agencies in purchasing or leasing low- or zero-emission buses and other vehicles using tech- nologies such as batteries; • electric school buses: the US Environmental Protec- tion Agency, through the Clean School Bus Program, will spend $5 billion over five years in the form of grants and discounts to states or local government agencies, as well as contractors. Eligible contractors include for-profit or non-profit entities that have the ability to sell clean school buses, zero-emission buses, charg- ing or refueling facilities, or other equipment need- ed to charge, power or maintain clean/zero-emission school buses, or arrange funding for that sale; • second life of EV batteries for grid services: the DOE intends to award grants for research, development and demonstration projects seeking to give a second life to EV batteries that have been used to power elec- tric vehicles, as well as for technologies and processes for the final recycling and disposal of EV batteries; • demand response: the law sets a new standard for considering investment in demand response to ex- pand the reach of the federal energy management program to include demand response in state energy conservation plans; • improve the grid: the DOE is authorized to allocate $5 billion to cooperation agreements or grants to strengthen and improve grid resilience and reliability, as well as an additional $3 billion for the existing Smart Grid Investment Matching Grant Program; • transmission policy: the law provides $2.5 billion in loans and/or direct funding to private transmission developers to provide financial stability for proposed transmission projects. The DOE can make its network available to the private individual, make loans or enter into public-private partnerships. Political action In May 2021, the state of Texas enacted a law in response to an extreme cold weather event that occurred in Feb- ruary 2021. The legislation ordered the Public Utility Commission (PUC) to develop and implement rules in the natural gas and electricity sectors to meet the energy needs of the electricity system during extreme weather events and periods of low renewable energy production. Legislation was approved to securitize most of the liabil- ities deriving from the February storm, reducing the total amount for which market operators would be liable for (thus reducing Enel’s liability). Legislation was also passed to restrict companies from entering into agreements with foreign-owned compa- nies from China, Iran, North Korea and Russia if those agreements provide the latter with direct or remote ac- cess to the Texas power grid. In August 2021, the state of Illinois enacted a law to raise the state’s Renewable Portfolio Standard (RPS) targets, provide incentives for electric vehicles and e-buses, and create new energy storage and network modernization programs. Illinois will switch to 100% clean energy by 2050, with in- terim targets of 50% by 2040 and 40% by 2030. The leg- islation translates into the closure of private coal plants of over 25 MW by 2030. Publicly owned coal/natural gas plants will close by 2045. By 2030, Illinois will have 1 mil- lion electric vehicles on the road, with $10 million availa- ble annually to convert state and local fleets. There are also policies to create goals for battery storage systems (BESS). Project work contracts will be required for all new indus- trial-scale solar and wind projects, and the renewable energy industry is required to report on diversity and in- clusion goals as of April 2022. In July 2021, the Missouri legislature approved a change in the tax assessment of wind farms that increased the tax exposure for assets that have been operating in the state for more than 5 years from 35% of the estimated value to 37.5%. New Jersey has implemented an industrial-scale solar re- newable energy incentive program that is administered by the state’s Bureau of Public Utilities. Additionally, in July 2021, the New Jersey legislature passed a law that will allow solar development on agricultural land, enabling the state to meet its solar development goals. Connecticut passed a law in June 2021 that sets a battery power storage target of 1 GW by 2030. Colorado and Nevada both passed laws in June 2021 that require utilities in each state to join a regional transmis- sion organization by 2030. Canada Canada announced a reinforced climate plan called “A Healthy Environment and a Healthy Economy“ at the United Nations Climate Change Conference (COP26) in November 2021 in order to achieve the Paris Agree- ment’s strengthened goal of reducing emissions by 40- 45% from 2005 levels by 2030. The Canadian Net-Zero Emissions Accountability Act, which became law on June 29, 2021, enshrines Canada’s commitment to achieving net-zero emissions by 2050. The law ensures transpar- ency and accountability as the government works to achieve its goals. The Minister of Environment and Climate Change will es- tablish the country’s emissions reduction plan for 2030 by the end of March 2022. The law requires public participation and independent advice to guide the Canadian government’s efforts. As part of the plan, the government launched the $8 billion Net-Zero Accelerator Fund to help large polluters reduce their emissions. In August 2021, the government launched a five-year $2.19 billion fund to help transportation service provid- ers move away from fossil fuel engines and switch to zero-emission vehicles. The Zero Emission Transit Fund is part of the federal government’s $11.9 billion invest- ment in public transportation and adds to Canada In- frastructure Bank’s planned $1.19 billion investment in zero-emission buses through its three-year growth plan. This fund seeks to support public transport and school bus operators to plan the switchover to electric vehicles, supporting the purchase of 5,000 zero-emission buses and building support infrastructure, including charging stations. Municipalities, school districts and private part- nerships will be able to work with the government to ex- ploit potential opportunities. Regulatory and rate issues 243 243 During the federal election in September 2021, the Lib- eral Party (currently in office) pledged to double Cana- da’s existing clean energy capacity to reach its net-zero emissions target by 2050. The Canadian Infrastructure Bank is injecting $5 billion to advance clean energy gen- eration, transmission and storage and have pledged to invest an additional $1 billion over the next four years to support renewable energy and grid modernization projects. While the federal government has no direct responsibility for Canada’s power grids (they are under provincial jurisdiction), the government has committed itself to: • introduce a Clean Electricity Standard to achieve a 100% net-zero emissions electricity system by 2035; • develop additional investment tax credits for a range of renewable energy and battery storage solutions to accelerate the deployment of clean energy into the grid; • create a Pan-Canadian Grid Council in partnership with provinces, territories, indigenous peoples, the private sector, labor organizations and civil society: – the Grid Council will work to establish national standards, best practices and incentives to pro- mote investment in infrastructure, smart grids, grid integration and innovation in the electricity sector, with the aim of making Canada the world’s most reliable, affordable and carbon-free electricity pro- ducer; – the Grid Council will promote the most cost-effec- tive approaches to planning and developing the electricity system in Canada, while promoting com- petitiveness to sell more clean Canadian power to the United States. Africa, Asia and Oceania South Africa The state-owned utility Eskom has started transmission unbundling with the creation in December of the Nation- al Transmission Company South Africa (NTCSA), which is expected to be operational in 2022. Unbundling will fa- cilitate competition in the power generation sector and improve access to the grid on a non-discriminatory ba- sis. India In 2021, the government granted independent power producers (IPPs) an extension of two and a half months to commission renewable energy plants due to the COV- ID emergency, provided that the IPPs did not request 244 244 Integrated Annual Report 2021 further extensions or increases in the rates under their power purchase agreements (PPA). The Government subsequently eased this requirement by allowing IPPs to request further extensions based on the conditions set out in their PPAs. Enel Green Power India took advantage of the extension for the 285 MW Coral Project. The Ministry of Energy has introduced two rules that strengthen the “must-run“ status for renewable projects, safeguarding IPPs against arbitrary curtailment and en- suring rapid recovery in the event of a change in law. To promote renewable energy projects, the government had waived transmission rates for renewable projects that sold electricity produced through long-term PPAs. The government then expanded the scope of this dero- gation by also allowing the cancellation of transmission rates for projects with short-term sales contracts and on power exchanges. The non-applicability of transmission rates represents an advantage for our projects. South Korea The main scheme to support the development of renew- ables in Korea is the Renewable Portfolio Standard (RPS), which obliges conventional generators with a capacity of more than 500 MW to procure a certain amount of electricity from renewable sources annually. This share will gradually rise from 2% in 2012 to 25% by 2030. In 2021 the share was 9%. Compliance with the RPS (the percentage of electricity generated from renewables) can be achieved by build- ing renewable plants or by purchasing green certificates (RECs). The number of RECs that a RES generator can sell for each MWh produced depends on the so-called “mul- tiplier“ which differs depending on the energy source. The multiplier values were updated in August 2021: the very advantageous multiplier (x4) for BESS+RES was abolished, while that for onshore wind was increased from x1 to x1.2; solar PV is still less than 1 (x0.8). Another important regulatory reform in 2021 was the in- troduction of a series of tools to facilitate the procure- ment of renewable energy by companies participating in the RE100 initiative, with the (voluntary) objective of using 100% of green energy to drive their businesses. Among the most interesting tools for Enel Green Power is the REC trading platform, which allows the direct exchange of RECs between generators and companies. However, Third Party PPAs and Direct PPAs can also represent new and potentially attractive routes to market by allowing the purchase and sale of renewable electricity between end users and generators without going through the en- ergy market. Infrastructure and Networks Italy Rates for the fifth regulatory period (2016-2023) are gov- erned by ARERA Resolution no. 654/2015/R/eel. This peri- od lasts eight years and is divided into two sub-periods of four years each (NPR1 for 2016-2019 and NPR2 for 2020- 2023). With regard to the NPR2 period, ARERA published Reso- lution no. 568/2019/R/eel, with which it updated rates for distribution and metering services in force in the 2020- 2023 period, publishing the new integrated texts (TIT 2020-2023 and TIME 2020-2023). With Resolution no. 639/2018/R/com, ARERA set the value of the WACC for distribution and metering activities, valid for the 2019-2021 period, at 5.9%. The method for determining the WACC for the 2022-2027 period was updated with Resolution 614/2021/R/com, es- tablishing a value of 5.2% for electricity distribution and metering. The regulation provides for an update of the value for 2025-2027, as well as the possibility of annual up- dating (in 2023 and 2024) should certain financial indica- tors lead to a change in the WACC of at least 0.5%. As for distribution and metering rates, ARERA approved both the definitive reference rates for 2020, calculated by taking into account the actual balance sheet data for 2019 (Resolution no. 131/2021/R/eel), and the provisional refer- ence rates for 2021 on the basis of the preliminary balance sheet data for 2020 (Resolution no. 159/2021/R/eel). The definitive reference rates for 2021 are expected to be pub- lished in 2022. As regards service quality, ARERA, with Resolution no. 646/2015/R/eel as amended, established output-based regulation for electricity distribution and metering servic- es, including the principles for regulation for 2016-2023 (TIQE 2016-2023). With Resolution no. 566/2019/R/eel, ARERA completed the update of the TIQE for the 2020- 2023 semi-period, proposing tools to bridge gaps in qual- ity of service still existing between the various areas of the country, taking account of the time needed to implement interventions on the grid as well as the effects of climate change. With Resolutions nos. 212/2021/R/eel and 537/2021/R/eel, ARERA specified the bonuses for resilience interventions completed by e-distribuzione in 2019 and 2020 eligible for the bonus-penalty mechanism envisaged under the provi- sions of Resolution no. 668/2019/R/eel, which introduced an incentive mechanism for investments to increase the resilience of distribution grids in terms of resistance to loads deriving from extreme weather events. With regard to relations between distributors and trad- ers, on January 1, 2021 the new version of the Electrici- ty Transport Grid Code came into force with Resolution no. 261/2020/R/eel, which due to the reduction in the time required to terminate transport contracts due to the default of sellers, reduced the credit exposure of distributors. Consequently, the value of guarantees that all sellers must give to distributors to cover the trans- port service provided was reduced (passing from a level of coverage ranging from 3 to 5 months of the trader’s turnover to a new range between 2 and 4 months). Energy efficiency - White certificates The decree of the Ministry for Ecological Transition of May 21, 2021 amended the ministerial decree of Janu- ary 11, 2017 as already amended by the decree of the Ministry for Economic Development of May 10, 2018. The measure set the national quantitative targets for electricity and gas distribution companies for the years 2021-2024 and also reduced the objectives for 2020 by 60%. The decree also updated the methods for distribu- tion companies to meet the obligation and for reimburs- ing the related costs. Iberia Methodology for calculating rates and electrical system charges On March 18, 2021, Royal Decree 148/2021 of March 9, 2021 was published in Spain’s Official Journal, which establishes the methodology for calculating electric- ity system charges. Furthermore, on March 28, Circular 3/2021 of March 17 of the National Markets and Com- petition Commission (CNMC) was published, amending Circular 3/2020 of 15 January, which had established the methodology for calculating electricity transmission and distribution rates. The new rates for access to the trans- mission and distribution grid, as well as the new charg- es for the electricity system, entered into force on June 1, 2021, by way of the Resolution of March 18, 2021 of the CNMC, which established the access rates for the electricity transmission and distribution grids applicable from June 1, 2021, and Order TED/371/2021 of April 19, which established the rates for the electricity system and capacity payments applicable from June 1, 2021. On September 15, 2021, Royal Decree Law 17/2021 of September 14 was published, containing urgent meas- ures to mitigate the impact of the rise in natural gas prices in the gas and electricity retail markets. It reduced charges for the electricity system by about 96% from September 16, 2021 to December 31, 2021 compared with those in effect from June 1, 2021. Regulatory and rate issues 245 245 Methodology for calculating charges for the gas system On December 30, 2020, Royal Decree 1184/2020 of December 29 was published, establishing the meth- odology for calculating gas system charges. It entered into force on October 1, 2021. On September 29, 2021, Order TED/1023/2021 of September 27 was published, establishing charges for the gas system for the period between October 1, 2021 and September 30, 2022. The amount to be recovered for charges for this period is €26.9 million. Electricity rates for 2021 On December 29, 2020, Order TEC/1271/2020 of De- cember 22 was published in Spain’s Official Journal, es- tablishing various costs for the electricity system for 2021 and extending the electricity access rates until the rates tariffs set by the National Markets and Competition Commission (CNMC) come into force. Similarly, on March 23, 2021, the Resolution of March 18, 2021 of the CNMC was published in Spain’s Official Journal, approving the access rates for the transmission and distribution grids to be applied starting from June 1, 2021. On April 22, 2021, Order TED/371/2021 of April 19, 2021 was published in Spain’s Official Journal, establishing electricity system charges applicable from June 1, 2021. Finally, Royal Decree Law 17/2021 of September 14 re- duced electricity rates by about 96% in the period from its entry into force until December 31 2021. Electricity rates for 2022 On December 22, 2021, the Resolution of December 16, 2021 of the National Markets and Competition Com- mission (CNMC) was published in Spain’s Official Journal, establishing the access rates for the electricity trans- mission and distribution grids applicable from January 1, 2022, which represent an average reduction of 5.4% compared with their values at June 1, 2021. On December 30, Order TED/1484/2021 of December 28 was published in Spain’s Official Journal, setting the elec- tricity system rates to be applied from January 1, 2022 and establishing various regulated costs of the electrici- ty system for 2022. The new charges for 2022 represent an average reduction of about 31% compared with the charges approved on June 1, 2021. Natural gas rates for 2021 Circular 6/2020 of July 22 of the National Markets and Competition Commission (CNMC) approved the meth- odology for calculating rates for transport, local networks and natural gas regasification. In addition, it established that this Commission must set access rates for regasifi- cation plants and, if necessary, the billing deadlines for the period of operation of the transport and distribution 246 246 Integrated Annual Report 2021 rates applicable from October 1, 2020. On December 29, 2020, the Resolution of December 21 of the Directorate General for Energy Policy and Mines was published, establishing the natural gas last resort rate (TUR) to be applied from January 1, 2021, with an average increase of 4.6% and 6.3% for last resort rate 1 (TUR 1) and last resort rate 2 (TUR 2), respectively, due to the increase in the cost of the commodity. These values remained in force throughout the 1st Half of 2021 as the necessary condition for any change (a variance of +/-2% in the cost of the commodity) was not met. On June 30, 2021, the Resolution of June 24, 2021 of the Directorate General for Energy Policy and Mines was published, establishing the natural gas last resort rate (TUR) to be applied starting from July 1, 2021, with a con- sequent increase of 2.9% and 3.9% for last resort rate 1 (TUR 1) and last resort rate 2 (TUR 2), respectively, due to the increase in the cost of the commodity. Finally, on September 29, 2021, the Resolution of Sep- tember 26, 2021 of the Directorate General for Energy Policy and Mines was published, which approves the nat- ural gas last resort rate (TUR) to be applied from Octo- ber 1, 2021, which in compliance with Royal Decree Law 17/2021 of September 14 translated into an increase of 0.9%, 4.6% and 11.2% for last resort rate 1 (TUR 1), last resort rate 2 (TUR 2) and last resort rate 3 (TUR 3), re- spectively. Natural gas rates for 2022 On December 27, the Resolution of December 22, 2021 of the Directorate General for Energy Policy and Mines was published, establishing the last resort rate for natural gas to be applied in the 1st Quarter of 2022. Taking account of the provisions of Royal Decree Law 17/2021 of Sep- tember 14, it translated into an increase of about 5.4%, 6.8% and 7.5% for last resort rate 1 (TUR 1), last resort rate 2 (TUR 2) and last resort rate 3 (TUR 3), respectively. Proposed remuneration for distribution activities from 2017 to 2019 During November 2021, work began on preparing a pro- posed order approving the incentive or penalty for the reduction of losses in the electricity distribution grid for 2016, the modification of base remuneration for 2016 for several distribution companies and the modification of the remuneration for electricity distribution companies for 2017, 2018 and 2019. Direct subsidies to electricity distribution companies On December 22, 2021, Royal Decree 1125/2021 was published in Spain’s Official Journal, promoting the dig- itization of distribution grids and charging infrastructure on public roads with support from European funds under the Recovery, Transformation and Resilience Plan. The aid will amount to €525 million for 2021-2023, which will be allocated among distributors based on their share of distribution remuneration. Distribution companies must present these projects, which they will co-finance at 50%, in their annual investment plans, together with supplementary information concerning the impact on employment, the industrial value chain and the penetra- tion of renewables, as well as digital programs to improve customer service quality. Legislation establishing the National Fund for the Sustainability of the Electricity System (FNSSE) On June 1, 2021, the Council of Ministers approved a bill establishing the National Fund for the Sustainability of the Electricity System, which is awaiting approval by the Congress of Deputies. It is intended to divide the cost of policies to promote renewable energy, high-efficien- cy cogeneration and energy recovery from waste among the various energy vectors. The FNSSE, which will be implemented gradually over a 5-year period, will be financed with contributions from operators in the various energy sectors, taxes deriving from Law 15/2012, the proceeds of auctions of CO2 emission rights and, up to a limit of 10% of the annual value of the Fund, with funding from the general State budget or with EU funds. Europe Romania In Romania, electricity distributors (DSOs) purchase elec- tricity on wholesale markets to cover grid losses. The price recognized ex-ante by the regulator for such pur- chases in 2021 was largely exceeded by the closing prices on the wholesale electricity markets, with a serious im- pact on the cash flows of the DSOs. The rate mechanism provides for the recovery of grid losses: the difference with purchase costs for the year t is recouped through distribution rates for the year t+2, but the circumstances generated pressure on the 2021 balance sheets of the DSOs, with a negative impact on working capital. Latin America Chile CNE Resolution no. 176/2020 - Exclusive activity On June 9, 2020, CNE Resolution no. 176 was published. It establishes the substance of the obligation for exclu- sive operation and separate accounts in the provision of public electricity distribution services in conformity with Law 21.194. Under the provisions of the resolution, companies hold- ing concessions for the public electricity distribution service operating in the Chilean national electricity sys- tem will have to set up as companies exclusively engaged in distribution activities and will only be able to exercise economic activities involved in the provision of the pub- lic distribution service, in compliance with applicable legislation. The rules established in the resolution shall apply from January 1, 2021. Where a company is unable to comply by that date for legitimate reasons, subject to notifying the CNE the application of the resolution may be postponed, but in any case not later than January 1, 2022. Law 21.249 - Exceptional measures supporting end users of health, electricity and gas services On August 8, Law 21.249 was approved, introducing ex- ceptional measures supporting the most vulnerable cus- tomers, measures that, in large part, Enel Distribución Chile was already implementing voluntarily. The meas- ures include a moratorium on the interruption of supply due to arrears and make it possible to pay electricity bill arrears in installments for customers defined as vulner- able. These measures were extended and strengthened with Law 21.340 until December 31, 2021 or the end of the state of emergency declared in response to the COVID-19 pandemic. ”Average bare price“ On March 20, 2021, the Ministry of Energy published the average “bare price“ to be applied starting from July 1, 2020, while on May 20, 2021 the Ministry of Energy also published the average bare price to be applied starting from January 1, 2021. Considering the price stabilization mechanism established with Law 21.185, the publication of this decree had no effect on end-user rates. ”Short-term bare price“ On December 3, 2020, the Ministry of Energy published Decree 12T/2020, setting the “bare price“ for the supply of electricity with effect from October 1, 2020. On March 22, 2021, the Ministry of Energy published De- cree 3T/2021, setting the “bare price“ for the supply of electricity with effect from April 1, 2021. Determination of 2020-2024 distribution rate The price determination process for the 2020-2024 pe- riod is still under way. For the moment, the rates contin- ue to be applied in accordance with the methodology in force for the 2016-2020 period. Regulatory and rate issues 247 247 Argentina Colombia The Energy and Gas Regulation Commission (CREG) deter- mines the remuneration methodology for the distribution grid. Distribution rates are set every five years and updated monthly based on the producer price index. Rate revisions With Resolution no. 122 of 2020, the Energy and Gas Reg- ulation Commission (CREG) set the distribution rates for Codensa for the period 2018-2023. In June 2021, with Resolution no. 068 of 2021, CREG ap- proved the update of the Codensa investment plan. Peru In Peru, the process for determining distribution rates takes place every four years and is referred to as the “Setting the Aggregate Distribution Value“ (VAD). Exceptionally, the last rate cycle set a duration of five years. Therefore, in 2018 the process of determining the VAD was completed for the years 2018-2022. The Peruvian regulations use a “model company“ approach. In each rate process, the investment and operating costs necessary to meet the demand for electricity in the conces- sion area are set and will be incorporated in the rate paid to the distributor. The VAD is determined individually for each distribution company with more than 50,000 customers. Rate revisions Until a revision of the definitive full rate is approved, the reg- ulator ENRE is entitled to set provisional rate adjustments in order to ensure stability in the provision of services. On March 21, 2021, Resolution ENRE no. 79/2021 estab- lished new transitional rates, which were subsequently in- creased by 9% with Resolution no. 106 of April 30, 2021, pending completion of the renegotiation of the full rate. Resolutions ENRE no. 263 and no. 266/2021 approved new rates to be applied starting from August 1, 2021. They only adjusted the seasonal stabilized price for large customers (with consumption of more than 300 kWh per month) as required by Resolution 748/21 of the Secretariat of Energy. The average rate was increased from $5.020 to $5.176/kWh (+3.1%). Brazil Rate revision for Enel Distribuição Ceará The latest full rate revisions approved for each Brazilian distribution company belonging to the Enel Group date back to 2018 (for Enel Distribuição Rio de Janeiro and Enel Distribuição Goiás) and 2019 (for Enel Distribuição Ceará and Enel Distribuição São Paulo). The next rate reviews are scheduled for 2023. The latest rate adjustments are summarized below: Company Average increase Rate adjustment date High voltage Low voltage Enel Distribuição Rio de Janeiro March 2021 +10.38% +4.63% Enel Distribuição Ceará April 2021 +10.21% +8.54% Enel Distribuição São Paulo June 2021 +3.67% +11.38% Enel Distribuição Goiás October 2021 +14.21% +17.32% 248 248 Integrated Annual Report 2021 End-user Markets Italy The current regulatory framework governing the process of eliminating regulated prices in the electricity sector (Law 124/2017 – the Competition Act – as most recent- ly amended by Decree Law 152/2021 implementing the NRRP, ratified with Law 233/2021) provides for a stag- gered postponement of the removal of price protection: to January 1, 2021 for small businesses, to January 1, 2023 for micro-enterprises and to January 2024 for domestic customers. As regards the gas sector, the elimination of price protections is scheduled to occur on January 1, 2023 for domestic customers and condominiums. With regard to the end of price safeguards for small firms in the electricity sector (January 1, 2021), the Ministry for Economic Development issued a decree implementing the Competition Act on December 31, 2020, delegating the Regulatory Authority for Energy, Networks and the Environment (ARERA) to define the measures governing the transition to the free market based on certain criteria and guidelines. With Resolution no. 491/2020/R/eel, AR- ERA established a last resort service (“gradual safeguards service“) for small businesses without a supplier, to be assigned by auction on a territorial basis for a period of three years. A ceiling of 35% was set for the market share that can be assigned to each supplier. In March 2021, Enel Energia and Servizio Elettrico Nazi- onale (together with Enel Italia) appealed the ministerial decree before the Lazio Regional Administrative Court, contesting the imposition of the antitrust cap at 35% and the lack of provisions (e.g., a social clause) for the reimbursement of the residual costs of Servizio Elettrico Nazionale following the loss of customers. With regard to the latter point, in March 2021, Servizio Elettrico Na- zionale and Enel Italia also challenged Resolution no. 491/2020/R/eel with an appeal before the Lombardy Re- gional Administrative Court. At the moment, no hearing has yet been set for these appeals. With ruling no. 18/2021, the Lombardy Regional Ad- ministrative Court granted the appeals filed by Servizio Elettrico Nazionale and Enel Energia, voiding Resolution no. 279/2017/R/com. The resolution had established an incentive mechanism to increase the use of electronic invoices with customers on the regulated markets and made the compensation for the seller of the differen- tial between the discount granted to customers and the avoided cost conditional upon reaching certain thresh- olds. With Resolution no. 477/2021/R/com, ARERA con- sequently also amended, with effect from 2022, the rules governing the recovery of amounts relating to previous years. Electricity With Resolution no. 604/2020/R/eel, ARERA updated for 2021 the rate component covering the marketing costs of the operators of the enhanced protection service (RCV) and the levels of the PCV fee, which represents the reference price for sellers on the free market. With Resolution no. 402/2021/R/eel, the updating of the RCV and the PCV for 2022 was postponed to the 1st Quarter of 2022, with effect from April 1, 2022, taking ac- count of the need to cover the costs incurred by opera- tors from January 2022 in the upcoming determinations. With ruling no. 565 of March 27, 2020, the Lombardy Regional Administrative Court partially voided Resolu- tion no. 119/2019/R/eel, with which ARERA had intro- duced changes to the compensation mechanism for the amounts not collected by operators of the enhanced protection service in respect of fraudulent withdrawals of power. In particular, the Regional Administrative Court voided the part of the resolution in which it provided for a reduction in the amounts subject to reimbursement for amounts invoiced in the period prior to its entry into force (April 2, 2019). With Resolution no. 240/2020/R/eel, ARERA amended the rules in compliance with the provi- sions of the Regional Administrative Court. With Resolution no. 32/2021/R/eel, ARERA established a mechanism to reimburse arrears relating to the general system charges paid by the sales companies on the free and safeguard markets to distribution companies but not collected from end users (for the safeguard market, this only applies to customers that can be disconnected). For customers who cannot be disconnected on the safe- guard market, the mechanism for reimbursing non-re- coverable charges is governed by Article 44 of the TIV (Integrated Sales Code). Gas With Resolution no. 401/2021/R/gas, ARERA postponed the update of the QVD component to the 1st Quarter of 2022, with effect from April 1, 2022, taking account of the need to cover the costs incurred by operators start- ing from January 2022. This decision was prompted by the need for further evaluation of the ongoing evolution of the structure of the retail markets as well as by the need to align the remuneration methods of the various regulated entities. In Articles 31-quinquies and 37.1 letter b) of the TIVG (Integrated Gas Sales Code), ARERA regulates specific mechanisms for the reimbursement of arrears for pro- viders of the last resort service and the default service on distribution grids. Regulatory and rate issues 249 249 Iberia Energy efficiency Law 18/2014 of October 15, which approves urgent measures for growth, competitiveness and efficiency, created the National Energy Efficiency Fund to achieve energy efficiency objectives. Order TED/275/2021 of March 18 established a contri- bution of €27.7 million to the National Energy Efficien- cy Fund for Endesa, corresponding to the obligation for 2021. In December 2021, the Ministry for the Ecological Transi- tion and the Demographic Challenge started preparation of a proposed order setting the contribution to the Na- tional Energy Efficiency Fund for 2022, establishing the amount proposed for Endesa at €26 million. Consumer protection measures: Social Bonus On October 16, Order TED/1124/2021 of October 8 was published in Spain’s Official Journal, establishing the dis- tribution of the 2021 obligation for funding the Social Bonus, with Endesa’s share being set at 34.72%. In Octo- ber, the National Competition and Markets Commission (CNMC) began hearings on its proposal to distribute the funding of the Social Bonus for 2022, with the percent- age proposed for Endesa set at 33.50%. On October 27, 2021, Royal Decree Law 23/2021 of Octo- ber 26 containing urgent measures in the field of energy for the protection of consumers and the introduction of transparency in the wholesale and retail electricity and natural gas markets was published in Spain’s Official Journal. The main consumer protection provisions in the decree are: • discounts through the Social Bonus mechanism have been increased from 25% to 60% for vulnerable cus- tomers and from 40% to 70% for severely vulnerable customers for the period from October 27, 2021 to March 31, 2022. Subsequently, Royal Decree 29/2021 of December 22, extended this measure until April 30, 2022; • the State budget contribution to the Social Bonus mechanism for heating was increased by €100 million to a total of €203 million, with the minimum benefit rising from €25 to €35 in 2021. Similarly, Royal Decree Law 21/2021 of 26 October was published, extending the social protection measures to address situations of social and economic vulnerability. Note that the “COVID vulnerable“ Social Bonus catego- ry has been extended, representing a 25% discount on the PVPC rate for unemployed workers, those in wage supplementation programs (ERTE) and businesses with reduced working hours due to COVID precautions, until February 28, 2022. Consumer protection measures: electricity supply guarantee On September 15, 2021, Royal Decree 17/2021 of Sep- tember 14 containing urgent measures to mitigate the impact of the rise in natural gas prices in retail gas and electricity markets was published in Spain’s Official Jour- nal, establishing a minimum essential supply for vulner- able customers (recipients of the electricity Social Bo- nus) in arrears with their utility bills and extending the payment period by six months (beyond the existing four months), during which supplies cannot be interrupted and power will be reduced to 3.5 kW only for customers with a larger supply. Similarly, Royal Decree Law 21/2021 of October 26 ex- tended the moratorium on interruption of supplies of electricity and gas to vulnerable domestic customers (recipients of the Social Bonus) until February 28, 2022. Consumer protection measures: tax measures On June 25, 2021, Royal Decree Law 12/2021 of June 24 was published in Spain’s Official Journal, adopting urgent measures in the field of energy taxation and electricity generation and on the management of regulatory fees and rates for water use. Specifically, the royal decree law reduced VAT from 21% to 10% on the electricity bills of consumers with low voltage service and contracted power up to 10 kW until December 31, 2021, provided 250 250 Integrated Annual Report 2021 that the average monthly price on the wholesale mar- ket in the previous month is greater than €45/MWh. For consumers benefitting from the Social Bonus program, 10% VAT will apply regardless of the wholesale market price. Royal Decree 17/2021 of September 14 containing urgent measures to mitigate the impact of the increase in nat- ural gas prices on the retail gas and electricity markets reduced the electricity tax from 5.1% to 0.5% from Sep- tember 15, 2021 to December 31, 2021. Both measures were extended until April 30, 2022 with Royal Decree 29/2021 of December 22. Europe Romania Latin America Free market In all Latin American countries, distribution companies can supply electricity to their customers on the regu- lated market. However, they can also apply free market conditions if customers exceed certain limits. The limits for the free market by country are as follows: Country Argentina Brazil Colombia Costa Rica Guatemala Panama Peru kW threshold >30 kW >1,000 kW or >500 kW(1) >100 kW or 55 MWh-month Not applicable(2) >100 kW >100 kW >200 kW(3) As from January 1, 2021, Romania began implementa- tion of the provisions of Regulation (EU) 2019/943 on the elimination of regulated prices for end users. In the 2nd Half of 2021, the Romanian authorities adopt- ed specific legislation (Government Emergency Order 118/2021, Law 259/2021, Government Emergency Order 130/2021) establishing a combination of price-capping and offsets. (1) The >500 kW threshold applies if the electricity consumed was gen- erated using renewable sources, which are subsidized by the gov- ernment through a discount on rates. (2) The concept of free-market customer does not apply in Costa Rica. (3) D.S. 018-2016-EM establishes that: - the installed power supply of customers who can choose between the regulated market and the free market (those with a power sup- ply of between 200 and 2,500 kW) is measured for each point of supply; - customers whose power supply exceeds 2,500 kW for each point of supply are free-market customers. Regulatory and rate issues 251 251 REPORT ON OPERATIONS 5. Outlook Enel is the largest private-sector renewables company in the world Investing in Enel means investing in a decarbonized business model that leaves no one behind. Enel is the largest private-sector electricity distribution company in the world Enel´s grids, which are the most highly digitalized in the world, will be the foundation of the energy transition. Enel had the largest customer base among private-sector companies The electrification of energy consumption will enable Enel to create value for itself and for its customers. A simple, predictable and attractive dividend policy Enel retains a dividend policy based on a fixed and increasing dividend until 2024. 252 Integrated Annual Report 2021 253 Outlook for operations The progressive roll-out of COVID-19 vaccines in 2021 created the conditions for strong growth at a global level. In this environment, the Group experienced a sound re- covery in operating indicators in terms of generation, di- stribution and sales to end users of electricity. In particu- lar, the Enel Group accelerated the construction of new renewables capacity during the year, with over 5 GW of new installed capacity worldwide, representing the abso- lute record for the Group, with an increase of more than 2 GW on the new capacity installed in 2020. At the same time, macroeconomic conditions were shar- ply influenced by strong growth in the prices of commo- dities, such as gas and coal, which have a direct impact on the price of electricity. This prompted the authorities of some European countries to intervene in an attempt to calm the increase in electricity prices for consumers, with measures that in some cases penalized companies operating in electricity generation and sales. In this context, the geographical diversification of the Group, its integrated business model along the entire va- lue chain, a sound financial structure and a high degree of digitalization have enabled Enel to display considerable resilience, which is reflected in our performance and fi- nancial position. In November 2021, the Group presented its new Strategic Plan, also providing a vision of the evolution of the busi- ness in this decade. More specifically, the Strategic Plan focuses on four stra- tegic lines of action. • Allocate capital to support the supply of decarbonized electricity. Between 2021 and 2030, the Enel Group plans to mobili- ze investments totaling €210 billion, of which €170 billion invested directly by the Group (an increase of 6% com- pared with the previous Plan) and €40 billion catalyzed by third parties. With these investments, the Enel Group expects to achieve total renewables capacity of about 154 GW by 2030, tripling the Group’s renewables portfolio compa- red with 2020, as well as increasing the grid’s customer base by 12 million and promoting the electrification of energy consumption, increasing the volume of electri- city sold by almost 30% while at the same time focusing on the development of beyond-commodity services, such as public electric mobility or behind-the-meter storage, in collaboration with partners. 254 254 Integrated Annual Report 2021 • Enable the electrification of customer energy demand. The Group’s strategic actions will seek to increase value for customers in the business-to-consumer (B2C), bu- siness-to-business (B2B) and business-to-government (B2G) segments, increasing the level of electrification of these customers while simultaneously improving the services we deliver. In “Tier 1” countries, it is expected that this targeted strategy, combined with investments in the basic asset, will increase the Group’s integrated margin by to 2.6 times between 2021 and 2030, with the support of a unified platform capable of managing the world’s largest customer base among private operators. • Leverage the creation of value throughout the value chain. In order to enhance the strategy of focusing on custo- mers through the use of platforms, in 2021 the Group created the Global Customer Operations Business Line, which is responsible for defining the commer- cial strategy and for directing the allocation of capi- tal towards customer needs, leveraging electrification while achieving excellent service levels. The refocusing of the Group will go hand in hand with the simplification and rebalancing of its portfolio, through: – a focus on “Tier 1” countries; – using resources made available from the disposal of assets that no longer support the Group’s strategy; and – mergers and acquisitions designed to improve posi- tioning, acquire skills or generate synergies. • Achieve sustainable Net-Zero objectives in advance. The Group has moved its “Net-Zero” commitment forward by 10 years, from 2050 to 2040, for all emissions along the value chain. The Group plans to abandon ther- mal generation by 2040, replacing it with new renewables capacity and hybridize renewables with storage solutions. Furthermore, we expect that by 2040 the electricity sold by the Group will be generated entirely from renewables and, by the same year, the Group will exit the retail gas sales business. As a result of the strategic lines of action described abo- ve, between 2020 and 2030 the Group’s ordinary EBITDA is expected to increase at a compound annual growth rate of 5-6%, with the ordinary profit of the Group expected to in- crease at a compound annual rate of 6-7%. With regard to the period covered by the 2022-2024 Plan, in 2024 the Group’s ordinary EBITDA is forecast to reach €21- 21.6 billion, compared with €19.2 billion in 2021. The Group’s ordinary profit is expected to rise to €6.7-6.9 billion in 2024, compared with €5.6 billion in 2021. Enel’s dividend policy for the 2022-2024 period remains simple, predictable and attractive. Shareholders should re- ceive a fixed dividend per share (DPS) that is expected to increase by 13% between 2021 and 2024, reaching €0.43 per share. strial growth and as part of the Group’s decarbonization policies; • an increase in investments in distribution grids, especially in Italy, with the aim of further improving service quality and increasing the flexibility and resilience of the grid; • an increase in investments dedicated to the electrifi- cation of consumption, with the aim of leveraging the growth of the customer base, and to achieving conti- nuous efficiency gains, supported by the development of global business platforms. The following developments are expected in 2022: • an acceleration of investments in renewable energy, especially in Iberia and North America, to support indu- Based on the foregoing, the financial targets on which the Group’s 2022-2024 Plan is based are reported below. Financial targets Profit growth Ordinary EBITDA (€ billions) Ordinary profit (€ billions) Value creation Dividend per share (€) 2021 2022 2023 2024 19.2 5.6 19-19.6 5.6-5.8 20-20.6 6.1-6.3 21-21.6 6.7-6.9 0.38 0.40 0.43 0.43 Outlook for operations 255 255 Other information Non-EU subsidiaries At the date of approval by the Board of Directors of the financial statements of Enel SpA for 2021 – March 17, 2022 – the Enel Group meets the “conditions for the listing of shares of companies with control over companies establi- shed and regulated under the law of non-EU countries” (hereinafter “non-EU subsidiaries”) established by CON- SOB with Article 15 of the Markets Regulation (approved with Resolution no. 20249 of December 28, 2017). Specifically, we report that: • in application of the materiality criteria for the purpo- ses of consolidation referred to in Article 15, paragraph 2, of the CONSOB Markets Regulation, 44 non-EU subsidiaries of the Enel Group have been identified to which the rules in question apply on the basis of the consolidated accounts of the Enel Group at December 31, 2020; • they are: 1) Almeyda Solar SpA (a Chilean company merged into Enel Green Power Chile SA on January 1, 2021); 2) Ampla Energia e Serviços SA (a Brazilian com- pany belonging to Enel Américas SA); 3) Aurora Wind Project LLC (a United States company belonging to Enel North America Inc.); 4) Celg Distribuição SA - Celg D (a Brazilian company belonging to Enel Américas SA); 5) Cimarron Bend Wind Holdings I LLC (a United Sta- tes company belonging to Enel North America Inc.); 6) Codensa SA ESP (a Colombian company merged into Emgesa SA ESP on March 1, 2022); 7) Companhia Ener- gética do Ceará - Coelce (a Brazilian company belon- ging to Enel Américas SA); 8) Dolores Wind SA de Cv (a Mexican company belonging to Enel Green Power SpA); 9) EGPNA Preferred Wind Holdings LLC (a United States company belonging to Enel North America Inc.); 10) Eletropaulo Metropolitana Eletricidade de São Pau- lo SA (a Brazilian company belonging to Enel Américas SA); 11) Emgesa SA ESP (a Colombian company belon- ging to Enel Américas SA, renamed Enel Colombia SA ESP on March 1, 2022); 12) Empresa Distribuidora Sur SA - Edesur (an Argentine company belonging to Enel Américas SA); 13) Enel Américas SA (a Chilean com- pany directly controlled by Enel SpA); 14) Enel Brasil SA (a Brazilian company belonging to Enel Américas SA); 15) Enel Chile SA (a Chilean company directly controlled by Enel SpA); 16) Enel Distribución Chile SA (a Chilean company belonging to Enel Chile SA); 17) Enel Distribu- ción Perú SAA (a Peruvian company belonging to Enel Américas SA); 18) Enel Finance America LLC (a United 256 256 Integrated Annual Report 2021 States company belonging to Enel North America Inc.); 19) Enel Fortuna SA (a Panamanian company belonging to Enel Américas SA); 20) Enel Generación Chile SA (a Chilean company belonging to Enel Chile SA); 21) Enel Generación Perú SAA (a Peruvian company belonging to Enel Américas SA); 22) Enel Green Power Brasil Par- ticipações Ltda (a Brazilian company merged into Enel Brasil SA on November 4, 2021); 23) Enel Green Power Cachoeira Dourada SA (a Brazilian company belonging to Enel Américas SA); 24) Enel Green Power Chile SA (a Chilean company belonging to Enel Chile); 25) Enel Green Power Diamond Vista Wind Project LLC (a United States company belonging to Enel North America Inc.); 26) Enel Green Power México S de RL de Cv (a Mexican company belonging to Enel Green Power SpA); 27) Enel Green Power North America Inc. (a United States com- pany belonging to Enel North America Inc.); 28) Enel Green Power Perú SAC (a Peruvian company belonging to Enel Américas SA); 29) Enel Green Power Rattlesna- ke Creek Wind Project LLC (a United States company belonging to Enel North America Inc.); 30) Enel Green Power RSA (Pty) Ltd (a South African company belon- ging to Enel Green Power SpA); 31) Enel Green Power RSA 2 (RF) (Pty) Ltd (a South African company belonging to Enel Green Power SpA); 32) Enel Kansas LLC (a Uni- ted States company belonging to Enel North America Inc.); 33) Enel North America Inc. (a United States com- pany directly controlled by Enel SpA); 34) Enel Perú SAC (a Peruvian company belonging to Enel Américas SA); 35) Enel Rinnovabile SA de Cv (a Mexican company be- longing to Enel Green Power SpA); 36) Enel Russia PJSC (a Russian company directly controlled by Enel SpA); 37) Enel X North America Inc. (a United States company belonging to Enel North America Inc.); 38) Geotérmica del Norte SA (a Chilean company belonging to Enel Chi- le SA); 39) High Lonesome Wind Power LLC (a United States company belonging to Enel North America Inc.); 40) Red Dirt Wind Project LLC (a United States company belonging to Enel North America Inc.); 41) Rock Creek Wind Project LLC (a United States company belonging to Enel North America Inc.); 42) Thunder Ranch Wind Project LLC (a United States company belonging to Enel North America Inc.); 43) Tradewind Energy Inc. (a United States company belonging to Enel North Ame- rica Inc.); 44) White Cloud Wind Project LLC (a United States company belonging to Enel North America Inc.); • the balance sheet and income statement of the above companies included in the reporting package used for the purpose of preparing the 2021 consolidated finan- cial statements of the Enel Group will be made available to the public by Enel SpA (pursuant to Article 15, para- graph 1a) of the Markets Regulation) at least 15 days pri- or to the day scheduled for the Ordinary Shareholders’ Meeting called to approve the 2021 financial statemen- ts of Enel SpA together with the summary statements showing the essential data of the latest annual financial statements of subsidiaries and associated companies (pursuant to the applicable provisions of Article 77, pa- ragraph 2-bis, of the CONSOB Issuers Regulation ap- proved with Resolution no. 11971 of May 14, 1999); • the articles of association and composition and powers of the control bodies from all the above subsidiaries have been obtained by Enel SpA and are available in updated form to CONSOB where the latter should re- quest such information for supervisory purposes (pur- suant to Article 15, paragraph 1b) of the Markets Regu- lation); • Enel SpA has verified that the above subsidiaries: – provide the auditor of the Parent, Enel SpA, with in- formation necessary to perform annual and interim audits of Enel SpA (pursuant to Article 15, paragraph 1 (letter c-i) of the Markets Regulation); – use an administrative and accounting system ap- propriate for regular reporting to the management and auditor of the Parent, Enel SpA, of income state- ment, balance sheet and financial data necessary for preparation of the consolidated financial statements (pursuant to Article 15, paragraph 1 (letter c-ii) of the Markets Regulation). Disclosures on financial instruments The disclosures on financial instruments required by Article 2428, paragraph 2, no. 6-bis of the Italian Civil Code are reported in the following notes to the consolidated finan- cial statements: 46 “Financial instruments by category”, 47 “Risk management”, 49 “Derivatives and hedge accoun- ting” and 50 “Assets and liabilities measured at fair value”. Atypical or unusual operations Pursuant to the CONSOB Notice of July 28, 2006, the Group did not carry out any atypical or unusual operations in 2021. Such operations include transactions whose significance, size, nature of the counterparties, subject matter, method for calculating the transfer price or timing could give rise to doubts concerning the propriety and/or completeness of disclosure, conflicts of interest, preservation of com- pany assets or protection of non-controlling shareholders. Subsequent events Significant events following the close of the year are di- scussed in note 57 “Events after the reporting period” to the consolidated financial statements. Transactions with related parties For more information on transactions with related parties, please see note 52 “Related parties” to the consolidated financial statements. Other information 257 257 Reconciliation of equity and profit of Enel SpA and the corresponding consolidated figures Pursuant to CONSOB Notice no. DEM/6064293 of July 28, 2006, the following table provides a reconciliation of Group profit for the year and equity with the correspon- ding figures for the Parent. Millions of euro Separate financial statements - Enel SpA Carrying amount of and impairment losses on consolidated equity investments Equity and profit (calculated using the same accounting policies) of the consolidated companies and groups and those accounted for using the equity method, net of non-controlling interests Translation reserve Goodwill Intercompany dividends Elimination of unrealized intercompany profits, net of tax effects and other minor adjustments TOTAL ATTRIBUTABLE TO OWNERS OF THE PARENT NON-CONTROLLING INTERESTS CONSOLIDATED FINANCIAL STATEMENTS Income statement Equity Income statement Equity at Dec. 31, 2021 at Dec. 31, 2020 4,762 (8,947) 34,967 (104,958) 2,326 687 30,743 (85,641) 13,089 94,975 4,091 78,099 - - (5,805) 90 3,189 668 3,857 (8,125) 13,821 - (1,027) 29,653 12,689 42,342 - (274) (4,146) (74) 2,610 1,012 3,622 (7,046) 13,779 - (1,609) 28,325 14,032 42,357 258 258 Integrated Annual Report 2021 Other information 259 259 CONSOLIDATED FINANCIAL STATEMENTS 6. Consolidated financial statements Sale of Open Fiber As part of the “Stewardship” business model, Open Fiber was sold in 2021, with the recognition of a capital gain of €1,763 million. Energy transition The Group continued the energy transition process by increasing its investment in new renewable generation capacity and digitalization. Impact of climate change In its valuation processes, the Group has taken account of the long-term impacts of climate change. 260 Integrated Annual Report 2021 261 Consolidated financial statements Consolidated Income Statement Millions of euro Notes 2021 2020 of which with related parties of which with related parties 4,038 10 5,385 2,958 202 1 62 71 Revenue Revenue from sales and services(1) (2) Other income Costs Electricity, gas and fuel(1) Services and other materials(1) Personnel expenses Net impairment losses/(reversals) on trade receivables and other receivables Depreciation, amortization and other impairment losses Other operating costs Capitalized costs Net results from commodity contracts(1) Operating profit(2) Financial income from derivatives Other financial income(2) Financial expense from derivatives Other financial expense Net income/(expense) from hyperinflation Share of profit/(loss) of equity-accounted investments Pre-tax profit Income taxes Profit from continuing operations Profit/(Loss) from discontinued operations Profit for the year (owners of the Parent and non-controlling interests) Attributable to owners of the Parent Attributable to non-controlling interests Earnings per share Basic earnings per share Basic earnings per share Basic earnings per share from continuing operations Basic earnings/(loss) per share from discontinued operations Diluted earnings per share Diluted earnings per share Diluted earnings per share from continuing operations Diluted earnings/(loss) per share from discontinued operations 10.a 10.b [Subtotal] 11.a 11.b 11.c 11.d 11.e 11.f 11.g 84,104 3,902 88,006 49,093 19,609 5,281 1,196 8,691 2,095 (3,117) [Subtotal] 82,848 12 13 14 13 14 15 16 2,522 7,680 2,718 1,882 1,257 6,114 20 571 5,500 1,643 3,857 - 3,857 3,189 668 0.31 0.31 - 0.31 0.31 - 7,010 6 13,826 3,152 218 24 138 32 63,642 2,362 66,004 26,026 18,366 4,793 1,285 7,163 2,202 (2,385) 57,450 (99) 8,455 1,315 2,676 2,256 4,485 57 (299) 5,463 1,841 3,622 - 3,622 2,610 1,012 0.26 0.26 - 0.26 0.26 - (1) The figures for 2020 have been adjusted, for comparative purposes only, to take account of the effects associated with the change in classification connect- ed with the fair value measurement of outstanding contracts at the end of the period for the purchase and sale of commodities with physical settlement. The change in classification had no impact on operating profit. For more details, please see note 7 to these consolidated financial statements. (2) For comparative purposes only, €87 million in 2020 in respect of the component recognized through profit or loss deriving from the remeasurement at fair value of the financial assets connected with service concession arrangements involving distribution operations in Brazil falling within the scope of IFRIC 12 have been reclassified from financial income to revenue. The latter classification had an impact of the same amount on operating profit. For more details, please see note 7 to these consolidated financial statements. 262 262 Integrated Annual Report 2021 Statement of Consolidated Comprehensive Income Millions of euro Profit for the year Notes Other comprehensive income/(expense) that may be subsequently reclassified to profit or loss (net of taxes) Effective portion of change in the fair value of cash flow hedges Change in the fair value of hedging costs Share of the other comprehensive expense of equity-accounted investments Change in the fair value of financial assets at FVOCI Change in translation reserve Other comprehensive income/(expense) that may not be subsequently reclassified to profit or loss (net of taxes) Remeasurement of net liabilities/(assets) for defined benefit plans Change in the fair value of equity investments in other companies Total other comprehensive income/(expense) for the year 36 Comprehensive income/(expense) for the year Attributable to: - owners of the Parent - non-controlling interests 2021 3,857 (725) 195 (645) 11 (90) 30 - (1,224) 2,633 2,562 71 2020 3,622 (268) (99) (9) (1) (4,510) (353) (21) (5,261) (1,639) (1,028) (611) Consolidated financial statements 263 263 Statement of Consolidated Financial Position at Dec. 31, 2021 at Dec. 31, 2020 of which with related parties of which with related parties Notes 18 21 22 23 24 25 26 27 28 30 84,572 91 18,070 13,821 11,034 704 2,772 530 5,704 3,268 78,718 103 17,668 13,779 8,578 861 1,236 304 5,159 2,494 14 1,120 119 [Total] 140,566 128,900 32 33 27 26 29 31 34 [Total] 35 3,109 16,076 121 530 22,791 8,645 5,002 8,858 65,132 1,242 206,940 1,321 32 157 123 2,401 12,046 176 446 3,471 5,113 3,578 5,906 33,137 1,416 163,453 21 1,144 863 190 164 Millions of euro ASSETS Non-current assets Property, plant and equipment Investment property Intangible assets Goodwill Deferred tax assets Equity-accounted investments Non-current financial derivative assets Non-current contract assets Other non-current financial assets Other non-current assets Current assets Inventories Trade receivables Current contract assets Tax assets Current financial derivative assets Other current financial assets Other current assets Cash and cash equivalents Assets classified as held for sale TOTAL ASSETS 264 264 Integrated Annual Report 2021 Millions of euro LIABILITIES AND EQUITY Equity attributable to owners of the Parent Share capital Treasury share reserve Other reserves Retained earnings Non-controlling interests Total equity Non-current liabilities Long-term borrowings Employee benefits Provisions for risks and charges (non-current portion) Deferred tax liabilities Non-current financial derivative liabilities Non-current contract liabilities Other non-current financial liabilities Other non-current liabilities Current liabilities Short-term borrowings Current portion of long-term borrowings Provisions for risks and charges (current portion) Trade payables Income tax liabilities Current financial derivative liabilities Current contract liabilities Other current financial liabilities Other current liabilities Liabilities included in disposal groups classified as held for sale Total liabilities TOTAL LIABILITIES AND EQUITY Notes [Total] 36 37 38 39 24 26 27 40 41 2,724 7,197 9,259 3,339 6,214 120 4,525 [Total] 87,878 37 37 39 43 26 27 44 42 [Total] 35 13,306 4,031 1,126 16,959 712 24,607 1,433 625 12,959 75,758 962 164,598 206,940 at Dec. 31, 2021 at Dec. 31, 2020 of which with related parties of which with related parties 10,167 (36) 1,721 17,801 29,653 12,689 42,342 10,167 (3) (39) 18,200 28,325 14,032 42,357 54,500 880 49,519 984 2,964 5,774 7,797 3,606 6,191 - 3,458 79,309 6,345 3,168 1,057 1 194 6 109 161 21 108 4,082 12,859 2,205 12 80 471 3,531 1,275 622 11,651 40,979 808 121,096 163,453 16 37 Consolidated financial statements 265 265 Statement of Changes in Consolidated Equity (note 36) Millions of euro Share capital and reserves attributable to owners of the Parent Share premium reserve Treasury share reserve Reserve for equity instruments - perpetual hybrid bonds At December 31, 2019 Distribution of dividends Purchase of treasury shares Equity instruments - perpetual hybrid bonds Reserve for share-based payments (LTI bonus) Reclassification for curtailment of defined benefit plans (IAS 19) following signing of the 5th Endesa Collective Bargaining Agreement Reclassifications Monetary restatement (IAS 29) Transactions in non-controlling interests Comprehensive income/ (expense) for the year of which: - other comprehensive income/(expense) - profit/(loss) for the year Share capital 10,167 - - - - - - - - - - - 7,487 - (11) - - - - - - - - - At December 31, 2020 10,167 7,476 Distribution of dividends Coupons paid to holders of hybrid bonds Reclassifications Purchase of treasury shares Reserve for share-based payments (LTI bonus) Equity instruments - perpetual hybrid bonds Monetary restatement (IAS 29) Change in the consolidation scope Transactions in non-controlling interests Comprehensive income/ (expense) for the year of which: - other comprehensive income/ (expense) - profit/(loss) for the year - - - - - - - - - - - - - - 20 - - - - - - - - - (1) - (2) - - - - - - - - - (3) - - (20) (13) - - - - - - - - - - - 2,386 - - - - - - - - Legal reserve 2,034 Other reserves Translation reserve Hedging reserve 2,262 (3,802) (1,610) Hedging instruments accounted Actuarial without loss controlling costs reserve at FVOCI investments reserve of control interests Parent interests Total equity (147) 21 (119) (1,043) (2,381) (1,572) 19,081 30,377 16,561 46,938 Reserve from measurement Reserve from of financial equity- Reserve from disposal Reserve from of equity acquisitions interests of non- Equity attributable to owners Non- of the controlling Retained earnings - - - - - - - - - - - - - - 6 - - - - - - - - - - - - - - - - - - - - - (257) (13) (2,987) (294) (2,987) (294) - - (95) (22) 2,610 (1,028) (611) (1,639) 280 (709) (729) (95) (22) - (3,638) (1,623) (5,261) - - - - - - - - - - - - - - - - - - 203 203 - (39) - - - - - - - - - - - - - - - - - - 11 11 - 10 (9) (9) - - - - - - - - - - - - - - - - - - 55 (648) (648) 106 (28) (231) (231) - - - - - - - - - - - - - - - 11 11 - - - - - - - - - - - - - - - - - - - - 3 - - - - - - - - - - - - - - - - - - - - - - - - (3,487) (3,487) (1,356) (4,843) - - - (106) (1) 105 (2) (71) (36) - - - - 318 (13) 2,386 6 - (1) 105 (20) (71) (13) - 9 3,181 318 45 147 - - - - - - - - - - 225 31 (13) 2,386 6 - (1) 252 3,622 42,357 (5,057) (71) (13) - 9 3,181 543 76 2,610 2,610 1,012 (3,791) (3,791) (1,266) 3,189 2,562 71 2,633 - (627) (597) (1,224) 3,189 3,189 668 3,857 (140) 449 (8) (912) (404) (1,316) 2,386 2,034 2,268 (7,046) (1,917) (242) (1) (128) (1,196) (2,381) (1,292) 18,200 28,325 14,032 - - - - - 3,181 - - - - - - - - - - - - - - - - - - - - - 36 9 - - - - - - - - - - - - - - - (1,234) - - - - - - - (10) 18 155 (359) 155 - (359) - At December 31, 2021 10,167 7,496 (36) 5,567 2,034 2,313 (8,125) (2,268) (721) (1,325) (2,378) (843) 17,801 29,653 12,689 42,342 266 266 Integrated Annual Report 2021 Millions of euro Share capital and reserves attributable to owners of the Parent Share capital 10,167 Reserve for equity Share Treasury instruments premium reserve share - perpetual reserve hybrid bonds 7,487 (11) (1) - (2) 2,386 Legal reserve 2,034 Other Translation reserves reserve Hedging reserve 2,262 (3,802) (1,610) At December 31, 2019 Distribution of dividends Purchase of treasury shares Equity instruments - perpetual hybrid bonds Reserve for share-based payments (LTI bonus) Reclassification for curtailment of defined benefit plans (IAS 19) following signing of the 5th Endesa Collective Bargaining Agreement Reclassifications Monetary restatement (IAS 29) Transactions in non-controlling interests Comprehensive income/ (expense) for the year of which: - other comprehensive income/(expense) - profit/(loss) for the year Distribution of dividends Coupons paid to holders of hybrid bonds Reclassifications Purchase of treasury shares Reserve for share-based payments (LTI bonus) Equity instruments - perpetual hybrid bonds Monetary restatement (IAS 29) Change in the consolidation Transactions in non-controlling Comprehensive income/ (expense) for the year scope interests of which: (expense) - other comprehensive income/ - profit/(loss) for the year - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 20 (20) (13) 3,181 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 6 - - - - - - - - - - - - - - - - - 36 9 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - (257) (13) (2,987) (294) (2,987) (294) (10) 18 (1,234) 155 (359) 155 - (359) - At December 31, 2020 10,167 7,476 (3) 2,386 2,034 2,268 (7,046) (1,917) At December 31, 2021 10,167 7,496 (36) 5,567 2,034 2,313 (8,125) (2,268) Reserve from measurement of financial instruments at FVOCI Reserve from equity- accounted investments Hedging costs reserve Actuarial reserve Reserve from disposal of equity interests without loss of control Reserve from acquisitions of non- controlling interests Equity attributable to owners of the Parent Retained earnings Non- controlling interests Total equity (147) 21 (119) (1,043) (2,381) (1,572) 19,081 30,377 16,561 46,938 - - - - - - - - - - - - - - - - (95) (22) (95) - (242) - - - - - - - - - 203 203 - (39) (22) - (1) - - - - - - - - - 11 11 - 10 - - - - - - - - (9) (9) - - - - - 106 - - (28) (231) (231) - - - - - - - - - - - - - - - - - - - 280 - - - (3,487) (3,487) (1,356) (4,843) - - - (106) (1) 105 (2) (13) 2,386 6 - (1) 105 (20) - - - - - 147 (13) 2,386 6 - (1) 252 (709) (729) 2,610 (1,028) (611) (1,639) - (3,638) (1,623) (5,261) 2,610 2,610 1,012 (128) (1,196) (2,381) (1,292) 18,200 28,325 14,032 (3,791) (3,791) (1,266) - - - - - - - 55 - (648) (648) - - - - - - - - - (140) 11 11 - - - - - - - - - 3 - - - - - - - - - - - 449 - - - 3,622 42,357 (5,057) (71) - (13) 9 3,181 543 76 (71) - (13) 9 3,181 318 45 - - - - - 225 31 (71) - (36) - - 318 - (8) (912) (404) (1,316) 3,189 2,562 71 2,633 - (627) (597) (1,224) 3,189 3,189 668 3,857 (721) (1,325) (2,378) (843) 17,801 29,653 12,689 42,342 Consolidated financial statements 267 267 Consolidated Statement of Cash Flows Millions of euro Pre-tax profit Adjustments for: Net impairment losses/(reversals) on trade receivables and other receivables Depreciation, amortization and other impairment losses Net financial (income)/expense(1) Net (gains)/losses from equity-accounted investments Changes in net working capital: - inventories - trade receivables - trade payables - other contract assets - other contract liabilities - other assets/liabilities(1) Accruals to provisions Utilization of provisions Interest income and other financial income collected Interest expense and other financial expense paid Net (income)/expense from measurement of commodities Income taxes paid Net capital gains Cash flows from operating activities (A) Investments in property, plant and equipment Investments in intangible assets Investments in non-current contract 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 used in investing activities (B) New long-term borrowings Repayments of borrowings Other changes in net financial debt Payments for acquisition of equity investments without change of control and other transactions in non-controlling interests Issues/(Redemptions) of hybrid bonds Sale/(Purchase) of treasury shares Dividends and interim dividends paid Coupons paid to holders of hybrid bonds Cash flows from/(used in) 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 year(2) Cash and cash equivalents at the end of the year(3) Notes 11.d 11.e 13-14 15 32 33 43 27 27 13-14 13-14 5,500 1,196 8,691 2,751 (571) (1,097) (649) (4,951) 4,357 56 75 15 1,578 (1,300) 1,653 (4,411) (304) 16 (1,846) (1,771) 10,069 18-21 (10,545) 22 (1,656) 8 8 46.3 46.3 (907) (283) 61 2,455 (10,875) 15,895 (11,321) 3,339 (1,295) 2,213 (13) (4,970) (71) 3,777 17 2,988 6,002 8,990 2021 2020 of which with related parties of which with related parties 33 (86) 34 62 (71) (104) (176) (458) 1,877 (4) 31 138 (32) 5,463 1,285 7,163 2,693 299 (1,654) (8) (1,350) 698 (15) (142) (837) 834 (1,202) 1,705 (3,690) 188 (1,575) (1) 11,508 (8,330) (1,218) (649) (33) 154 (41) (10,117) 3,924 (118) (1,950) (712) (1,067) 588 (13) (4,742) - (3,972) (497) (3,078) 9,080 6,002 (1) For comparative purposes only, in 2020 the component recognized through profit or loss deriving from the remeasurement at fair value of the financial assets connected with service concession arrangements involving distribution operations in Brazil falling within the scope of IFRIC 12 was reclassified from financial income to revenue. The latter classification did not have an impact on cash flows from operating activities. (2) Of which cash and cash equivalents equal to €5,906 million at January 1, 2021 (€9,029 million at January 1, 2020), short-term securities equal to €67 million at January 1, 2021 (€51 million at January 1, 2020) and cash and cash equivalents pertaining to “Assets held for sale” in the amount of €29 million at January 1, 2021. (3) Of which cash and cash equivalents equal to €8,858 million at December 31, 2021 (€5,906 million at December 31, 2020), short-term securities equal to €88 million at December 31, 2021 (€67 million at December 31, 2020) and cash and cash equivalents pertaining to “Assets held for sale” in the amount of €44 million at December 31, 2021 (€29 million at December 31, 2020). 268 268 Integrated Annual Report 2021 Notes to the consolidated financial statements Basis of presentation 1. Form and content of the consolidated financial statements Enel SpA has its registered office in Viale Regina Margher- ita 137, Rome, Italy, and since 1999 has been listed on the Milan stock exchange. There were no changes in the company name in 2021. Enel is an energy multinational and is one of the world’s leading integrated operators in the electricity and gas in- dustries, with a special focus on Europe and Latin America. The consolidated financial statements as at and for the year ended December 31, 2021 comprise the financial statements of Enel SpA, its subsidiaries and Group hold- ings in associates and joint ventures, as well as the Group’s share of the assets, liabilities, costs and revenue of joint operations (“the Group”). A list of the subsidiaries, associates, joint operations and joint ventures included in the consolidation scope is at- tached. These consolidated financial statements were approved and authorized for publication by the Board of Directors on March 17, 2022. These consolidated financial statements have been audit- ed by KPMG SpA. Basis of presentation The consolidated financial statements as at and for the year ended December 31, 2021 have been prepared in accordance with international accounting standards (In- ternational Accounting Standards - IAS and International Financial Reporting Standards - IFRS) issued by the In- ternational Accounting Standards Board (IASB), the inter- pretations of the IFRS Interpretations Committee (IFRSIC) and the Standing Interpretations Committee (SIC), recog- nized in the European Union pursuant to Regulation (EC) no. 1606/2002 and in effect as of the close of the year. All of these standards and interpretations are hereinafter re- ferred to as the “IFRS-EU”. The consolidated financial statements have also been pre- pared in conformity with measures issued in implementa- tion of Article 9, paragraph 3, of Legislative Decree 38 of February 28, 2005. The consolidated financial statements consist of the con- solidated income statement, the statement of consolidat- ed comprehensive income, the statement of consolidated financial position, the statement of consolidated changes in equity and the consolidated statement of cash flows and the related notes. The assets and liabilities recognized in the statement of consolidated financial position are classified on a “current/ non-current basis”, with separate reporting of assets held for sale and liabilities included in disposal groups held for sale. Current assets, which include cash and cash equiv- alents, are assets that are intended to be realized, sold or consumed during the normal operating cycle of the Group; current liabilities are liabilities that are expected to be settled during the normal operating cycle of the Group. The consolidated income statement classifies costs on the basis of their nature, with separate reporting of profit from continuing operations and profit/(loss) from discontinued operations attributable to owners of the Parent and to non-controlling interests. The consolidated statement of cash flows is prepared us- ing the indirect method, with separate reporting of any cash flows by operating, investing and financing activities associated with discontinued operations. In particular, although the Group does not diverge from the provisions of IAS 7 in the classification of items: • cash flows from operating activities report cash flows from core operations, interest on loans granted and ob- tained and dividends received from associates or joint ventures; • investing activities comprise investments in property, plant and equipment and intangible assets and dispos- als of such assets and contract assets related to ser- vice concession arrangements. They include, also, the effects of business combinations in which the Group acquires or loses control of companies, as well as other minor investments; • cash flows from financing activities include cash flows generated by liability management transactions and leases, dividends and interim dividends paid to owners of the Parent and non-controlling interests and the ef- Notes to the consolidated financial statements 269 269 fects of transactions in non-controlling interests that do not change the status of control of the companies involved; • a separate item is used to report the impact of exchange rates on cash and cash equivalents and their impact on profit or loss is eliminated in full in order to neutralize the effect on cash flows from operating activities. For more information on cash flows as reported in the statement of cash flows, please see the note on “Cash flows” in the Report on Operations. The consolidated financial statements have been prepared on a going concern basis using the cost method, with the exception of items measured at fair value in accordance with IFRS, as explained in the measurement bases applied to each individual item, and of non-current assets and dis- posal groups classified as held for sale, which are meas- ured 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 Enel SpA. All figures are shown in millions of euro unless stated other- wise. The consolidated income statement, the statement of consolidated financial position and the consolidated statement of cash flows report transactions with related parties, the definition of which is given in note 2.2 “Signifi- cant accounting policies”. The consolidated financial statements provide compara- tive information in respect of the previous year. 2. Accounting policies 2.1 Use of estimates and management judgment Preparing the consolidated financial statements under IF- RS-EU requires management to take decisions and make estimates and assumptions that may impact the carrying amounts of revenue, costs, assets and liabilities and the re- lated disclosures concerning the items involved as well as contingent assets and liabilities at the reporting date. The estimates and management’s judgments are based on pre- vious experience and other factors considered reasonable in the circumstances. They are formulated when the carry- ing amount of assets and liabilities is not easily determined from other sources. The actual results may therefore differ from these estimates. The estimates and assumptions are periodically revised and the effects of any changes are re- flected through profit or loss if they only involve that period. If the revision involves both the current and future periods, the change is recognized in the period in which the revision is made and in the related future periods. In order to enhance understanding of the consolidated fi- nancial statements, the following sections examine the main items affected by the use of estimates and the cases that reflect management judgments to a significant degree, un- derscoring the main assumptions used by management in measuring these items in compliance with the IFRS-EU. The critical element of such valuations is the use of assumptions and professional judgments concerning issues that are by their very nature uncertain. Changes in the conditions underlying the assumptions and judgments could have a substantial impact on future results. The information included in the consolidated financial statements is selected on the basis of a materiality analysis carried out in accordance with the requirements of Prac- tice Statement 2 “Making Materiality Judgments”, issued by the International Accounting Standards Board (IASB), and on the basis of investor expectations.(22) In addition, as regards the impact of COVID-19, the continuing instability connect- ed with the pandemic creates uncertainty in forecasts for future developments in the macroeconomic, financial and business environment in which the Group operates, which is reflected in the assessments and the estimates produced by management regarding the carrying amounts of the as- sets and liabilities affected by greater volatility. Please see note 6 “COVID-19 disclosures” for details on the areas of the financial statements most affected by the COVID-19 pan- demic, drawing on the information available at December 31, 2021 and considering the constantly evolving scenario. With regard to the effects of climate change issues, the Group believes that climate change represents an implic- it element in the application of the methodologies and models used to perform estimates in the valuation and/or measurement of certain accounting items. Furthermore, the Group has also taken account of the impact of climate change in the significant judgments made by management. In this regard, the main items included in the consolidat- ed financial statements at December 31, 2021 affected by management’s use of estimates and judgments refer to the impairment of non-financial assets, obligations connected with the energy transition, including those for decommis- sioning and site restoration of certain generation plants, and the impairment of inventories of a number of coal-fired plants. For further details on these items, see note 18 “Prop- erty, plant and equipment”, note 23 “Goodwill”, note 32 “In- ventories” and note 39 “Provisions for risks and charges”. (22) “Information is material if omitting, misstating or obscuring it could reasonably be expected to influence the decisions that the primary users of general purpose financial statements make on the basis of those financial statements, which provide financial information about a specific reporting entity.” 270 270 Integrated Annual Report 2021 Use of estimates Revenue from contracts with customers Revenue from supply of electricity and gas to end users is recognized at the time the electricity or gas is delivered and includes, in addition to amounts invoiced on the basis of pe- riodic (and pertaining to the year) meter readings or on the volumes notified by distributors and transporters, an esti- mate of the electricity and gas delivered during the period but not yet invoiced that 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 year-end is based on estimates of the daily consumption of individual customers, primarily de- termined on their historical information, adjusted to reflect the climate factors or other matters that may affect the es- timated consumption. For more details on such revenue, see note 10.a “Revenue from sales and services”. Impairment of non-financial assets When the carrying amount of property, plant and equip- ment, investment property, intangible assets, right-of-use assets, goodwill and investments in associates/joint ven- tures exceeds its recoverable amount, which is the higher of the fair value less costs to sell and the value in use, the assets are impaired. Impairment tests are carried out in accordance with the provisions of IAS 36, as described in greater detail in note 23 “Goodwill”. In order to determine the recoverable amount, the Group generally adopts the value in use criterion. Value in use is based on the estimated future cash flows generated by the asset, discounted to their present value using a pre-tax discount rate that reflects the current market assessment of the time value of money and of the specific risks of the asset. Future cash flows used to determine value in use are based on the most recent Business Plan, approved by the manage- ment, containing forecasts for volumes, revenue, operating costs and investments. These projections cover the next three years. For subsequent years, account is taken of: • assumptions concerning the long-term evolution of the main variables considered in the calculation of cash flows, as well as the average residual useful life of the assets or the duration of the concessions, based on the specific characteristics of the businesses; • a long-term growth rate equal to the long-term growth of electricity demand and/or inflation (depending on the country and business) that does not in any case exceed the average long-term growth rate of the market in- volved. The recoverable amount is sensitive to the estimates and assumptions used in the calculation of cash flows and the discount rates applied. Nevertheless, possible changes in the underlying assumptions on which the calculation of such amounts is based could generate different recover- able amounts. The analysis of each group of non-financial assets is unique and requires management to use estimates and assumptions considered prudent and reasonable in the specific circumstances. In the current scenario, the analysis of impairment indica- tors has become even more important as an attempt was also made to assess whether the impact of the COVID-19 pandemic could reduce the carrying amount of certain non-financial assets as at December 31, 2021. For this rea- son, the Group has carefully considered the effects of the COVID-19 pandemic in determining the existence of impair- ment indicators for non-financial assets. Furthermore, in line with its business model and in the con- text of the acceleration of the decarbonization of the gen- eration mix and driving the energy-transition process, the Group has also carefully assessed whether climate change issues have affected the reasonable and supportable as- sumption used to estimate expected cash flows. In this re- gard, where necessary, the Group has also taken account of the long-term impact of climate change, in particular by considering in the estimation of the terminal value a long- term growth rate in line with the change in electricity de- mand determined using energy models for each country. Information on the main assumptions used to estimate the recoverable amount of assets with reference to the impacts relating to climate change, as well as information on chang- es in these assumptions, is provided in note 23 “Goodwill”. Expected credit losses on financial assets At the end of each reporting period, the Group recogniz- es a loss allowance for expected credit losses on trade re- ceivables and other financial assets measured at amortized cost, debt instruments measured at fair value through other comprehensive income, contract assets and all other assets in scope. Loss allowances for financial assets are based on assump- tions about risk of default and on the measurement of ex- pected credit losses. Management uses judgment in mak- ing these assumptions and selecting the inputs for the im- pairment calculation, based on the Group’s past experience, current market conditions as well as forward-looking esti- mates at the end of each reporting period. The expected credit loss (i.e., ECL) – determined consider- ing probability of default (PD), loss given default (LGD), and exposure at default (EAD) – is the difference between all contractual cash flows that are due in accordance with the contract and all cash flows that are expected to be received (including all shortfalls) discounted at the original effective interest rate (EIR). In particular, for trade receivables, contract assets and lease receivables, including those with a significant fi- nancial component, the Group applies the simplified ap- Notes to the consolidated financial statements 271 271 proach, determining expected credit losses over a period corresponding to the entire life of the asset, generally equal to 12 months. Based on the specific reference market and the regulatory context of the sector, as well as expectations of recovery after 90 days, for such assets, the Group mainly applies a default definition of 180 days past due to determine ex- pected credit losses, as this is considered an effective in- dication of a significant increase in credit risk. Accordingly, financial assets that are more than 90 days past due are generally not considered to be in default, except for some specific regulated markets. For trade receivables and contract assets the Group mainly applies a collective approach based on grouping trade re- ceivables and contract assets into specific clusters, taking into account the specific regulatory and business context. Only if the trade receivables are deemed to be individually significant by management and there is specific informa- tion about any significant increase in credit risk, does the Group apply an analytical approach. In case of individual assessment, PD is mainly obtained from an external provider. Conversely, for collective assessment, trade receivables are grouped based on shared credit risk characteristics and past due information, considering a specific definition of default. Based on each business and local regulatory framework as well as differences in customer portfolios also in terms of risk, default rates and recovery expectations, specific clus- ters are defined. The contract assets are considered to have substantially the same risk characteristics as the trade receivables for the same types of contracts. In order to measure the ECL for trade receivables on a collective basis, as well as for contract assets, the Group considers the following assumptions related to ECL pa- rameters: • PD, assumed as to be the average default rate, is cal- culated on a cluster basis and taking into consideration minimum 24 month historical data; • LGD is a function of the default bucket’s recovery rates, discounted at the EIR; and • EAD is estimated as the carrying exposure at the report- ing date net of cash deposits, including invoices issued but not expired and invoices to be issued. Based on specific management evaluations, the for- ward-looking adjustment can be applied considering qualitative and quantitative information in order to reflect possible future events and macroeconomic scenarios, which may affect the risk of the portfolio or the financial instrument. For additional details on the key assumptions and inputs 272 272 Integrated Annual Report 2021 used please see note 46 “Financial instruments by cate- gory”. Depreciable amount of certain elements of Italian hydroelectric plants subsequent to enactment of Law 134/2012 Law 134 of August 7, 2012 containing “urgent measures for growth” (published in the Gazzetta Ufficiale of August 11, 2012), introduced a sweeping overhaul of the rules gov- erning hydroelectric concessions. Among its various pro- visions, the law establishes that five years before the expi- ration of a major hydroelectric water diversion concession and in cases of lapse, relinquishment or revocation, where there is no prevailing public interest for a different use of the water, incompatible with its use for hydroelectric gen- eration, the competent public entity shall organize a pub- lic call for tenders for the award for consideration of the concession for a period ranging from 20 to a maximum of 30 years. In order to ensure operational continuity, the law also gov- erns the methods of transferring ownership of the busi- ness unit necessary to operate the concession, including all legal relationships relating to the concession, from the outgoing concession holder to the new concession holder, in exchange for payment of a price to be determined in ne- gotiations between the departing concession holder and the grantor agency, taking due account of the following elements: • for intake and governing works, penstocks and outflow channels, which under the consolidated law governing waters and electrical plants are to be relinquished free of charge (Article 25 of Royal Decree 1775 of December 11, 1933), the revalued cost less government grants re- lated to assets, also revalued, received by the conces- sion holder for the construction of such works, depre- ciated for ordinary wear and tear; • for other property, plant and equipment, the market val- ue, meaning replacement value, reduced by estimated depreciation for ordinary wear and tear. While acknowledging that the new regulations introduce important changes as to the transfer of ownership of the business unit with regard to the operation of the hydroe- lectric concession, the practical application of these prin- ciples faces difficulties, given the uncertainties that do not permit the formulation of a reliable estimate of the value that can be recovered at the end of existing concessions (residual value). Accordingly, management has decided it could not pro- duce a reasonable and reliable estimate of residual value. The fact that the legislation requires the new concession holder to make a payment to the departing concession holder prompted management to review the depreciation schedules for assets classified as to be relinquished free of charge prior to Law 134/2012 (until the year ended on December 31, 2011, given that the assets were to be relin- quished free of charge, the depreciation period was equal to the closest date between the term of the concession and the end of the useful life of the individual asset), cal- culating depreciation no longer over the term of the con- cession but, if longer, over the useful life of the individual assets. If additional information becomes available to ena- ble the calculation of residual value, the carrying amounts of the assets involved will be adjusted prospectively. Determining the fair value of financial instruments The fair value of financial instruments is determined on the basis of prices directly observable in the market, where available, or, for unlisted financial instruments, using spe- cific valuation techniques (mainly based on present val- ue) that maximize the use of observable market inputs. In rare circumstances where this is not possible, the inputs are estimated by management taking due account of the characteristics of the instruments being measured. For more information on financial instruments measured at fair value, please see note 50 “Assets and liabilities measured at fair value”. In accordance with IFRS 13, the Group includes a meas- urement of credit risk, both of the counterparty (Credit Valuation Adjustment or CVA) and its own (Debit Valua- tion Adjustment or DVA), in order to adjust the fair value of financial instruments for the corresponding amount of counterparty risk, using the method discussed in note 50 “Assets and liabilities measured at fair value”. Changes in the assumptions made in estimating the input data could have an impact on the fair value recognized for those instruments, especially in current conditions where markets are volatile and the economic outlook is highly un- certain and subject to rapid change. Development expenditure In order to determine the recoverability of development expenditure, the recoverable amount is estimated mak- ing assumptions regarding any further cash outflow that is expected to be incurred before the asset is ready for use or sale, the discount rates to be applied and the expected period of benefits. Pensions and other post-employment benefits Some of the Group’s employees participate in pension plans offering benefits based on their wage history and years of service. Certain employees are also eligible for other post-employment benefit schemes. The expenses and liabilities of such plans are calculated on the basis of estimates carried out by consulting actuaries, who use a combination of statistical and actuarial elements in their calculations, including statistical data on past years and forecasts of future costs. Other components of the estimation that are considered include mortality and re- tirement rates as well as assumptions concerning future developments in discount rates, the rate of wage increas- es, the inflation rate and trends in healthcare cost. These estimates can differ significantly from actual devel- opments owing to changes in economic and market con- ditions, increases or decreases in retirement rates and the lifespan of participants, as well as changes in the effective cost of healthcare. Such differences can have a substantial impact on the quantification of pension costs and other related expens- es. With regard to the COVID-19 pandemic, the Group has carefully analyzed the possible impacts of the economic crisis generated by the emergency on the actuarial as- sumptions used in the measurement of the actuarial liabil- ities and assets serving the plans. For more details on the main actuarial assumptions adopt- ed, please see note 38. Provisions for risks and charges For more details on provisions for risks and charges, please see note 39 “Provisions for risks and charges”. Note 55 “Contingent assets and liabilities” also provides information regarding the most significant contingent as- sets and liabilities for the Group at year end. Litigation The Group is involved in various civil, administrative and tax disputes connected with the normal pursuit of its activi- ties that could give rise to significant liabilities. It is not al- ways objectively possible to predict the outcome of these disputes. The assessment of the risks associated with this litigation is based on complex factors whose very nature requires recourse to management judgments, even when taking account of the contribution of external advisors as- sisting the Group, about whether to classify them as con- tingent liabilities or liabilities. Provisions have been recognized to cover all significant li- abilities for cases in which legal counsel feels an adverse outcome is likely and a reasonable estimate of the amount of the expense can be made. Obligations associated with generation plants, including decommissioning and site restoration Generation activities may entail obligations for the opera- tor with regard to future interventions that will have to be performed following the end of the operating life of the plant. Such interventions may involve the decommissioning of plants and site restoration, or other obligations linked to the type of generation technology involved. The nature of such obligations may also have a major impact on the ac- counting treatment used for them. In the case of nuclear power plants, where the costs re- gard both decommissioning and the storage of waste fuel and other radioactive materials, the estimation of the future cost is a critical process, given that the costs will Notes to the consolidated financial statements 273 273 er than being a general incremental borrowing rate. In particular, the risk of default is mitigated for the lessors as they have the right to reclaim the underlying asset itself. For more information on lease liabilities, please see note 46 “Financial instruments by category”. Income tax Recovery of deferred tax assets At December 31, 2021, the consolidated financial state- ments report deferred tax assets in respect of tax loss- es or tax credits usable in subsequent years and income components whose deductibility is deferred in an amount whose future recovery is considered by management to be highly probable. The recoverability of such assets is subject to the achieve- ment of future profits sufficient to absorb such tax losses and to use the benefits of the other deferred tax assets. Significant management judgment is required to assess the probability of recovering deferred tax assets, consid- ering all negative and positive evidence, and to determine the amount that can be recognized, based upon the likely timing and the level of future taxable profits together with future tax planning strategies and the tax rates applicable at the date of reversal. However, where the Group should become aware that it is unable to recover all or part of recognized tax assets in future years, the consequent adjustment would be taken to profit or loss in the year in which this circumstance arises. The recoverability of deferred tax assets is reviewed at the end of each period. Deferred tax assets not recog- nized are reassessed at each reporting date in order to verify the conditions for their recognition. Where required, the Group monitored the recovery times of deferred tax assets as well as those relating to the re- versal of deductible temporary differences, if any, as a re- sult of the greater uncertainty caused by the COVID-19 pandemic. For more detail in deferred tax assets recognized or not recognized, please see note 24 “Deferred tax assets and liabilities”. be incurred over a very long span of time, estimated at up to 100 years. The obligation, based on financial and engineering as- sumptions, is calculated by discounting the expected fu- ture cash flows that the Group considers it will have to pay to meet the obligations it has assumed. The discount rate used to determine the present value of the liability is the pre-tax risk-free rate and is based on the economic parameters of the country in which the plant is located. That liability is quantified by management on the basis of the technology existing at the measurement date and is re- viewed each year, taking account of developments in stor- age, decommissioning and site restoration technology, as well as the ongoing evolution of the legislative framework governing health and environmental protection. Subsequently, the value of the obligation is adjusted to reflect the passage of time and any changes in estimates. Onerous contracts In order to identify an onerous contract, the Group esti- mates the non-discretionary costs necessary to fulfil the obligations assumed (including any penalties) under the contract and the economic benefits that are presumed to be obtained from the contract. Leases When the interest rate implicit in the lease cannot be readily determined, the Group uses the incremental bor- rowing rate (IBR) at the lease commencement date to cal- culate the present value of the lease payments. This is the interest rate that the lessee would have to pay to borrow over a similar term, and with a similar security, the funds necessary to obtain an asset of a similar value to the right of use asset in a similar economic environment. When no observable inputs are available, the Group estimates the IBR making assumptions to reflect the terms and condi- tions of the lease and certain lessee-specific estimates. One of the most significant judgments for the Group in adopting IFRS 16 is determining this IBR necessary to cal- culate the present value of the lease payments required to be paid to the lessor. The Group approach to deter- mine an IBR is based on the assessment of the following three key components: • the risk free rate, that consider the currency flows of the lease payments, the economic environment where the lease contract has been negotiated and also the lease term; • the credit spread adjustment, in order to calculate an IBR that is specific for the lessee considering any un- derlying Parent or other guarantee; • the lease related adjustments, in order to reflect into the IBR calculation the fact that the discount rate is directly linked to the type of the underlying asset, rath- 274 274 Integrated Annual Report 2021 Management judgment Identification of cash generating units (CGUs) For impairment testing, if the recoverable amount cannot be determined for an individual asset, the Group identi- fies the smallest group of assets that generate largely in- dependent cash inflows. The smallest group of assets that generates cash inflows that are largely independent of the cash inflows from other assets or group of assets is a CGU. Identifying such CGUs involves management judgments regarding the specific nature of the assets and the busi- ness involved (geographical segment, business segment, regulatory framework, etc.) and the evidence that the cash inflows of the group of assets are largely independent of those associated with other assets (or groups of assets). The assets of each CGU are also identified on the basis of the manner in which management manages and monitors those assets within the business model adopted. In par- ticular, the number and scope of the CGUs are updated systematically to reflect the impact of new business com- binations and reorganizations carried out by the Group, and to take account of external factors that could influ- ence the ability of assets to generate independent cash inflows. In particular, 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 CGU, undergo separate analysis of their recoverability and be impaired where necessary. The CGUs identified by management to which the goodwill recognized in these consolidated financial statements has been allocated and the criteria used to identify the CGUs are indicated in note 23 “Goodwill”. Determining the useful life of non-financial assets In determining the useful life of property, plant and equip- ment and intangible assets with a finite useful life, the Group considers not only the future economic benefits – contained in the assets – obtained through their use, but also many other factors, such as physical wear and tear, the technical, commercial or other obsolescence of the product or service produced with the asset, legal or similar limits (e.g., safety, environmental or other restrictions) on the use of the asset, if the useful life of the asset depends on the useful life of other assets. Furthermore, in estimating the useful lives of the assets concerned, the Group has taken account of its commit- ment under the Paris Agreement. For more information on this issue, please see note 18 “Property, plant and equip- ment”. 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 investment, 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 analyz- es all facts and circumstances including any agreements with other investors, rights arising from other contractu- al arrangements and potential voting rights (call options, warrants, put options granted to non-controlling share- holders, etc.). These other facts and circumstances could be especially significant in such assessment when the Group holds less than a majority of voting rights, or similar rights, in the investee. Following such analysis of the existence of control, in ap- plication of IFRS 10 the Group consolidated certain com- panies (Emgesa and Codensa) on a line-by-line basis even though it did not hold more than half of the voting rights, determining that the requirements for de facto control ex- isted. Furthermore, even if it holds more than half of the voting rights in another entity, the Group considers all the rele- vant facts and circumstances in assessing whether it con- trols the investee. The Group reassesses whether or not it controls an in- vestee if facts and circumstances indicate that there are changes to one or more of the elements considered in verifying the existence of control. Determination of the existence of joint control and of the type of joint arrangement Under the provisions of IFRS 11, a joint arrangement is an agreement where two or more parties have joint control. Joint control exists only when the decisions over the rele- vant activities require the unanimous consent of the par- ties that share joint control. A joint arrangement can be configured as a joint venture or a joint operation. Joint ventures are joint arrangements whereby the parties that have joint control have rights to the net assets of the arrangement. Conversely, joint op- erations are joint arrangements whereby the parties that have joint control 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 Notes to the consolidated financial statements 275 275 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 oc- curred in one or more of the elements considered in veri- fying the existence of joint control and the type of the joint arrangement. For more information on the Group’s investments in joint ventures, please see note 25 “Equity-accounted invest- ments”. Determination of the existence of significant influence over an associate Associates are those in which the Group exercises signifi- cant influence, i.e., the power to participate in the financial and operating policy decisions of the investee but not exer- cise control or joint control over those policies. In general, it is presumed that the Group has a significant influence when it has an ownership interest of 20% or more. In order to determine the existence of significant influence, management must apply judgment and consider all facts and circumstances. The Group re-assesses whether or not it has significant in- fluence if facts and circumstances indicate that there are changes to one or more of the elements considered in ver- ifying the existence of significant influence. For more information on the Group’s equity investments in associates, please see note 25 “Equity-accounted invest- ments”. Application of “IFRIC 12 - Service concession arrangements” to concessions IFRIC 12 applies to “public-to-private” service concession arrangements, which can be defined as contracts under which the operator is obligated to provide public services, i.e., give access to major economic and social services for a certain period of time, on behalf of a public entity (the gran- tor). In these contracts, the grantor conveys to an operator the right to manage the infrastructure used to provide ser- vices. More specifically, IFRIC 12 gives guidance on the accounting by operators for “public-to-private” service concession ar- rangements in the event that: • the grantor controls or regulates what services the op- erator must provide with the infrastructure, to whom it must provide them, and at what price; and • the grantor controls – through ownership, beneficial en- titlement or otherwise – any significant residual interest in the infrastructure at the end of the term of the ar- rangement. In assessing the applicability of these requirements for the Group, as operator, management carefully analyzed existing concessions. 276 276 Integrated Annual Report 2021 On the basis of that analysis, the provisions of IFRIC 12 are applicable to some of the infrastructure of a number of companies that operate primarily in Brazil. Further details about the infrastructure used in the service concession arrangements in the scope of IFRIC 12 are pro- vided in note 19 “Infrastructure within the scope of ‘IFRIC 12 - Service concession arrangements’”. Revenue from contracts with customers In the process of applying IFRS 15, the Group has made the following judgments (further details about the most signif- icant effect on the Group’s revenue are provided in note 10.a “Revenue from sales and services”). Furthermore, during the year, the Group carefully moni- tored the effects of the uncertainties linked to the COV- ID-19 pandemic on the recognition of its revenue, in par- ticular as regards the main areas affected by significant judgments. Identification of the contract The Group carefully analyzes the contractual terms and conditions on a jurisdictional level in order to determine when a contract exists and the terms of that contract’s en- forceability so as to apply IFRS 15 only to such contracts. Identification and satisfaction of performance obligations When a contract includes multiple promised goods or services, in order to assess if they should be accounted for separately or as a group, the Group considers both the individual characteristics of goods/services and the na- ture of the promise within the context of the contract, also evaluating all the facts and circumstances relating to the specific contract under the relevant legal and regulatory framework. To evaluate when a performance obligation is satisfied, the Group evaluates when the control of the goods or services is transferred to the customer, assessed primarily from the perspective of the customer. Determination of the transaction price The Group considers all relevant facts and circumstanc- es in determining whether a contract includes variable consideration (i.e., consideration that may vary or de- pends upon the occurrence or non-occurrence of a fu- ture event). In estimating variable consideration, the Group uses the method that better predicts the consideration to which it will be entitled, applying it consistently throughout the contract and for similar contracts, also considering all available information, and updating such estimates until the uncertainly is resolved. The Group includes the esti- mated variable consideration in the transaction price only to the extent that it is highly probable that a significant re- versal in the cumulative revenue recognized will not occur when the uncertainty is resolved. Principal versus agent assessment The Group considers that it is an agent in some con- tracts in which it is not primarily responsible for fulfilling the contract and therefore it does not control goods or services before they are being transferred to customers. For example, the Group acts as an agent in some contracts for electricity/gas network connection services and other related activities depending on local legal and regulatory framework. Allocation of transaction price For contracts that have more than one performance obli- gation (e.g., “bundled” sale contracts), the Group generally allocates the transaction price to each performance ob- ligation in proportion to its stand-alone selling price. The Group determines stand-alone selling prices considering all information and using observable prices when they are available in the market or, if not, using an estimation meth- od that maximizes the use of observable inputs and apply- ing it consistently to similar arrangements. If the Group evaluates that a contract includes an option for additional goods or services (e.g., customer loyalty pro- grams or renewal options) that represents a material right, it allocates the transaction price to this option since the option gives rise to an additional performance obligation. Contract costs The Group assesses recoverability of the incremental costs of obtaining a contract either on a contract-by-contract basis, or for a group of contracts if those costs are associ- ated with the group of contracts. The Group supports the recoverability of such costs on the basis of its experience with other similar transactions and evaluating various factors, including potential renew- als, amendments and follow-on contracts with the same customer. The Group amortizes such costs over the average custom- er term. In order to determine this expected period of ben- efit from the contract, the Group considers its past experi- ence (e.g., “churn rate”), the predictive evidence from sim- ilar contracts and available information about the market. Classification and measurement of financial assets At initial recognition, in order to classify financial assets as financial assets at amortized cost, at fair value through other comprehensive income and at fair value through profit or loss, management assesses both the contractual cash flow characteristics of the instrument and the busi- ness model for managing financial assets in order to gen- erate cash flows. In order to evaluate the contractual cash flow character- istics of the instrument, management performs the SPPI test at an instrument level, in order to determine if it gives rise to cash flows that are solely payments of principal and interest (SPPI) on the principal amount outstanding, per- forming specific assessment on the contractual clauses of the financial instruments, as well as quantitative analysis, if required. The business model determines whether cash flows will result from collecting contractual cash flows, selling the financial assets, or both. For more details, please see note 46 “Financial instruments by category”. Hedge accounting Hedge accounting is applied to derivatives in order to re- flect into the financial statements the effect of risk man- agement strategies. Accordingly, at the inception of the transaction the Group documents the hedge relationship between hedging in- struments and hedged items, as well as its risk manage- ment objectives and strategy. The Group also assesses, both at hedge inception and on an ongoing basis, wheth- er hedging instruments are highly effective in offsetting changes in the fair values or cash flows of hedged items. On the basis of management’s judgment, the effective- ness assessment based on the existence of an econom- ic relationship between the hedging instruments and the hedged items, the dominance of credit risk in the changes in fair value and the hedge ratio, as well as the measure- ment of the ineffectiveness, is evaluated through a qualita- tive assessment or a quantitative computation, depending on the specific facts and circumstances and on the char- acteristics of the hedged items and the hedging instru- ments. For cash flow hedges of forecast transactions designated as hedged items, management assesses and documents that they are highly probable and present an exposure to changes in cash flows that affect profit or loss. Furthermore, during the year, the Group carefully moni- tored the possible effects of the uncertainties linked to the COVID-19 pandemic on its hedge relationships. For additional details on the key assumptions about effec- tiveness assessment and ineffectiveness measurement, please refer to note 49.1 “Derivatives and hedge account- ing”. Leases The complexity of the assessment of the lease contracts, and also their long-term expiring date, requires consider- able professional judgments for application of IFRS 16. In particular, this regards: • the application of the definition of a lease to the cases typical of the sectors in which the Group operates; • the identification of the non-lease component in the lease; • the evaluation of any renewable and termination op- tions included in the lease in order to determine the term of leases, also considering the probability of their exercise and any significant leasehold improvements on Notes to the consolidated financial statements 277 277 the underlying asset, taking due consideration of recent interpretations issued by the IFRS Interpretations Com- mittee; • the identification of any variable lease payments that depend on an index or a rate to determine whether the changes of the latter impact the future lease payments and also the amount of the right-of-use asset; • the estimate of the discount rate to calculate the pres- ent value of the lease payments; further details on as- sumptions about this rate are provided in the paragraph “Use of estimates”. Subsidiaries Subsidiaries are all entities over which the Group has con- trol. The Group controls an entity, regardless of the nature of the formal relationship between them, when it is ex- posed, 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. The figures of the subsidiaries are consolidated on a full line-by-line basis as from the date control is acquired until such control ceases. For more information on leases, please see note 20 “Leases”. Consolidation procedures The financial statements of subsidiaries used to prepare the consolidated financial statements were prepared at December 31, 2021 in accordance with the accounting policies adopted by the Group. If a subsidiary uses different accounting policies from those adopted in preparing the consolidated financial statements for similar transactions and facts in similar cir- cumstances, appropriate adjustments are made to ensure conformity with Group accounting policies. Assets, liabilities, revenue and expenses of a subsidiary ac- quired or disposed of during the year are included in or excluded from the consolidated financial statements, re- spectively, from the date the Group gains control or until the date the Group ceases to control the subsidiary. Profit or loss for the year and the other comprehensive in- come are attributed to owners of the Parent and non-con- trolling interests, even if this results in a loss for non-con- trolling interests. All intercompany assets and liabilities, equity items, reve- nue, expenses and cash flows relating to transactions be- tween entities of the Group are eliminated in full. Changes in ownership interest in subsidiaries that do not result in loss of control are accounted for as equity trans- actions, with the carrying amounts of the controlling and non-controlling interests adjusted to reflect changes in their interests in the subsidiary. Any difference between the amount to which non-controlling interests are adjust- ed and the fair value of the consideration paid or received is recognized in consolidated equity. When the Group ceases to have control over a subsidiary, any interest retained in the entity is remeasured to its fair value, recognized through profit or loss, at the date when control is lost, recognizing any gain or loss from the loss of control through profit or loss. In addition, any amounts previously recognized in other comprehensive income in respect of the former subsidiary are accounted for as if the Group had directly disposed of the related assets or liabilities. Uncertainty over income tax treatments The Group determines whether to consider each uncer- tain income tax treatment separately or together with one or more other uncertain tax treatments as well as whether to reflect the effect of uncertainty by using the most like- ly amount or the expected value method, based on which approach better predicts the resolution of the uncertainty for each uncertain tax treatments, taking account of local tax regulations. The Group makes significant use of professional judgment in identifying uncertainties about income tax treatments and reviews the judgments and estimates made in the event of a change in facts and circumstances that could change its assessment of the acceptability of a specific tax treatment or the estimate of the effects of uncertainty, or both. For more information on income taxes, please see note 16 “Income taxes”. 2.2 Significant accounting policies Related parties Related parties are mainly those that share the same par- ent with Enel SpA, the companies that directly or indirectly are controlled by Enel SpA, the associates or joint ventures (including their subsidiaries) of Enel SpA, or the associates or joint ventures (including their subsidiaries) of any Group company. Related parties also include entities that operate post-employment benefit plans for employees of Enel SpA or its associates (specifically, the FOPEN and FONDENEL pension funds), as well as the members of the boards of statutory auditors, and their immediate family, and the key management personnel, and their immediate family, of Enel SpA and its subsidiaries. Key management personnel com- prises management personnel who have the power and di- rect or indirect responsibility for the planning, management and control of the activities of the Company. They include directors (whether executive or not). 278 278 Integrated Annual Report 2021 Investments in associates and joint ventures An associate is an entity over which the Group has signifi- cant influence. Significant influence is the power to partic- ipate in decisions concerning the financial and operating policies of the investee without having control or joint con- trol over the investee. A joint venture is a joint arrangement over which the Group exercises joint control and has rights to the net assets of the arrangement. Joint control is the sharing of control of an arrangement, whereby decisions about the relevant ac- tivities require unanimous consent of the parties sharing control. The Group’s investments in associates and joint ventures are accounted for using the equity method. Under the equity method, these investments are initially recognized at cost and any goodwill arising from the differ- ence between the cost of the investment and the Group’s share of the net fair value of the investee’s identifiable as- sets and liabilities at the acquisition date is included in the carrying amount of the investment. After the acquisition date, their carrying amount is adjusted to recognize changes in the Group’s share of profit or loss of the associate or joint venture in Group profit or loss. Adjust- ments to the carrying amount may also be necessary fol- lowing changes in the Group’s share in the associate or joint venture as a result of changes in the other comprehensive income of the investee. The Group’s share of these changes is recognized in the Group’s other comprehensive income. Dividends received from joint ventures and associates re- duce the carrying amount of the investments. Gains and losses resulting from transactions between the Group and the associates or joint ventures are eliminated to the extent of the interest in the associate or joint venture. The financial statements of the associates or joint ventures are prepared for the same reporting period as the Group. When necessary, adjustments are made to bring the ac- counting policies in line with those of the Group. After application of the equity method, the Group deter- mines whether it is necessary to recognize an impairment loss on its investment in an associate or joint venture. If there is objective evidence of a loss of value, the entire carrying amount of the investment undergoes impairment testing pursuant to IAS 36 as a single asset. For more in- formation on impairment, please see the section “Impair- ment of non-financial assets” in note 2.1 “Use of estimates and management judgment”. If the investment ceases to be an associate or a joint ven- ture, the Group recognizes any retained investment at its fair value, through profit or loss. Any amounts previously recognized in other comprehensive income in respect of the former associate or joint venture are accounted for as if the Group had directly disposed of the related assets or liabilities. If the ownership interest in an associate or a joint 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 income relating to that reduction is accounted for as if the Group had directly disposed of the related assets or liabilities. When a portion of an investment in an associate or joint venture meets the criteria to be classified as held for sale, any retained portion of an investment in the associate or joint venture that has not been classified as held for sale is accounted for using the equity method until disposal of the portion classified as held for sale takes place. Joint operations are joint arrangements whereby the Group, which holds joint control, has rights to the assets and obligations for the liabilities relating to the arrange- ment. For each joint operation, the Group recognized as- sets, liabilities, costs and revenue on the basis of the pro- visions of the arrangement rather than the interest held. Where there is an increase in the interest in a joint ar- rangement that meets the definition of a business: • if the Group acquires control, and had rights over the assets and obligations for the liabilities of the joint ar- rangement immediately before the acquisition date, then the transaction represents a business combination achieved in stages. Consequently, the Group applies the requirements for a business combination achieved in stages, including the remeasurement of the interest it held previously in the joint operation at its fair value at the acquisition date; • if the Group obtains joint control (i.e., it already had an interest in a joint operation without holding joint con- trol), the interest previously held in the joint operation shall not be remeasured. For more information on the Group’s investments in asso- ciates and joint ventures, please see note 25 “Equity-ac- counted investments”. Translation of foreign currency items Transactions in currencies other than the functional cur- rency are initially recognized at the spot exchange rate prevailing on the date of the transaction. Monetary assets and liabilities denominated in a foreign currency other than the functional currency are subse- quently translated using the closing exchange rate (i.e., the spot exchange rate prevailing at the reporting date). Non-monetary assets and liabilities denominated in for- eign currency that are recognized at historical cost are translated using the exchange rate at the date of the transaction. Non-monetary assets and liabilities in foreign currency measured at fair value are translated using the exchange rate at the date the fair value was determined. Any exchange differences are recognized through profit or loss. Notes to the consolidated financial statements 279 279 In determining the spot exchange rate to use on initial rec- ognition of the related asset, expense or income (or part of it) on the derecognition of a non-monetary asset or non-monetary liability relating to advance consideration in foreign currency paid or received, the date of the transac- tion is the date on which the Group initially recognizes the non-monetary asset or non-monetary liability associated with the advance consideration. If there are multiple advance payments or receipts, the Group determines the transaction date for each payment or receipt of advance consideration. Translation of financial statements denominated in a foreign currency For the purposes of the consolidated financial statements, all revenue, expenses, assets and liabilities are stated in euro, which is the presentation currency of the Parent. In order to prepare the consolidated financial statements, the financial statements of consolidated companies with functional currencies other than the presentation curren- cy used in the consolidated financial statements are trans- lated into euros by applying the closing exchange rate to the assets and liabilities, including goodwill and consolida- tion adjustments, and the average exchange rate for the period to the income statement items on the condition it approximates the exchange rates prevailing at the date of the respective transactions. Any resulting exchange gains or losses are recognized as a separate component of equity in a special reserve. The gains and losses are recognized proportionately in the income statement on the disposal (partial or total) of the subsidiary. When the functional currency of a consolidated company is the currency of a hyperinflationary economy, the Group restates the financial statements in accordance with IAS 29 before applying the specific conversion method set out below. In order to consider the impact of hyperinflation on the local currency exchange rate, the financial position and performance (i.e., assets, liabilities, equity items, revenue and expenses) of a company whose functional currency is the currency of a hyperinflationary economy are translated into the Group’s presentation currency (the euro) using the exchange rate prevailing at the reporting date, except for comparative amounts presented in the previous year’s fi- nancial statements which are not adjusted for subsequent changes in the price level or subsequent changes in ex- change rates. Business combinations Business combinations initiated before January 1, 2010 and completed within that financial year are recognized on the basis of IFRS 3 (2004). 280 280 Integrated Annual Report 2021 Such business combinations were recognized using the purchase method, where the purchase cost is equal to the fair value at the date of the exchange of the assets acquired and the liabilities incurred or assumed, plus costs directly attributable to the acquisition. This cost was allocated by recognizing the assets, liabilities and identifiable contin- gent liabilities of the acquired company at their fair values. Any positive difference between the cost of the acquisition and the fair value of the net assets acquired attributable to owners of the Parent was recognized as goodwill. If the dif- ference is negative, it is recognized through profit or loss. The carrying amount of non-controlling interests was de- termined in proportion to the interest held by non-con- trolling shareholders in the net assets. In the case of busi- ness combinations achieved in stages, at the acquisition date, any adjustment to the fair value of the net assets ac- quired previously was recognized in equity; the amount of goodwill was determined for each transaction separately based on the fair values of the acquiree’s net assets at the date of each exchange transaction. Business combinations carried out as from January 1, 2010 are recognized on the basis of IFRS 3 (2008), which is re- ferred to as IFRS 3 (Revised) hereafter. More specifically, business combinations are recognized using the acquisition method, where the acquisition cost (the consideration transferred) is equal to the fair value at the acquisition date of the assets acquired and the liabili- ties incurred or assumed, as well as any equity instruments issued by the acquirer. The consideration transferred in- cludes the fair value of any asset or liability resulting from a contingent consideration arrangement. Costs directly attributable to the acquisition are recog- nized through profit or loss. The consideration transferred is allocated by recognizing the assets, liabilities and identifiable contingent liabili- ties of the acquired company at their fair values as at the acquisition date. The excess of the consideration trans- ferred, measured at fair value as at the acquisition date, the amount of any non-controlling interest in the acquiree plus the fair value of any equity interest in the acquiree previously held by the Group (in a business combination achieved in stages) over the net amount of the identifia- ble assets acquired and the liabilities incurred or assumed measured at fair value is recognized as goodwill. If the dif- ference is negative, the Group verifies whether it has cor- rectly identified all the assets acquired and liabilities as- sumed and reviews the procedures used to determine the amounts to recognize at the acquisition date. If after this assessment the fair value of the net assets acquired still exceeds the total consideration transferred, this excess represents a gain on a bargain purchase and is recognized through profit or loss. The carrying amount of non-controlling interests is deter- mined either in proportion to the interest held by non-con- trolling shareholders in the net identifiable assets of the acquiree or at their fair value as at the acquisition date. In the case of business combinations achieved in stages, at the date of acquisition of control the previously held equi- ty interest in the acquiree is remeasured to fair value and any positive or negative difference is recognized in profit or loss. Any contingent consideration is recognized at fair value at the acquisition date. Subsequent changes to the fair val- ue of the contingent consideration classified as an asset or a liability, or as a financial instrument within the scope of IFRS 9, are recognized in profit or loss. If the contin- gent consideration is not within the scope of IFRS 9, it is measured in accordance with the appropriate IFRS-EU. Contingent consideration that is classified as equity is not re-measured, and its subsequent settlement is accounted for within equity. If the fair values of the assets, liabilities and contingent li- abilities can only be calculated on a provisional basis, the business combination is recognized using such provisional values. Any adjustments resulting from the completion of the measurement process are recognized within 12 months of the acquisition date, restating comparative figures. Fair value measurement For all fair value measurements and disclosures of fair val- ue, that are either required or permitted by IFRS, the Group applies IFRS 13. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability, in an orderly transaction, between market participants, at the measure- ment date (i.e., an exit price). The fair value measurement assumes that the transaction to sell an asset or transfer a liability takes place in the prin- cipal market, i.e., the market with the greatest volume and level of activity for the asset or liability. In the absence of a principal market, it is assumed that the transaction takes place in the most advantageous market to which the Group has access, i.e., the market that maximizes the amount that would be received to sell the asset or minimizes the amount that would be paid to transfer the liability. The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market partic- ipants act in their economic best interest. Market partici- pants are independent, knowledgeable sellers and buyers who are able to enter into a transaction for the asset or the liability and who are motivated but not forced or otherwise compelled to do so. When measuring fair value, the Group considers the char- acteristics of the asset or liability, in particular: • for a non-financial asset, a fair value measurement takes into account a market participant’s ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use; • for liabilities and own equity instruments, the fair val- ue reflects the effect of non-performance risk, i.e., the risk that an entity will not fulfill an obligation, including among others the credit risk of the Group itself; • in the case of groups of financial assets and financial li- abilities with offsetting positions in market risk or credit risk, managed on the basis of an entity’s net exposure to such risks, it is permitted to measure fair value on a net basis. In measuring the fair value of assets and liabilities, the Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data are availa- ble, maximizing the use of relevant observable inputs and minimizing the use of unobservable inputs. Property, plant and equipment Property, plant and equipment is stated at cost, net of accumulated depreciation and accumulated impairment losses, if any. Such cost includes expenses directly attrib- utable to bringing the asset to the location and condition necessary for its intended use. The cost is also increased by the present value of the es- timate of the costs of decommissioning and restoring the site on which the asset is located where there is a legal or constructive obligation to do so. The corresponding lia- bility is recognized under provisions for risks and charges. The accounting treatment of changes in the estimate of these costs, the passage of time and the discount rate is discussed in note 39 “Provisions for risks and charges”. Property, plant and equipment transferred from custom- ers to connect them to the electricity distribution network and/or to provide them with other related services is ini- tially recognized at its fair value at the date on which con- trol is obtained. Borrowing costs that are directly attributable to the ac- quisition, construction or production of a qualifying asset, i.e., an asset that takes a substantial period of time to get ready for its intended use or sale, are capitalized as part of the cost of the assets themselves. Borrowing costs as- sociated with the purchase/construction of assets that do not meet such requirement are expensed in the period in which they are incurred. Certain assets that were revalued at the IFRS-EU transi- tion date or in previous periods are recognized at their fair value, which is considered to be their deemed cost at the revaluation date. Where individual items of major components of property, plant and equipment have different useful lives, the com- ponents are recognized and depreciated separately. Subsequent costs are recognized as an increase in the carrying amount of the asset when it is probable that fu- ture economic benefits associated with the cost incurred to replace a part of the asset will flow to the Group and the Notes to the consolidated financial statements 281 281 cost of the item can be measured reliably. All other costs are recognized in profit or loss as incurred. The cost of replacing part or all of an asset is recognized as an increase in the carrying amount of the asset and is depreciated over its useful life; the carrying amount of the replaced unit is derecognized through profit or loss. Property, plant and equipment, net of its residual value, is depreciated on a straight-line basis over its estimated useful life, which is reviewed annually. Any changes in de- preciation criteria shall be applied prospectively. For more information on estimating useful life, please see note 2.1 “Use of estimates and management judgment”. Depreciation begins when the asset is available for use. The estimated useful life of the main items of property, plant and equipment is as follows: Civil buildings Buildings and civil works incorporated in plants 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 - mechanical and electrical machinery Solar power plants: 10-70 years 10-100 years 7-85 years 5-60 years 5-100 years 3-53 years 3-53 years 3-53 years 3-53 years 50 years 20-25 years 25-30 years 10-25 years 20-40 years 20-30 years 20-30 years 15-30 years - mechanical and electrical machinery 20-30 years Public and artistic lighting: - public lighting installations - artistic lighting installations Transport 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 10-20 years 20 years 12-50 years 20-55 years 10-60 years 5-55 years 5-50 years 3-34 years 3-30 years 6-35 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 indefinite useful life. Assets recognized under property, plant and equipment 282 282 Integrated Annual Report 2021 are derecognized either upon their disposal (i.e., at the date the recipient obtains control) or when no future eco- nomic benefit is expected from their use or disposal. Any gain or loss, recognized through profit or loss, is calculat- ed as the difference between the net disposal proceeds, determined in accordance with the transaction price re- quirements of IFRS 15, and the carrying amount of the derecognized assets. Assets to be relinquished free of charge The Group’s plants include assets to be relinquished free of charge at the end of the concessions. These mainly regard major water diversion works and the public lands used for the operation of the thermal power plants. Within the Italian regulatory framework in force until 2011, if the concessions are not renewed, at those dates all in- take and governing works, penstocks, outflow channels and other assets on public lands were to be relinquished free of charge to the State in good operating condition. Accordingly, depreciation on assets to be relinquished was calculated over the shorter of the term of the concession and the 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 considered in the same manner as other categories of “property, plant and equipment” and are therefore depre- ciated over the useful life of the asset (where this exceeds the term of the concession), as discussed in the section above on the “Depreciable amount 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 oper- ating condition. The terms of the concessions extend up to 2067. A number of generation companies that operate in Lat- in America hold administrative concessions with similar conditions to those applied under the Spanish concession system. These concessions will expire in 2071. Infrastructure serving a concession not within the scope of “IFRIC 12 - Service concession arrangements” As regards the distribution of electricity, the Group is a concession holder in Italy for this service. The concession, granted by the Ministry for Economic Development, was issued free of charge and terminates on December 31, 2030. If the concession is not renewed upon expiry, the grantor is required to pay an indemnity. The amount of the indemnity will be determined by agreement of the parties using appropriate valuation methods, based on both the carrying amount of the assets themselves and their prof- itability. In determining the indemnity, such profitability will be rep- resented by the present value of future cash flows. The in- frastructure serving the concession is owned and available to the concession holder. It is recognized under “Property, plant and equipment” and is depreciated over the useful lives of the assets. Enel also operates under administrative concessions for the distribution of electricity in other countries (including Spain and Romania). These concessions give the right to build and operate distribution networks for an indefinite period of time. Infrastructure within the scope of “IFRIC 12 - Service concession arrangements” Under a “public-to-private” service concession arrange- ment within the scope of “IFRIC 12 - Service concession arrangements” the operator acts as a service provider and, in accordance with the terms specified in the contract, it constructs/upgrades infrastructure used to provide a public service and/or operates and maintains that infra- structure for the years of the concession. The Group, as operator, does not account for the infra- structure within the scope of IFRIC 12 as property, plant and equipment and it recognizes and measures revenue in accordance with IFRS 15 for the services it performs. In particular, when the Group provides construction or up- grade services, depending on the characteristics of the service concession arrangement, it recognizes: • a financial asset, if the Group has an unconditional con- tractual right to receive cash or another financial asset from the grantor (or from a third party at the direction of the grantor), that is the grantor has little discretion to avoid payment. In this case, the grantor contractually guarantees to pay to the operator specified or deter- minable amounts or the shortfall between the amounts received from the users of the public service and spec- ified or determinable amounts (defined by the contract), and such payments are not dependent on the usage of the infrastructure; and/or • an intangible asset, if the Group receives the right (a li- cense) to charge users of the public service provided. In such a case, the operator does not have an unconditional right to receive cash because the amounts are contin- gent on the extent that the public uses the service. If the Group (as operator) has a contractual right to re- ceive an intangible asset (a right to charge users of public service), borrowing costs are capitalized using the criteria specified in note 18 “Property, plant and equipment”. However, for construction/upgrade services, both types of consideration are generally classified as a contract asset during the construction/upgrade period. For more details about such consideration, please see note 10.a “Revenue from sales and services”. Leases The Group holds property, plant and equipment for its various activities under lease contracts. At inception of a contract, the Group assesses whether a contract is, or contains, a lease. For contracts entered into or changed on or after January 1, 2019, the Group has applied the definition of a lease un- der IFRS 16, that is met if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. Conversely, for contracts entered into before January 1, 2019, the Group determined whether the arrangement was or contained a lease under IFRIC 4. Group as a lessee At commencement or on modification of a contract that contains a lease component and one or more additional lease or non-lease components, the Group allocates the consideration in the contract to each lease component on the basis of its relative stand-alone price. The Group recognizes a right-of-use asset and a lease lia- bility at the commencement date of the lease (i.e., the date the underlying asset is available for use). The right-of-use asset represents a lessee’s right to use an underlying asset for the lease term; it is initially measured at cost, which includes the initial amount of lease liabili- ty adjusted for any lease payments made at or before the commencement date less any lease incentives received, plus any initial direct costs incurred and an estimate of costs to retire and remove the underlying asset and to re- store the underlying asset or the site on which it is located. Right-of-use assets are subsequently depreciated on a straight-line basis over the shorter of the lease term and the estimated useful lives of the right-of-use assets, as follows: Average residual life (years) Buildings Ground rights of renewable energy plants Vehicles and other means of transport 7 32 5 If the lease transfers ownership of the underlying asset to the Group at the end of the lease term or if the cost of the right-of-use asset reflects the fact that the Group will exer- cise a purchase option, depreciation is calculated using the estimated useful life of the underlying asset. In addition, the right-of-use assets are subject to impair- ment and adjusted for any remeasurement of lease liabili- ties. The lease liability is initially measured at the present value of lease payments to be made over the lease term. In cal- Notes to the consolidated financial statements 283 283 culating the present value of lease payments, the Group uses the lessee’s incremental borrowing rate at the lease commencement date when the interest rate implicit in the lease is not readily determinable. Variable lease payments that do not depend on an index or a rate are recognized as expenses in the period in which the event or condition that triggers the payment occurs. After the commencement date, the lease liability is meas- ured at amortized cost using the effective interest method and is remeasured upon the occurrence of certain events. The Group applies the short-term lease recognition ex- emption to its lease contracts that have a lease term of 12 months or less from the commencement date. It also ap- plies the low-value assets recognition exemption to lease contracts for which the underlying asset is of low-value whose amount is estimated not material. For example, the Group has leases of certain office equipment (i.e., personal computers, printing and photocopying machines) that are considered of low-value. Lease payments on short-term leases and leases of low-value assets are recognized as expense on a straight-line basis over the lease term. The Group presents right-of-use assets that do not meet the definition of investment property in “Property, plant and equipment” and lease liabilities in “Borrowings”. Consistent with the requirement of the standard, the Group presents separately the interest expense on lease liabilities under “Other financial expense” and the depreci- ation charge on the right-of-use assets under “Deprecia- tion, amortization and impairment losses”. Group as a lessor When the Group acts as a lessor, it determines at the lease inception date whether each lease is a finance lease or an operating lease. Leases in which the Group essentially transfers all the risks and rewards associated with ownership of the underlying asset are classified as finance leases; otherwise, they are classified as operating leases. To make this assessment, the Group considers the indicators provided by IFRS 16. If a contract contains lease and non-lease components, the Group allocates the consideration in the contract applying IFRS 15. The Group accounts for rental income arising from oper- ating leases on a straight-line basis over the lease terms and it recognizes it as other revenue. Investment property Investment property consists of the Group’s real estate held to earn rentals and/or for capital appreciation rath- er than for use in the production or supply of goods and services. Investment property is measured at acquisition cost less any accumulated depreciation and any accumulated im- pairment losses. 284 284 Integrated Annual Report 2021 Investment property, excluding land, is depreciated on a straight-line basis over the useful lives of the related as- sets. Impairment losses are determined on the basis of the cri- teria described in the section below.. The breakdown of the fair value of investment property is detailed in note 50 “Assets and liabilities measured at fair value”. Investment property is derecognized either when it has been transferred (i.e., at the date the recipient obtains control) or when it is permanently withdrawn from use and no future economic benefit is expected from its dis- posal. Any gain or loss, recognized through profit or loss, is calculated as the difference between the net disposal proceeds, determined in accordance with the transaction price requirements of IFRS 15, and the carrying amount of the derecognized assets. Transfers are made to (or from) investment property only when there is a change in use. Intangible assets Intangible assets are identifiable assets without physical substance controlled by the Group and capable of gen- erating 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 the related cost can be reliably determined. The cost includes any directly attributable expenses nec- essary to make the assets ready for their intended use. Development expenditure is recognized as an intangible asset only when the Group can demonstrate the technical feasibility of completing the asset, its intention and ability to complete development and to use or sell the asset and the availability of resources to complete the asset. Research costs are recognized as expenses. Intangible assets with a finite useful life are recognized net of accumulated amortization and any impairment losses. Amortization is calculated on a straight-line basis over the asset’s estimated useful life, which is reassessed at least annually; any changes in amortization policies are reflected on a prospective basis. For more information on estimating useful life, please see note 2.1 “Use of estimates and man- agement judgment”. 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 at least annually. The Group’s intangible assets have a finite useful life, with the exception of a number of concessions and goodwill. Intangible assets with indefinite useful lives are not amor- tized, but are tested for impairment annually. The assessment of indefinite useful life is reviewed annual- ly to determine whether the indefinite useful life continues to be supportable. If not, the change in useful life from in- definite to finite is accounted for as a change in account- ing estimate. Intangible assets are derecognized either at the time of their disposal (at the date when the recipient obtains con- trol) or when no future economic benefit is expected from their use or disposal. Any gain or loss, recognized through profit or loss, is calculated as the difference between the net consideration received in the disposal, determined in accordance with the provisions of IFRS 15 concern- ing the transaction price, and the carrying amount of the derecognized assets. The estimated useful life of the main intangible assets, distinguishing between internally generated and acquired assets, is as follows: Development expenditure: - internally generated - acquired Industrial patents and intellectual property rights: - internally generated - acquired Concessions, licenses, trademarks and similar rights: - internally generated - acquired Intangible assets from service concession arrangements: - internally generated - acquired Other: - internally generated - acquired 2-26 years 3-26 years 3-10 years 2-50 years 20 years 1-40 years - 5 years 2-28 years 1-28 years The Group also presents costs to obtain a contract with a customer capitalized in accordance with IFRS 15 as intan- gible assets. The Group recognized such costs as an asset only if: • the costs are incremental, that is they are directly at- tributable to an identified contract and the Group would not have incurred them if the contract had not been ob- tained; • the Group expects to recover them, through reimburse- ments (direct recoverability) or the margin (indirect re- coverability). In particular, the Group generally capitalizes trade fees and commissions paid to agents for such contracts if the cap- italization criteria are met. Capitalized customer contract costs are amortized on a systematic basis, consistent with the pattern of the trans- fer of the goods or services to which they relate, and un- dergo impairment testing to identify any impairment loss- es to the extent that the carrying amount of the asset rec- ognized exceeds the recoverable amount. The Group amortizes the capitalized customer contract costs on a straight-line basis over the expected period of benefit from the contract (i.e., the average term of the cus- tomer relationship); any changes in amortization policies are reflected on a prospective basis. Goodwill Goodwill represents the future economic benefits arising from other assets acquired in a business combination that are not individually identified and separately recognized. For further details, please see the section of the account- ing policies “Business combinations”. Goodwill arising on the acquisition of subsidiaries is rec- ognized separately. After initial recognition, goodwill is not amortized, but is tested for impairment at least annually as part of the CGU to which it pertains. For the purpose of impairment testing, goodwill is allocat- ed, from the acquisition date, to each CGU that is expect- ed to benefit from the synergies of the combination. Goodwill relating to equity investments in associates and joint ventures is included in their carrying amount. Impairment of non-financial assets At each reporting date, property, plant and equipment, in- vestment property, intangible assets, right-of-use assets, goodwill and equity investments in associates/joint ven- tures are reviewed to determine whether there is evidence of impairment. CGUs to which goodwill, intangible assets with an indef- inite useful life and intangible assets not yet available for use are allocated are tested for recoverability annually or more frequently if there is evidence suggesting that the assets can be impaired. If such evidence exists, the recoverable amount of any in- volved asset is estimated on the basis of the use of the as- set and its future disposal, in accordance with the Group’s most recent Business Plan. For the estimate of the recov- erable amount, please see note 2.1 “Use of estimates and management judgment”. The recoverable amount is determined for an individu- al asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets and therefore it is determined for the CGU to which the asset belongs. If the carrying amount of an asset or of a CGU to which it is allocated is greater than its recoverable amount, an im- pairment loss is recognized in profit or loss and presented under “Depreciation, amortization and other impairment losses”. Impairment losses of CGUs are firstly charged 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 apply, the carrying amount of the asset is re- Notes to the consolidated financial statements 285 285 stored through profit or loss, under “Depreciation, amor- tization and other impairment losses”, in an amount that shall not exceed the carrying amount that the asset would have had if the impairment loss had not been recognized. The original amount of goodwill is not restored even if in subsequent years the reasons for the impairment no longer apply. If certain specific identified assets owned by the Group are impacted by adverse economic or operating condi- tions that undermine their capacity to contribute to the generation of cash flows, they can be isolated from the rest of the assets of the CGU, undergo separate analysis of their recoverability and be impaired where necessary. Inventories Inventories are measured at the lower of cost and net realizable value except for inventories involved in trading activities, which are measured at fair value with recog- nition through profit or loss. Cost is determined on the basis of average weighted cost, which includes related ancillary charges. Net estimated realizable value is the es- timated normal selling price net of estimated costs to sell or, where applicable, replacement cost. For the portion of inventories held to discharge sales that have already been made, the net realizable value is de- termined on the basis of the amount established in the contract of sale. Inventories include environmental certificates (for exam- ple, green certificates, energy efficiency certificates and European CO2 emissions allowances) that were not uti- lized for compliance in the reporting period. As regards CO2 emissions allowances, inventories are allocated be- tween the trading portfolio and the compliance portfo- lio, 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 com- modities) held for use in production are not written down if it is expected that the final product in which they will be incorporated will be sold at a price sufficient to enable recovery of the cost incurred. Financial instruments Financial instruments are any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity; they are recognized and measured in accordance with IAS 32 and IFRS 9. A financial asset or liability is recognized in the consol- idated financial statements when, and only when, the Group becomes party to the contractual provision of the 286 286 Integrated Annual Report 2021 instrument (i.e., the trade date). Trade receivables arising from contracts with custom- ers, in the scope of IFRS 15, are initially measured at their transaction price (as defined in IFRS 15) if such receiva- bles do not contain a significant financing component or when the Group applies the practical expedient allowed by IFRS 15. Conversely, the Group initially measures financial assets other than the above-mentioned trade receivables at their fair value plus, in the case of a financial asset not measured at fair value through profit or loss, transaction costs. Financial assets are classified, at initial recognition, as financial assets at amortized cost, at fair value through other comprehensive income and at fair value through profit or loss, on the basis of both the Group’s business model and the contractual cash flow characteristics of the instrument. For this purpose, the assessment to determine wheth- er the instrument gives rise to cash flows that are solely payments of principal and interest (SPPI) on the principal amount outstanding is referred to as the SPPI test and is performed at an instrument level. The Group’s business model for managing financial as- sets refers to how it manages its financial assets in order to generate cash flows. The business model determines whether cash flows will result from collecting contractual cash flows, selling the financial assets, or both. For purposes of subsequent measurement, financial as- sets are classified in four categories: • financial assets measured at amortized cost (debt in- struments); • financial assets at fair value through OCI with reclas- sification of cumulative gains and losses (debt instru- ments); • financial assets designated at fair value through OCI with no reclassification of cumulative gains and losses upon derecognition (equity instruments); and • financial assets at fair value through profit or loss. Financial assets measured at amortized cost This category mainly includes trade receivables, other fi- nancial assets and loan assets. Financial assets at amortized cost are held within a busi- ness model whose objective is to hold financial assets in order to collect contractual cash flows and whose con- tractual terms give rise, on specified dates, to cash flows that are solely payments of principal and interest on the principal amount outstanding. Such assets are initially recognized at fair value, adjusted for any transaction costs, and subsequently measured at amortized cost using the effective interest method and are subject to impairment. Gains and losses are recognized in profit or loss when the asset is derecognized, modified or impaired. Financial assets at fair value through other comprehensive income (FVOCI) - Debt instruments This category mainly includes: • listed debt securities held by the Group reinsurance company and not classified as held for trading; and • the tax credits provided for by Decree Law 34/2020 (the “Revival Decree”). Financial assets at fair value through other comprehensive income are assets held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets and whose contractual cash flows give rise, on specified dates, to cash flows that are solely payments of principal and interest on the princi- pal amount outstanding. Changes in fair value for these financial assets are recog- nized in other comprehensive income as well as loss al- lowances that do not reduce the carrying amount of the financial assets. When a financial asset is derecognized (e.g., at the time of sale), the cumulative gains and losses previously recog- nized in equity (except impairment and foreign exchange gains and losses to be recognized in profit or loss) are re- versed to profit or loss. Financial assets at fair value through other comprehensive income (FVOCI) - Equity instruments This category includes mainly equity investments in other entities irrevocably designated as such upon initial recog- nition. Gains and losses on these financial assets are never reclas- sified to profit or loss. The Group may transfer the cumula- tive gain or loss within equity. Equity instruments designated at fair value through OCI are not subject to impairment testing. Dividends on such investments are recognized in profit or loss unless they clearly represent a recovery of a part of the cost of the investment. Financial assets at fair value through profit or loss This category mainly includes: securities, equity invest- ments in other companies, financial investments in funds held for trading and financial assets designated as at fair value through profit or loss at initial recognition. Financial assets at fair value through profit or loss are: • financial assets with cash flows that are not solely pay- ments of principal and interest, irrespective of the busi- ness model; • financial assets held for trading because acquired or incurred principally for the purpose of selling or repur- chasing in the short term; • debt instruments designated upon initial recognition, under the option allowed by IFRS 9 (fair value option), if doing so eliminates, or significantly reduces, an ac- counting mismatch; • derivatives, including separated embedded derivatives, held for trading or not designated as effective hedging instruments. Such financial assets are initially recognized at fair value with subsequent gains and losses from changes in their fair value recognized through profit or loss. This category also includes listed equity investments which the Group had not irrevocably elected to classify at fair val- ue through OCI. Dividends on listed equity investments are also recognized as other income in the income statement when the right of payment has been established. Financial assets that qualify as contingent consideration are also measured at fair value through profit or loss. Impairment of financial assets At each reporting date, the Group recognizes a loss allow- ance for expected credit losses on trade receivables and other financial assets measured at amortized cost, debt instruments measured at fair value through other com- prehensive income (FVOCI), contract assets and all other assets within the scope of IFRS 9. In compliance with IFRS 9, as from January 1, 2018, the Group adopted a new impairment model based on the determination of expected credit losses (ECL) using a for- ward-looking approach. In essence, the model provides for: • the application of a single framework for all financial assets; • the recognition of expected credit losses on an ongo- ing basis and the updating of the amount of such losses at the end of each reporting period, reflecting changes in the credit risk of the financial instrument; • the measurement of expected losses on the basis of reasonable information, obtainable without undue cost, about past events, current conditions and forecasts of future conditions. For trade receivables, contract assets and lease receiva- bles, including those with a significant financial compo- nent, the Group adopts the simplified approach, determin- ing expected credit losses over a period corresponding to the entire life of the asset, generally equal to 12 months. For all financial assets other than trade receivables, con- tract assets and lease receivables, the Group applies the general approach under IFRS 9, based on the assessment of a significant increase in credit risk since initial recogni- tion. Under such approach, a loss allowance on financial assets is recognized at an amount equal to the lifetime expected credit losses, if the credit risk on those financial assets has increased significantly, since initial recognition, considering all reasonable and supportable information, including also forward-looking inputs. If at the reporting date the credit risk on financial assets has not increased significantly since initial recognition, the Group measures the loss allowance for those financial assets at an amount equal to 12-month expected credit losses. Notes to the consolidated financial statements 287 287 For financial assets on which a loss allowance equal to life- time expected credit losses has been recognized in the previous reporting period, the Group measures the loss al- lowance at an amount equal to 12-month expected credit losses when the condition regarding a significant increase in credit risk is no longer met. The Group recognizes in profit or loss, as an impairment gain or loss, the amount of expected credit losses (or re- versal) that is required to adjust the loss allowance at the reporting date to the amount that is required to be recog- nized in accordance with IFRS 9. The Group applies the low credit risk exemption, avoiding the recognition of loss allowances at an amount equal to lifetime expected credit losses due to a significant increase in credit risk of debt securities at fair value through OCI, whose counterparty has a strong financial capacity to meet its contractual cash flow obligations (e.g., investment grade). For more information on the impairment of financial assets, please see note 46 “Financial instruments by category”. Cash and cash equivalents This category includes deposits that are available on de- mand or at very short term, as well as highly liquid short- term financial investments that are readily convertible into a known amount of cash and which are subject to insignif- icant risk of changes in value. In addition, for the purpose of the consolidated statement of cash flows, cash and cash equivalents do not include bank overdrafts at the reporting date. Financial liabilities at amortized cost This category mainly includes borrowings, trade payables, lease liabilities and debt instruments. Financial liabilities, other than derivatives, are recognized when the Group becomes a party to the contractual claus- es of the instrument and are initially measured at fair value adjusted for directly attributable transaction costs. Finan- cial liabilities are subsequently measured at amortized cost using the effective interest rate method. The effective in- terest rate is the rate that exactly discounts the estimated future cash payments or receipts over the expected life of the financial instrument or a shorter period, where ap- propriate, to the carrying amount of the financial asset or liability. Financial liabilities at fair value through profit or loss Financial liabilities at fair value through profit or loss in- clude financial liabilities held for trading and financial lia- bilities designated upon initial recognition as at fair value through profit or loss. Financial liabilities are classified as held for trading if they are incurred for the purpose of repurchasing in the near term. This category also includes derivative financial in- struments entered into by the Group that are not desig- nated as hedging instruments in hedge relationships as 288 288 Integrated Annual Report 2021 defined by IFRS 9. Separated embedded derivatives are also classified as at fair value through profit or loss unless they are designated as effective hedging instruments. Gains or losses on liabilities at fair value through profit or loss are recognized through profit or loss. Financial liabilities designated upon initial recognition at fair value through profit or loss are designated at the in- itial date of recognition, only if the criteria in IFRS 9 are satisfied. In this case, the portion of the change in fair value attribut- able to own credit risk is recognized in other comprehen- sive income. The Group has not designated any financial liability as at fair value through profit or loss, upon initial recognition. Financial liabilities that qualify as contingent consideration are also measured at fair value through profit or loss. Derecognition of financial assets and liabilities Financial assets are derecognized whenever one of the following conditions is met: • the contractual right to receive the cash flows associat- ed with the asset expires; • the Group has transferred substantially all the risks and rewards associated with the asset, transferring its rights to receive the cash flows of the asset or assuming a contractual obligation to pay such cash flows to one or more beneficiaries under a contract that meets the re- quirements provided by IFRS 9 (the “pass through test”); • the Group has not transferred or retained substantially all the risks and rewards associated with the asset but has transferred control over the asset. Financial liabilities are derecognized when they are extin- guished, i.e., when the contractual obligation has been dis- charged, cancelled or expired. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modi- fied, such an exchange or modification is treated as the derecognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognized in profit or loss. Derivative financial instruments A derivative is a financial instrument or another contract: • whose value changes in response to the changes in an underlying variable such as an interest rate, commodity or security price, foreign exchange rate, a price or rate index, a credit rating or other variable; • that requires no initial net investment, or one that is smaller than would be required for a contract with simi- lar response to changes in market factors; • that is settled at a future date. Derivative instruments are classified as financial assets or liabilities depending on the positive or negative fair value and they are classified as “held for trading” within “Other business models” and measured at fair value through prof- it or loss, except for those designated as effective hedging instruments. All derivatives held for trading are classified as current as- sets or liabilities. Derivatives not held for trading purposes, but measured at fair value through profit or loss since they do not qualify for hedge accounting, and derivatives designated as effective hedging instruments are classified as current or not cur- rent on the basis of their maturity date and the Group in- tention to hold the financial instrument till maturity or not. For more details about derivatives and hedge accounting, please see note 49 “Derivatives and hedge accounting”. Embedded derivatives An embedded derivative is a derivative included in a “combined” contract (the so-called “hybrid instrument”) that contains another non-derivative contract (the so- called “host contract”) and gives rise to some or all of the combined contract’s cash flows. The main Group contracts that may contain embedded derivatives are contracts to buy or sell non-financial items with clauses or options that affect the contract price, vol- ume or maturity. A derivative embedded in a hybrid contract containing a financial asset host is not accounted for separately. The financial asset host together with the embedded deriva- tive is required to be classified in its entirety as a financial asset at fair value through profit or loss. Contracts that do not represent financial instruments to be measured at fair value are analyzed in order to iden- tify any embedded derivatives, which are to be separat- ed and measured at fair value. This analysis is performed when the Group becomes party to the contract or when the contract is renegotiated in a manner that significantly changes the original associated cash flows. Embedded derivatives are separated from the host con- tract and accounted for as derivatives when: • the host contract is not a financial instrument meas- ured at fair value through profit or loss; • the economic risks and characteristics of the embed- ded derivative are not closely related to those of the host contract; • a separate contract with the same terms as the em- bedded derivative would meet the definition of a de- rivative. Embedded derivatives that are separated from the host contract are recognized in the consolidated financial statements at fair value with changes recognized in profit or loss (except when the embedded derivative is part of a designated hedge relationship). 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 delivery in accordance with the Group’s normal ex- pected purchase, sale or usage requirements are out of the scope of IFRS 9 and then recognized as executory contracts, according to the “own use exemption”. A contract to buy or sell non-financial items is classified as “normal purchase or sale” if it is entered into: • for the purpose of the physical settlement; • in accordance with the entity’s expected purchase, sale or usage requirements. Moreover, contracts to buy or sell non-financial items with physical settlement (for example, fixed-price forward con- tracts on energy commodities) do not qualify for the own use exemption and are recognized as derivatives meas- ured at fair value through profit or loss only if: • they can be settled net in cash; and • they are not entered into in accordance with the Group’s expected purchase, sale or usage requirements. The Group recognizes the fair value gain or loss on con- tracts for the purchase or sale of energy commodities still outstanding at the reporting date on a net basis under the item “Net results from commodity contracts”. Subsequently, at the settlement date: • the fair value gain or loss on closed contracts for the sale of energy commodities as well as the related rev- enue, together with the impact on profit or loss of the derecognition of the derivative, are recognized under “Other revenue”; • the fair value gain or loss on closed contracts for the purchase of energy commodities as well as the related cost, together with the impact on profit or loss of the derecognition of the derivative, are recognized under “Electricity, gas and fuel” and “Services and other ma- terials”. The Group analyzes all contracts to buy or sell non-fi- nancial assets on an ongoing basis, with a specific focus on forward purchases and sales of electricity and energy commodities, in order to determine if they shall be classi- fied and treated in accordance with IFRS 9 or if they have been entered into for “own use”. Offsetting financial assets and liabilities The Group offsets financial assets and liabilities when: • there is a legally enforceable right to set off the recog- nized amounts; and • there is the intention of settling on a net basis or real- izing the asset and settling the liability simultaneously. Hyperinflation In a hyperinflationary economy, the Group adjusts non-monetary items, equity and items deriving from in- dex-linked contracts up to the limit of recoverable amount, using a price index that reflects changes in general pur- chasing power. The effects of initial application are recognized in equity Notes to the consolidated financial statements 289 289 net of tax effects. Conversely, during the hyperinflation- ary period (until it ceases), the gain or loss resulting from adjustments is recognized in profit or loss and disclosed separately in financial income and expense. Starting from 2018, this standard applies to the Group’s transactions in Argentina, whose economy has been de- clared hyperinflationary from July 1, 2018. Non-current assets (or disposal groups) classified as held for sale and discontinued operations Non-current assets (or disposal groups) are classified as held for sale if their carrying amount will be recov- ered principally through a sale transaction, rather than through continuing use. is applicable only when This classification criterion non-current 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 control of a subsidiary and the requirements provided for under IFRS 5 are met, all the assets and liabilities of that subsidiary are classified as held for sale when the classi- fication criteria are met, regardless of whether the Group will retain a non-controlling interest in its former subsid- iary after the sale. The Group applies these classification criteria as envis- aged in IFRS 5 to an investment, or a portion of an in- vestment, in an associate or a joint venture. Any retained portion of an investment in an associate or a joint venture that has not been classified as held for sale is accounted for using the equity method until disposal of the portion that is classified as held for sale takes place. Non-current assets (or disposal groups) and liabilities of disposal groups classified as held for sale are presented separately from other assets and liabilities in the state- ment of financial position. The amounts presented for non-current assets or for the assets and liabilities of disposal groups classified as held for sale are not reclassified or re-presented for prior pe- riods presented. Immediately before the initial classification of non-cur- rent assets (or disposal groups) as held for sale, the car- rying amounts of such assets (or disposal groups) are measured in accordance with the accounting standard applicable to those assets or liabilities. Non-current as- sets (or disposal groups) 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 write-down of the assets (or disposal groups) to fair value less costs to sell and gains for their reversals are recognized in profit or loss from continuing opera- tions. Non-current assets are not depreciated (or amortized) 290 290 Integrated Annual Report 2021 while they are classified as held for sale or while they are part of a disposal group classified as held for sale. If the classification criteria are no longer met, the Group ceases to classify the non-current assets (or disposal groups) as held for sale. In this case they are measured at the lower of: • the carrying amount before the asset (or disposal group) was classified as held for sale, adjusted for any depreciation, amortization or reversals of impairment losses that would have been recognized if the asset (or disposal group) had not been classified as held for sale; and • the recoverable amount, which is equal to the greater of its fair value net of costs to sell and its value in use, as calculated at the date of the subsequent decision not to sell. Any adjustment to the carrying amount of a non-current asset that ceases to be classified as held for sale is in- cluded in profit or loss from continuing operations. A discontinued operation is a component of the Group that either has been disposed of, or is classified as held for sale, and: • represents a separate major business line or geo- graphical segment; • is part of a single coordinated plan to dispose of a sep- arate major business line or geographical segment; or • is a subsidiary acquired exclusively with a view to re- sale. The Group presents, in a separate line item of the income statement, a single amount comprising the total of: • the post-tax profit or loss of discontinued operations; and • the post-tax gain or loss recognized on the measure- ment at fair value less costs to sell or on the disposal of the assets or disposal groups constituting the dis- continued operation. The corresponding amount is restated in the income statement for prior periods presented in the financial statements, so that the disclosures relate to all operations that are discontinued by the end of the current report- ing period. If the Group ceases to classify a component as held for sale, the results of the component previously presented in discontinued operations are reclassified and included in profit or loss from continuing operations for all periods presented. Environmental certificates Some Group companies are affected by national regula- tions governing green certificates and energy efficiency certificates (so-called “white certificates“), as well as the EU Emissions Trading System. Green certificates accrued in proportion to electricity generated by renewable energy plants and energy effi- ciency certificates accrued in proportion to energy sav- ings achieved that have been certified by the compe- tent authority are treated as non-monetary government grants related to income and are recognized at fair value, under other operating profit, with recognition of an as- set under other non-financial assets, if the certificates are not yet credited to the ownership account, or under inventories, if the certificates have already been credited to that account. At the time the certificates are credited to the ownership account, they are reclassified from other assets to inven- tories. Revenue from the sale of such certificates is recognized under revenue from contracts with customers, with a corresponding decrease in inventories. For the purposes of accounting for charges arising from regulatory requirements concerning green certificates, energy efficiency certificates and CO2 emissions allow- ances, the Group uses the “net liability approach”. Under this accounting policy, environmental certificates received free of charge and those self-produced as a result of Group’s operations that will be used for com- pliance purposes are recognized at nominal value (nil). In addition, charges incurred for obtaining (in the market or in some other transaction for consideration) any missing certificates to fulfil compliance requirements for the re- porting period are recognized through profit or loss on an accruals basis under other operating costs, as they rep- resent “system charges” consequent to compliance with a regulatory requirement. Employee benefits Liabilities related to employee benefits paid upon or after ceasing employment in connection with defined bene- fit plans or other long-term benefits accrued during the employment period are determined separately for each plan, using actuarial assumptions to estimate the amount of the future benefits that employees have accrued at the reporting date (using the projected unit credit method). More specifically, the present value of the defined benefit obligation is calculated by using a discount rate deter- mined on the basis of market yields at the end of the re- porting period on high-quality corporate bonds. If there is no deep market for high-quality corporate bonds in the currency in which the bonds are denominated, the corre- sponding yield of government securities is used. The liability, net of any plan assets, is recognized on an accruals basis over the vesting period of the related rights. These appraisals are performed by independent actuaries. If the plan assets exceed the present value of the related defined benefit obligation, the surplus (up to the limit 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 ac- tuarial measurement of the liabilities, the return on the plan assets (net of the associated interest income) and the effect of the asset ceiling (net of the associated inter- est) are recognized in other comprehensive income when they occur. For other long-term benefits, the related ac- tuarial gains and losses are recognized through profit or loss. In the event of a change being made to an existing de- fined benefit plan or the introduction of a new plan, any past service cost is recognized immediately in profit or loss. In addition, the Group is involved in defined contribution plans under which it pays fixed contributions to a sepa- rate entity (a fund) and has no legal or constructive obli- gation to pay further contributions if the fund does not hold sufficient assets to pay all employee benefits relat- ing to employee service in the current and prior periods. Such plans are usually aimed to supplement pension benefits due to employees post-employment. The related costs are recognized through profit or loss on the basis of the amount of contributions paid in the period. Termination benefits Liabilities for benefits due to employees for the early ter- mination of employee service arise out of the Group’s de- cision to terminate an employee’s employment before the normal retirement date or an employee’s decision to ac- cept an offer of benefits in exchange for the termination of employment. The event that gives rise to an obligation is the termination of employment rather than employee service. Termination benefits are recognized at the earlier of the following dates: • when the entity can no longer withdraw its offer of benefits; and • when the entity recognizes a cost for a restructuring that is within the scope of IAS 37 and involves the pay- ment of termination benefits. The liabilities are measured on the basis of the nature of the employee benefits. More specifically, when the ben- efits represent an enhancement of other post-employ- ment benefits, the associated liability is measured in ac- cordance with the rules governing that type of benefits. Otherwise, if the termination benefits due to employees are expected to be fully settled before 12 months of the close of the period in which the benefits are recognized, the entity measures the liability in accordance with the requirements for short-term employee benefits; if they are not expected to be fully settled before 12 months of the close of period in which the benefits are recognized, the entity measures the liability in accordance with the requirements for other long-term employee benefits. Share-based payments The Group undertakes share-based payment transac- tions settled with equity instruments as part of the remu- Notes to the consolidated financial statements 291 291 neration policy adopted for the Chief Executive Officer/ General Manager and for key management personnel. The most recent long-term incentive plans provide for the grant to recipients of an incentive represented by an equity component and a monetary component. In order to settle the equity component through the bo- nus award of Enel shares, a program for the purchase of treasury shares to support these plans was approved. For more details on share-based incentive plans, please see note 51 “Share-based payments”. The Group recognizes the services rendered by employ- ees as personnel expenses and indirectly estimates their value, and the corresponding increase in equity, on the basis of the fair value of the equity instruments (i.e., Enel shares) at the grant date. This fair value is based on the observable market price of Enel (on the Mercato Tele- matico Azionario (electronic stock exchange) organized and operated by Borsa Italiana SpA), taking account of the terms and conditions under which the shares were granted (with the exception of vesting conditions exclud- ed from the measurement of fair value). The cost of these share-based payment transactions set- tled with equity instruments is recognized through profit or loss, with a balancing entry in a specific equity item, over the period in which the service and return perfor- mance conditions are met (vesting period). The overall expense recognized is adjusted at each re- porting date until the vesting date to reflect the best estimate available to the Group of the number of equity instruments for which the service and performance con- ditions other than market conditions will be satisfied, so that the amount recognized at the end is based on the effective number of equity instruments that satisfy the service and performance conditions other than market conditions at the vesting date. No expense is recognized for awards which ultimately do not vest because the performance conditions other than market conditions and/or the service conditions have not been satisfied. Conversely, the transactions are consid- ered to have vested irrespective of whether the market or non-vesting conditions are satisfied, provided that all the other performance and/or service conditions are sat- isfied. Provisions for risks and charges Provisions are recognized where there is a legal or con- structive obligation as a result of a past event at the end of the reporting period, the settlement of which is expect- ed to result in an outflow of resources whose amount can be reliably estimated. Where the impact is significant, the accruals are determined by discounting expected future cash flows using a pre-tax discount rate that reflects the current market assessment of the time value of money and, if applicable, the risks specific to the liability. 292 292 Integrated Annual Report 2021 If the provision is discounted, the periodic adjustment of the present value for the time factor is recognized as a financial expense. When the Group expects some or all charges to be reim- bursed, the reimbursement is recognized as a separate asset, but only when the reimbursement is virtually certain. Where the liability relates to decommissioning and/or site restoration in respect of property, plant and equipment, the initial recognition of the provision is made against the related asset and the expense is then recognized in profit or loss through the depreciation of the asset involved. Where the liability regards the treatment and storage of nuclear waste and other radioactive materials, the pro- vision is recognized against the related operating costs. A liability for restructuring refers to a program planned and controlled by management that materially changes the scope of a business undertaken by the Group or the manner in which the business is conducted. Such a lia- bility is recognized when a constructive obligation is es- tablished, i.e., when the Group has approved a detailed formal restructuring plan and has started to implement the plan or has announced its main features to those af- fected by it. Provisions do not include liabilities in respect of uncertain income tax treatments that are recognized as tax liabili- ties. The Group could provide a warranty in connection with the sale of a product (whether a good or service) from contracts with customers in the scope of IFRS 15, in ac- cordance with the contract, the law or its customary busi- ness practices. In this case, the Group assesses whether the warranty provides the customer with assurance that the related product will function as the parties intended because it complies with agreed-upon specifications or whether the warranty provides the customer with a ser- vice in addition to the assurance that the product com- plies with agreed-upon specifications. After the assessment, if the Group establishes that an assurance warranty is provided, it recognizes a separate warranty liability and corresponding expense when trans- ferring the product to the customer, as additional costs of providing goods or services, without attributing any of the transaction price (and therefore revenue) to the warranty. The liability is measured and presented as a provision. Otherwise, if the Group determines that a service warran- ty is provided, it accounts for the promised warranty as a performance obligation in accordance with IFRS 15, rec- ognizing the contract liability as revenue over the period the warranty service is provided and the costs associated as they are incurred. Finally, if the warranty includes both an assurance ele- ment and a service element and the Group cannot rea- sonably account for them separately, then it accounts for both of the warranties together as a single performance obligation. In the case of contracts in which the unavoidable costs of meeting the obligations under the contract exceed the economic benefits expected to be received under it (on- erous contracts), the Group recognizes a provision as the lower of the excess of unavoidable costs of meeting the obligations under the contract over the economic bene- fits expected to be received under it and any compensa- tion or penalty arising from failure to fulfil it. Changes in estimates of accruals to the provisions ad- dressed here are recognized through profit or loss in the period in which the changes occur, with the exception of those in the costs of decommissioning, retiring and/or restoration resulting from changes in the timetable and costs necessary to extinguish the obligation or from a change in the discount rate. These changes increase or decrease the carrying amount of the related assets and are taken to profit or loss through depreciation. Where they increase the carrying amount of the assets, it is also determined whether the new carrying amount of the as- sets is fully recoverable. If this is not the case, a loss equal to the unrecoverable amount is recognized through profit or loss. Decreases in estimates are recognized up to the carrying amount of the assets. Any excess is recognized immedi- ately in profit or loss. For more information on the estimation criteria adopted in determining provisions for retiring and/or restoration of property, plant and equipment, especially those asso- ciated with decommissioning nuclear power plants and storage of waste fuel and other radioactive materials, please see note 2.1 “Use of estimates and management judgment”. Revenue from contracts with customers The Group recognizes revenue from contracts with cus- tomers in order to represent the transfer of promised goods or services to the customers at an amount that reflects the consideration to which the Group expects to be entitled in exchange for those goods or services. The Group applies this core principle using a five-step model: • identify the contract with the customer (step 1). The Group applies IFRS 15 to contracts with customers in the scope of the standard when the contract is le- gally enforceable and all the criteria envisaged for step 1 are met: If the criteria are not met, any consideration received from the customer is generally recognized as an ad- vance; • identify the performance obligations in the contract (step 2). The Group identifies all goods or services promised in the contract, separating them into performance obli- gations to account for separately if they are both: ca- pable of being distinct and distinct within the context of the contract. As an exception, the Group accounts for as a single performance obligation a series of distinct goods or services that are substantially the same and that have the same pattern of transfer to the customer over time. In assessing the existence and the nature of the per- formance obligations, the Group considers all of the contract’s features as mentioned in step 1. For each distinct good or service identified, the Group determines whether it acts as a principal or agent, respectively if it controls or not the specified good or service that is promised to the customer before its control is transferred to the customer. When the Group acts as agent, it recognizes revenue on a net basis, corresponding to any fee or commission to which it expects to be entitled; • determine the transaction price (step 3). The transaction price represents the amount of con- sideration to which the Group expects to be entitled in exchange for transferring goods or services to a cus- tomer, excluding amounts collected on behalf of third parties (e.g., some sale taxes and value-added taxes). The Group determines the transaction price at incep- tion of the contract and updates it each reporting pe- riod for any changes in circumstances. When the Group determines the transaction price, it considers whether the transaction price includes var- iable consideration, non-cash consideration received from a customer, consideration payable to a customer and a significant financing component; • allocate the transaction price (step 4). The Group allocates the transaction price at contract inception to each separate performance obligation to depict the amount of consideration to which the Group expects to be entitled in exchange for transfer- ring the promised goods or services. When the contract includes a customer option to acquire additional goods or services that represents a material right, the Group allocates the transaction price to this performance obligation (i.e., the option) and defers the relative revenue until those future goods or services are transferred or the option ex- pires. The Group generally allocates the transaction price on the basis of the relative stand-alone selling price of each distinct good or service promised in the contract (that is, the price at which the Group would sell that good or service separately to the customer); • recognize revenue (step 5). The Group recognizes revenue when (or as) each perfor- mance obligation is satisfied by transferring the prom- ised good or service to the customer, which is when the customer obtains control of the good or service. Notes to the consolidated financial statements 293 293  To this end, the Group first determines if one of the over-time criteria is met. (or the payment is due) that is recognized as revenue when the Group performs under the contract. For each performance obligation satisfied over time, the Group recognizes revenue over time by measuring progress toward the complete satisfaction of that per- formance obligation using an output method or an in- put method and applies a single method of measuring progress from contract inception until full satisfaction and to similar performance obligations and in similar circumstances. When the Group cannot reasonably measure the pro- gress, it recognizes revenue only to the extent of the costs incurred that are considered recoverable. If the performance obligation is not satisfied over time, the Group determines the point in time at which the customer obtains the control, considering whether the indicators of the transfer of control collectively indi- cate that the customer has obtained control. Depending on the type of transaction, the broad crite- ria used under IFRS 15 are summarized below: – revenue from the sale of goods is recognized at the point in time at which the customer obtains the control of goods if the Group considers that the sale of goods is satisfied at a point in time; – revenue from providing services is recognized on the basis of the progress towards complete sat- isfaction of the performance obligation measured with an appropriate method that better depicts this progress if the Group considers that the per- formance obligation is satisfied over time. The cost incurred method (cost-to-cost method) is consid- ered appropriate for measuring progress, except when specific contract analyses suggest the use of an alternative method, which better depicts the Group’s performance obligation fulfilled at the re- porting date. The Group does not disclose the information about the remaining performance obligations in existing contracts if the performance obligation is part of a contract that has an original expected duration of one year or less and if the Group recognizes revenue in the amount to which it has a right to invoice the customer. More information on the application of this revenue rec- ognition model is provided in note 2.1 “Use of estimates and management judgment” and in note 10.a “Revenue from sales and services”. If the Group performs by transferring goods or services to a customer before the customer pays the consider- ation or before payment is due, it recognizes a contract asset relating to the right to consideration in exchange for goods or services transferred to the customer. If a customer pays the consideration before the Group transfers goods or services to the customer, the Group recognizes a contract liability when the payment is made 294 294 Integrated Annual Report 2021 Other revenue The Group recognizes revenue other than that deriving from contracts with customers mainly referring to: • revenue from the sale of energy commodities based on contracts with physical settlement, which do not qualify for the own use exemption and therefore is recognized at FVTPL in accordance with IFRS 9; • changes in the fair value of settled contracts to sell en- ergy commodities with physical settlement, which do not qualify for the own use exemption and therefore are recognized at FVTPL in accordance with IFRS 9; • operating lease revenue accounted for on an accruals basis in accordance with the substance of the relevant lease agreement. Other operating income Other operating income primarily includes gains on dis- posal of assets that are not an output of the Group’s ordi- nary activities and government grants. Grants related to assets, including non-monetary grants at fair value, are recognized where there is reasonable assurance that they will be received and that the Group will comply with all conditions attaching to them as set by the government, government agencies and similar bodies whether local, national or international. When loans are provided by governments at a below-mar- ket rate of interest, the benefit is regarded as a govern- ment grant. The loan is initially recognized and measured at fair value and the government grant is measured as the difference between the initial carrying amount of the loan and the funds received. The loan is subsequently meas- ured in accordance with the requirements for financial liabilities. Government grants are recognized in profit or loss on a systematic basis over the periods in which the Group rec- ognizes as expenses the costs that the grants are intend- ed to compensate. 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. Capital grants, including non-monetary grants at fair val- ue, i.e., those received to purchase, build or otherwise ac- quire non-current assets (for example, an item of property, plant and equipment or an intangible asset), are deducted from the carrying amount of the asset and are recognized in profit or loss over the depreciable/amortizable life of the asset as a reduction in the depreciation/amortization charge. If there is insufficient information to enable ade- quate attribution to the non-current assets to which they refer, grants related to assets are recognized as deferred income under other liabilities, and credited to profit or loss on a systematic basis over the useful life of the asset. Financial income and expense from derivatives Financial income and expense from derivatives includes: • income and expense from derivatives measured at fair value through profit or loss on interest rate and cur- rency risks; • income and expense from fair value hedge derivatives on interest rate risk; • income and expense from cash flow hedge derivatives on interest rate and currency risks. Other financial income and expense For all financial assets and liabilities measured at amor- tized cost and interest-bearing financial assets classified as at fair value through other comprehensive income, in- terest income and expense are recognized using the ef- fective interest rate method. Interest income is recognized to the extent that it is prob- able that the economic benefits will flow to the Group and the amount can be reliably measured. Other financial income and expense include also changes in the fair value of financial instruments other than de- rivatives. Dividends Dividends are recognized when the unconditional right to receive payment is established. Dividends and interim dividends payable to the Parent’s shareholders and non-controlling interests are recog- nized as changes in equity in the period in which they are approved by the Shareholders’ Meeting and the Board of Directors, respectively. Income taxes Current income taxes Current income taxes for the year, which are recognized under “income tax liabilities” net of payments on account, or under “tax assets” where there is a credit balance, are determined using an estimate of taxable income and in conformity with the applicable regulations. Such liabilities and assets are determined using the tax rates and tax laws that are enacted or substantively en- acted by the end of the reporting period in the countries where taxable income has been generated. Current income taxes are recognized in profit or loss with the exception of current income taxes related to items recognized outside profit or loss that are recognized in equity. Deferred tax liabilities and assets Deferred tax liabilities and assets are calculated on the temporary differences between the carrying amounts of liabilities and assets in the financial statements and their corresponding amounts recognized for tax purposes on the basis of tax rates in effect on the date the temporary difference will reverse, which is determined on the basis of tax rates that are enacted or substantively enacted as at the end of the reporting period. Deferred tax liabilities are recognized for all taxable tem- porary differences, except when such liability arises from the initial recognition of goodwill or in respect of taxa- ble temporary differences associated with investments in subsidiaries, associates and joint ventures, when the Group can control the timing of the reversal of the tem- porary differences and it is probable that the temporary differences will not reverse in the foreseeable future. Deferred tax assets are recognized for all deductible tem- porary differences, the carry forward of tax losses and any unused tax credits. For more information concerning the recoverability of such assets, please see the appropriate section of the discussion of estimates. Deferred taxes and liabilities are recognized in profit or loss, with the exception of those in respect of items rec- ognized outside profit or loss that are recognized in eq- uity. Deferred tax assets and deferred tax liabilities are offset only if there is a legally enforceable right to offset current tax assets with current tax liabilities and when they relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities which intend either to settle current tax liabilities and as- sets on a net basis, or to realize the assets and settle the liabilities simultaneously, in each future period in which significant amounts of deferred tax liabilities or assets are expected to be settled or recovered. Uncertainty over income tax treatments In defining “uncertainty“, it shall be considered whether a particular tax treatment will be accepted by the relevant taxation authority. If it is deemed probable that the tax treatment will be accepted (where the term “probable“ is defined as “more likely than not“), then the Group rec- ognizes and measures its current/deferred tax asset or liabilities applying the requirements in IAS 12. Conversely, when the Group feels that it is not likely that the taxation authority will accept the tax treatment for income tax purposes, the Group reflects the uncertainty in the manner that best predicts the resolution of the un- certain tax treatment. The Group determines whether to consider each uncertain tax treatment separately or to- gether with one or more other uncertain tax treatments Notes to the consolidated financial statements 295 295 based on which approach provides better predictions of the resolution of the uncertainty. In assessing whether and how the uncertainty affects the tax treatment, the Group assumes that a taxation authority will accept or not an uncertain tax treatment supposing that the tax- ation authority will examine amounts it has a right to ex- amine and have full knowledge of all related information when making those examinations. The Group reflects the effect of uncertainty in accounting for current and de- ferred tax using the expected value or the most likely amount, whichever method better predicts the resolution of the uncertainty. Since uncertain income tax positions meet the definition of income taxes, the Group presents uncertain tax liabili- ties/assets as current tax liabilities/assets or deferred tax liabilities/assets. 3. New and amended standards and interpretations The Group has applied the following standards, interpre- tations and amendments that took effect as from January 1, 2021. • “Amendments to IFRS 9, IAS 39, IFRS 7, and IFRS 16 – Interest Rate Benchmark Reform – Phase 2”, issued in August 2020. The amendments supplement those is- sued in 2019 (Interest Rate Benchmark Reform - Phase 1) and address issues that could affect financial report- ing after a benchmark has been reformed or replaced with an alternative benchmark rate. The objectives of the Phase 2 amendments are to assist companies: (i) in applying the IFRSs when changes occur in contractual cash flows or hedge relationships due to the reform of the benchmarks for determining interest rates; and (ii) in providing information to users of financial state- ments. In addition, when the Phase 1 exemptions cease to ap- ply, companies are required to amend the documen- tation of hedge relationship to reflect the changes re- quired under the IBOR reform by the end of the year in which the changes are made (such changes do not constitute the discontinuation of the hedge relation- ship). When the description of a hedged element in the documentation of the hedge relationship is changed, the amounts accumulated in the hedging reserve shall be considered to be based on the alternative bench- mark rate on the basis of which the future hedged cash flows will be determined. The amendments will require providing additional dis- closures about the entity’s exposure to the risks aris- ing from the interest rate benchmark reform and relat- ed risk management activities. • “Amendment to IFRS 16: COVID 19-related rent con- cessions beyond 30 June 2021”, issued on May 28, 2020 in order to permit lessees to not account for rent concessions (rent payment holidays, deferral of lease payments, reductions in rent for a period of time, pos- sibly followed by rent increases in future periods) as lease modifications if they are a direct consequence of the COVID-19 pandemic and meet certain conditions. According to IFRS 16, a lease modification is a change in the scope of a lease, or the consideration for a lease, that was not part of the original terms and conditions of the lease. Accordingly, rent concessions would rep- resent lease modifications unless they were provided for in the original lease agreement. The amendment applies only to lessees, while lessors are required to apply the current provisions of IFRS 16. The amendment was to be applied until June 30, 2021 but, in consideration of the persistence of the impacts of the COVID-19 pandemic, on March 31, 2021, the IASB extended the period of application of the practi- cal expedient to June 30, 2022. The application of the amendments did not have a ma- terial impact on these consolidated financial statements. 4. Argentina - Hyperinflationary economy: impact of the application of IAS 29 As from July 1, 2018, the Argentine economy has been considered hyperinflationary based on the criteria estab- lished by “IAS 29 - Financial reporting in hyperinflation- ary economies”. This designation is determined following an assessment of a series of qualitative and quantitative circumstances, including the presence of a cumulative inflation rate of more than 100% over the previous three years. For the purposes of preparing the consolidated financial statements at December 31, 2021, and in accordance with IAS 29, certain items of the statements of financial position of the investees in Argentina have been remeas- ured by applying the general consumer price index to historical data in order to reflect changes in the purchas- ing power of the Argentine peso at the reporting date for those companies. 296 296 Integrated Annual Report 2021 Bearing in mind that the Enel Group acquired control of the Argentine companies on June 25, 2009, the remeas- urement of the non-monetary financial statement figures was conducted by applying the inflation indices starting from that date. In addition to being already reflected in the opening statement of financial position, the account- ing effects of that remeasurement also include chang- es during the period. More specifically, the effect of the remeasurement of non-monetary items, the equity items and the income statement items recognized in 2021 was recognized in a specific line of the income statement un- der financial income and expense. The associated tax ef- fect was recognized in taxes for the year. In order to also take account of the impact of hyperin- flation on the exchange rate of the local currency, the income statement balances expressed in the hyperinfla- tionary currency have been translated into the Group’s presentation currency (euro) applying, in accordance with IAS 21, the closing exchange rate rather than the aver- age rate for the year in order to adjust these amounts to present values. The cumulative changes in the general price indices at December 31, 2018, December 31, 2019, December 31, 2020 and December 31, 2021 are shown in the following table. Periods From July 1, 2009 to December 31, 2018 From January 1, 2019 to December 31, 2019 From January 1, 2020 to December 31, 2020 From January 1, 2021 to December 31, 2021 Cumulative change in general consumer price index 346.30% 54.46% 35.41% 49.73% In 2021, the application of IAS 29 generated net financial income (gross of tax) of €20 million. The following tables report the effects of IAS 29 on the balance at December 31, 2021 and the impact of hyper- inflation on the main income statement items for 2021, differentiating between that concerning the revaluation on the basis of the general consumer price index and that due to the application of the closing exchange rate rather than the average exchange rate for the period, in accord- ance with the provisions of IAS 21 for hyperinflationary economies. Millions of euro Total assets Total liabilities Equity Cumulative hyperinflation effect at Dec. 31, 2020 Hyperinflation effect for the period Exchange differences Cumulative hyperinflation effect at Dec. 31, 2021 962 192 770 594 173 421(1) (190) (19) (171) 1,366 346 1,020 (1) The figure includes loss for the year, equal to €122 million. Millions of euro Revenue Costs Operating profit Net financial income/(expense) Net income/(expense) from hyperinflation Pre-tax profit Income taxes Loss for the year (owners of the Parent and non- controlling interests) Attributable to owners of the Parent Attributable to non-controlling interests IAS 29 effect IAS 21 effect Total effect at Dec. 31, 2021 143 182(1) (39) (13) 20 (32) 90 (122) (80) (42) (26) (25)(2) (1) - - (1) (3) 2 27 (25) 117 157 (40) (13) 20 (33) 87 (120) (53) (67) (1) (2) Includes impact on depreciation, amortization and impairment losses of €62 million. Includes impact on depreciation, amortization and impairment losses of €(2) million. Notes to the consolidated financial statements 297 297 5. Climate change disclosures The move towards “net zero” is under way worldwide and the processes of decarbonization and electrification of the global economy are crucial to avoiding the serious conse- quences of an increase in temperatures of over 1.5 °C. With this outlook, the Group has set its strategic guide- lines as follows: • allocate capital to support a decarbonized electricity supply; • enable the electrification of customers’ energy demand; • leverage the creation of value along the value chain; • bring forward achievement of the sustainable “net-ze- ro” goals to 2040. The Group has considered the risks related to climate change and the commitments established under the Paris Agreement in the preparation of these consolidated finan- cial statements at December 31, 2021, which appropriately reflect the effects of achieving the carbon neutrality ob- jectives on assets, liabilities, and profit and loss, highlight- ing its significant and foreseeable impacts as required un- der the Conceptual Framework of the IFRS. In this regard, in accordance with the provisions of the document published by the IFRS Foundation on November 20, 2020,(23) the Group provides explicit information in the notes to these consolidated financial statements regard- ing how climate change is reflected in our accounts. For a more effective and comprehensive communication concerning climate change disclosures prepared as part of the notes to these consolidated financial statements, we have mapped this disclosure as shown below, providing references to the various sections where issues associated with climate change are addressed. Topic Note Estimates and judgments concerning climate change Note 2.1 “Use of estimates and management judgment” Sustainable investment Note 18 “Property, plant and equipment” Note 22 “Intangible assets” Measurement of non- financial assets Note 11.e “Depreciation, amortization and other impairment losses” Note 18 “Property, plant and equipment” Note 23 “Goodwill” Provisions Note 39 “Provisions for risks and charges” Sustainable finance Note 46.3 “Borrowings” Note 57 “Events after the reporting period” Content • Reference to management’s use of estimates and judgments with regard to climate change (taking account of their materiality within financial reporting). • Focus on estimating expected cash flows from specific assets/CGUs • Focus of the effects of the Group’s commitments under the Paris (section: "Impairment of non-financial assets”). Agreement and their impact on the estimation of the useful life of the assets involved (section “Determining the useful life of non-financial assets”). • Focus on assets involved in renewable generation, infrastructure connected with the development of the grid and investment in expanding the e-Mobility, e-City, e-Industries, and e-Home businesses. • Focus on the development of intellectual property for achieving strategic objectives such as decarbonization, electrification and the development of platform models. • Focus on the effects related to the commitments of the Group in line with the Paris Agreement with regard to the measurement of non-financial assets, with particular regard to the residual useful life of certain assets and impairment testing. • Focus on the impact of climate change on provisions for risks and charges connected with generation plants, including those for decommissioning and restoration of sites, and provisions for restructuring plans linked to the energy transition (which include decarbonization and digitization). Focus on: • issues of sustainability-linked bonds connected with the achievement of sustainability objectives in line with the SDGs issued by the UN; • green bonds used to finance specific sustainable Group projects and • sustainable loans connected with the achievement of Sustainable initiatives; Development Goals (SDGs). Share-based payments Note 51 “Share-based payments” Environmental compliance Note 11.f “Other operating costs” Note 39 “Provisions for risks and charges” Note 2.2 “Significant accounting policies” • Description of long-term incentive plans anchored to achievement of specific climate-related targets. • Description of the costs connected with environmental compliance obligations under national and international regulations (in particular those concerning CO2 emission allowances, green certificates and energy efficiency certificates). • Description of costs generated by not having sufficient environmental certificates to meet environmental compliance regulations. • Description of accounting treatment of environmental certificates (sections: “Environmental certificates” and “Inventories”). (23) “Effects of climate-related matters on financial statements”, which completes an article written by Nick Anderson, member of the International Accounting Standards Board, on this issue in November 2019. 298 298 Integrated Annual Report 2021 6. COVID-19 disclosures In view of the challenges posed by current circumstanc- es, the Group carefully monitors the evolution of the COVID-19 pandemic with regard to the main areas and countries in which it operates, in line with the recom- mendations of ESMA primarily contained in the public statements(24) published in March, May, July and October 2020, and of CONSOB in its warning notices nos. 6/2020 of April 9, 2020, 8/2020 of July 16, 2020 and 1/2021 of February 16, 2021. The Group analyzed the impacts of COVID-19 on busi- ness operations, the financial position and performance, also identifying the main risks and uncertainties to which it is exposed. Note also that, due to the continuing uncertainty regard- ing the future evolution of the macroeconomic, financial and business environment in which the Group operates, the impacts of the COVID-19 pandemic for the purpos- es of the Integrated Annual Report at December 31, 2021 are reflected in the assessments and estimates made by management concerning the carrying amount of the income statement items, assets and liabilities that expe- rience the greatest volatility (in particular, revenue and costs, property, plant and equipment, goodwill, employee benefits, and financial instruments). 7. Restatement of comparative disclosures Reclassification of commodity contracts with physical settlement In order to improve the representation of contracts en- tered into for the purchase or sale of commodities with physical settlement (that do not qualify for the own use exemption) measured at fair value through profit or loss (within the scope of IFRS 9), the Group modified their presentation in the consolidated financial statements in 2021. More specifically, in 2020: • the unrealized fair value gain or loss on energy com- modity sales contracts outstanding at the reporting date were presented under “Revenue from sales and services”; • the unrealized fair value gain or loss on energy com- modity purchase contracts outstanding at the report- ing date were presented under “Electricity, gas and fuel” and “Services and other materials”. In 2021, the unrealized fair value gain or loss on contracts for the purchase or sale of energy commodities out- standing at the reporting date are recognized on a net basis under the item “Net results from commodity con- tracts”. The new presentation method constitutes a change in ac- counting policy, in accordance with “IAS 8 - Accounting policies, changes in accounting estimates and errors”. Accordingly, it was necessary to restate the income state- ment balances for previous periods for comparative pur- poses only, with no impact on either net profit or equity. Reclassification of the remeasurement at fair value of assets in respect of concession arrangements (IFRIC 12) in Brazil In order to improve the representation of the remeas- urement at fair value of financial assets in respect of concession arrangements within the scope of applica- tion of IFRIC 12 in Brazil in profit or loss, in 2021, the gain was reclassified from financial income to revenue from contracts with customers (IFRS 15) since it refers to the remeasurement at fair value of contract assets. That said, the following table reports the reclassifications made to costs, revenue, net results from commodity con- tracts and financial income in order to restate the com- parative figures at December 31, 2020. (24) ESMA 71-99-1290 of March 11, 2020; ESMA 32-63-951 of March 25, 2020; ESMA 31-67-742 of March 27, 2020; ESMA 32-63-972 of May 20, 2020; ESMA 32-61-417 of July 21, 2020 and ESMA 32-63-1041 of October 28, 2020. Notes to the consolidated financial statements 299 299 Impact on the income statement Millions of euro Notes Effect of reclassification of energy commodity contracts with physical settlement IFRS 9 2020 Effect of reclassification of remeasurement at fair value of financial assets in respect of concession arrangements within scope of IFRIC 12 in Brazil 932 932 977 68 1,045 113 87 87 87 (87) Revenue Revenue from sales and services Other income Costs Electricity, gas and fuel Services and other materials Personnel expenses Net impairment losses/(reversals) on trade receivables and other receivables Depreciation, amortization and other impairment losses Other operating costs Capitalized costs Net results from commodity contracts Operating profit Financial income from derivatives Other financial income Financial expense from derivatives Other financial expense Net income/(expense) from hyperinflation Share of profit/(loss) of equity-accounted investments Pre-tax profit Income taxes Profit from continuing operations Profit/(Loss) from discontinued operations Profit for the year (owners of the Parent and non-controlling interests) Attributable to owners of the Parent Attributable to non-controlling interests Earnings per share Basic earnings per share Basic earnings per share Basic earnings per share from continuing operations Basic earnings/(loss) per share from discontinued operations Diluted earnings per share Diluted earnings per share Diluted earnings per share from continuing operations Diluted earnings/(loss) per share from discontinued operations 10.a 10.b 62,623 2,362 [Subtotal] 64,985 11.a 11.b 11.c 11.d 11.e 11.f 11.g 25,049 18,298 4,793 1,285 7,163 2,202 (2,385) [Subtotal] 56,405 12 13 14 13 14 15 16 (212) 8,368 1,315 2,763 2,256 4,485 57 (299) 5,463 1,841 3,622 - 3,622 2,610 1,012 0.26 0.26 - 0.26 0.26 - The figures presented in the comments and the tables of the notes to these consolidated financial statements at December 31, 2021 are uniform and comparable with each other. 300 300 Integrated Annual Report 2021 2020 restated 63,642 2,362 66,004 26,026 18,366 4,793 1,285 7,163 2,202 (2,385) 57,450 (99) 8,455 1,315 2,676 2,256 4,485 57 (299) 5,463 1,841 3,622 - 3,622 2,610 1,012 0.26 0.26 - 0.26 0.26 - Changes in the consolidation scope 8. Main acquisitions and disposals during the year In the two periods under review, the consolidation scope changed as a result of a number of transactions: 2020 • In January 2020, the Wild Plains project company, 100% owned by Tradewind, was sold. The sale did not have an impact on profit or loss. • On May 11, 2020 Endesa Energía sold 80% of Endesa Soluciones for €21 million. The interest, which had pre- viously been consolidated on a line-by-line basis, was accounted for using the equity method. • On July 7, 2020, Enel Green Power España acquired 100% of Parque Eólico Tico SLU, Tico Solar 1 SLU and Tico Solar 2 SLU for a total of €40 million. • On September 14, Endesa Generación Portugal ac- quired 100% of Suggestion Power (Unipessoal) Ltda for a total of €6 million. • On September 17, 2020, Enel X International acquired 60% of Viva Labs AS for a total of €3 million. • Enel Green Power Panama acquired 100% of Jaguito So- lar and Progreso Solar in 2020 for a total of €2 million. In addition to the above changes in the consolidation scope, the following transactions, although they do not represent transactions involving the acquisition or loss of control, gave rise to a change in the interest held by the Group in the investees in 2020: • the disposal of a number of 50% owned joint ventures in Enel North America’s hydroelectric portfolio. In Decem- ber 2019, the entire portfolio had been classified as held for sale in accordance with IFRS 5. The gain recognized in profit or loss was €2 million; • Enel SpA increased its interest in Enel Américas by 5.03% under the provisions of share swaps entered into with a financial institution. The Group’s total stake therefore reached 65% in 2020; • Enel SpA increased its interest in Enel Chile by 2.89% un- der the provisions of two share swaps entered into with a financial institution. The Group’s total stake therefore reached 64.93% in 2020. 2021 • On January 8, 2021, 100% of Tynemouth Energy Storage was sold for €1 million. The sale did not have any signif- icant impact on profit or loss. • On January 20, 2021 100% of Enel Green Power Bulgaria was sold for a total of €35 million. The sale did not have any significant impact on profit or loss. • On March 10, 2021, Enel Green Power Italy acquired 100% of e-Solar Srl, the owner of a photovoltaic pro- ject with an authorized capacity of 170.11 MW, for €2.7 million. • On March 29, 2021, Enel X Srl acquired 100% of City- Poste Payment SpA, an Italian company that offers consumers access to payment services through both physical and digital channels, enabling them to carry out numerous types of transactions with private- and public-sector entities. • In the 1st Quarter of 2021 the consolidation scope changed with the full consolidation of Australian renew- able energy companies previously accounted for using the equity method due to a change in governance ar- rangements at the companies, without the acquisition of an additional interest. The purchase price allocation process was completed in December 2021 and essen- tially confirmed the carrying amount of the net assets acquired following an impairment loss of about €9 mil- lion. • On May 13, 2021 EGP Solar 1 LLC was sold for a total of about €4 million. • In the first nine months of 2021, Enel Green Power Es- paña acquired 100% of 30 renewables companies for a total of €86 million. • On September 8, 2021, Genability was sold by Enel X North America for about €6 million. • The purchase price allocation process for Viva Labs AS, acquired on September 17, 2020 by Enel X International, was completed in September, following which the car- rying amounts recognized at the acquisition date were confirmed. Other changes In addition to the above changes in the consolidation scope, the following transactions, which although they do not represent transactions involving the acquisition or loss of control, gave rise to a change in the interest held by the Group in the investees: • on March 15, Enel SpA launched a partial voluntary ten- der offer for up to a maximum of 7,608,631,104 shares of Enel Américas, equal to 10% of the share capital at that date. The offer period began on March 15 and ended on April 13, 2021.The tender offer was subject to the merger Notes to the consolidated financial statements 301 301 of EGP Américas SpA into Enel Américas SA being com- pleted, which took place on April 1, 2021. The total price was €1,271 million. Following completion of the partial voluntary tender offer and the completion of the EGP Américas merger, Enel owns about 82.3% of the out- standing share capital of Enel Américas; • on November 24, Enel Green Power RSA 2 (Pty) Ltd sold a stake in the investments held in Oyster Bay Wind Farm, Garob Wind Farm, Aced Renewables Hidden Valley and Soetwater Wind Farm for a total of ZAR 340 million, cor- responding to about €19 million. Following the transac- tion, the Group’s interest in those companies decreased from 60% to 55%; • on December 3, Enel SpA finalized the sale of the entire stake held in Open Fiber SpA, equal to 50% of the latter’s share capital, to Macquarie Asset Management and CDP Equity SpA for a total of about €2,733 million. The capital gain realized by the Group on a consolidated basis came to about €1,763 million. Acquisition of CityPoste Payment On March 29, 2021, Enel X Srl acquired 100% of CityPoste Payment SpA, a payment institution authorized to oper- ate by the Bank of Italy in the provision of payment servic- es both digitally (using a proprietary platform) and using physical sites (its network of points of sale). In December 2021 the identification of the fair value of the assets acquired and liabilities assumed was completed, following which negative goodwill of about €1 million was recognized. Millions of euro Net assets acquired Cost of the acquisition Goodwill/(Negative goodwill) Carrying amount pre March 29, 2021 Adjustments for purchase price allocation Amount recognized at March 29, 2021 2 21 19 20 22 21 (1) Acquisitions of renewable energy companies in Spain In the first nine months of 2021 Enel Green Power España acquired 100% of 30 renewable energy companies for a total of €86 million for the development and construction of photovoltaic and wind plants in Spain. Determination of goodwill Millions of euro Net assets acquired Cost of the acquisition (of which paid in cash) Goodwill/(Negative goodwill) 86 86 75 - The total price of the transaction amounted to €103 million as it includes repayment of the debt of the acquired com- panies due to the previous shareholders in the amount of €17 million. 302 302 Integrated Annual Report 2021 Sale of Open Fiber On December 3, 2021, Enel SpA finalized the sale of the entire stake held in Open Fiber SpA, equal to 50% of the latter’s share capital, to Macquarie Asset Management and CDP Equity SpA for a total of about €2,733 million. The capital gain realized by the Group on a consolidated basis came to about €1,763 million. The price was collected in full. Millions of euro Value of the transaction Value of the investment at December 2, 2021 Early settlement of financial asset with Open Fiber and related income Reversal of OCI reserve Consolidated capital gain 9. Segment reporting 2,733.3 (614.5) (310.6) (45.1) 1,763.1 The representation of the financial position and perfor- mance by business segment and geographical segment presented here is based on the approach used by man- agement in monitoring Group performance for the two years being compared. Notes to the consolidated financial statements 303 303 Performance by business segment Results for 2021(1) Millions of euro Revenue and other income from third parties Revenue and other income from transactions with other segments Total revenue Total costs Net results from commodity contracts Depreciation and amortization Impairment losses Impairment gains Thermal Generation and Trading Enel Green Power Infrastructure and Networks End-user Markets Enel X Services Holding and other Total reporting segment Eliminations and adjustments Total 22,883 7,244 17,164 37,396 1,513 20 1,786 88,006 - 88,006 10,272 2,282 3,492 1,312 28 1,977 148 19,511 (19,511) - 33,155 32,791 9,526 4,710 20,656 38,708 1,541 1,997 1,934 107,517 (19,511) 88,006 13,446 37,762 1,258 2,083 422 92,472 (19,511) 72,961 535 (55) - 2,044 - - (2) 2,522 929 1,297 2,692 410 222 188 36 5,774 Operating profit (2,586) 3,082 4,348 1,657 2,568 (12) 392 (10) 205 (35) 1,126 (203) 37 (6) 30 51 (2) 2 - 4,381 (268) (323) 1,472 7,680 Capital expenditure 822 5,662(2) 5,296 643 367 139 68 12,997 (1) Segment revenue includes both revenue from third parties and revenue from transactions with other segments. (2) Does not include €111 million regarding units classified as “held for sale”. Results for 2020(1) (2) (3) (4) - - - - - - 2,522 5,774 4,381 (268) 7,680 12,997 Millions of euro Revenue and other income from third parties Revenue and other income from transactions with other segments Total revenue Total costs Net results from commodity contracts Depreciation and amortization Impairment losses Impairment gains Operating profit Capital expenditure Thermal Generation and Trading Enel Green Power Infrastructure and Networks End-user Markets Enel X Services Holding and other Total reporting segment Eliminations and adjustments Total 14,332 5,852 15,919 28,793 1,097 2 9 66,004 - 66,004 7,404 1,840 3,510 715 24 1,868 145 15,506 (15,506) - 19,429 29,508 1,121 1,870 11,909 26,651 969 1,911 81,510 (15,506) 66,004 64,508 (15,506) 49,002 21,736 19,615 (421) 778 950 (43) 15 694 7,692 3,113 68 - 264 - 1,252 2,597 366 150 728 (67) 2,734 4,629 621 (47) 4,349 3,937 1,079 (141) 1,817 460 18 - (16) 303 154 340 (4) 28 1 (1) (6) 172 11 (4) (99) 5,343 3,408 (303) (226) (218) 8,455 103 71 10,197 - - - - - - (99) 5,343 3,408 (303) 8,455 10,197 (1) Segment revenue includes both revenue from third parties and revenue from transactions with other segments. (2) The figures for revenue from third parties and transactions with other segments have been calculated more accurately. (3) The figures for 2020 have been adjusted, for comparative purposes only, to take account of the effects associated with the change in classification connect- ed with the fair value measurement of outstanding contracts at the end of the period for the purchase and sale of commodities with physical settlement. The change in classification had no impact on operating profit. For more details, please see note 7 to these consolidated financial statements. (4) For comparative purposes only, €87 million in 2020 in respect of the component recognized through profit or loss deriving from the remeasurement at fair value of the financial assets connected with service concession arrangements involving distribution operations in Brazil falling within the scope of IFRIC 12 have been reclassified from financial income to revenue. The latter classification had an impact of the same amount on operating profit. For more details, please see note 7 to these consolidated financial statements. 304 304 Integrated Annual Report 2021 Performance by geographical segment Results for 2021(1) Millions of euro Italy Iberia Latin America Europe North America Africa, Asia and Oceania Other, eliminations and adjustments Total Revenue and other income from third parties Revenue and other income from transactions with other segments 44,282 20,800 16,956 2,335 1,479 240 1,914 88,006 1,135 252 1 13 34 1 (1,436) - Total revenue 45,417 21,052 16,957 2,348 1,513 Total costs 40,751 17,412 12,867 2,063 Net results from commodity contracts Depreciation and amortization 1,967 543 53 38 2,107 1,754 1,177 Impairment losses 1,747 1,797 Impairment gains Operating profit Capital expenditure (22) 2,801 3,842 (170) 802 2,203 536 (9) 2,439 3,722 186 87 (65) 115 455 748 (81) 356 161 - 167 241 135 4 65 32 - 13 478 88,006 (1,015) 72,961 (2) 2,522 129 5,774 21 (2) 4,381 (268) 1,343 7,680 2,293 217(2) 265 12,997 (1) Segment revenue includes both revenue from third parties and revenue from transactions with other segments. (2) Does not include €111 million regarding units classified as “held for sale”. Results for 2020(1) (2) (3) Millions of euro Italy Iberia Latin America Europe North America Africa, Asia and Oceania Other, eliminations and adjustments Total Revenue and other income from third parties Revenue and other income from transactions with other segments 31,418 17,006 13,897 2,074 1,333 152 124 66,004 785 164 6 11 34 1 (1,001) - Total revenue 32,203 17,170 Total costs 24,205 13,480 13,903 9,713 2,085 1,576 Net results from commodity contracts Depreciation and amortization Impairment losses Impairment gains Operating profit Capital expenditure (174) 85 (40) - 1,835 1,640 1,209 (10) 4,790 2,842 268 (160) 2,027 1,638 1,230 1,225 (3) 1,698 2,860 185 136 (126) 314 411 1,367 622 33 306 536 (3) (61) 1,816 153 98 - 36 31 - (12) 417 (877) (692) 66,004 49,002 (3) (99) 111 5,343 3 (1) (301) 3,408 (303) 8,455 213 10,197 (1) Segment revenue includes both revenue from third parties and revenue from transactions with other segments. (2) The figures for 2020 have been adjusted, for comparative purposes only, to take account of the effects associated with the change in classification connect- ed with the fair value measurement of outstanding contracts at the end of the period for the purchase and sale of commodities with physical settlement. The change in classification had no impact on operating profit. For more details, please see note 7 to these consolidated financial statements. (3) For comparative purposes only, €87 million in 2020 in respect of the component recognized through profit or loss deriving from the remeasurement at fair value of the financial assets connected with service concession arrangements involving distribution operations in Brazil falling within the scope of IFRIC 12 have been reclassified from financial income to revenue. The latter classification had an impact of the same amount on operating profit. For more details, please see note 7 to these consolidated financial statements. Notes to the consolidated financial statements 305 305 Financial position by business segment At December 31, 2021 Thermal Generation and Trading Enel Green Power Infrastructure and Networks End- user Markets Enel X Services Holding and other Total reporting segment Eliminations and adjustments 9,384 36,205 38,635 49 5,016 21,473 4,030 600 788 12 85,472 143 32,036 - - Total 85,472 32,036 216 1 4,814 4,319 Millions of euro Property, plant and equipment Intangible assets Non-current and current contract assets Trade receivables Other Trade payables Non-current and current contract liabilities Sundry provisions Other 1 525 - 77 2,601 826 6,731 2,614 6,533 3,812 547 383 - 608 43 651 435 1,614 22,543 14,203 (6,451) 16,092 (6,107) 8,096 Operating assets 18,734(1) 44,649(2) 69,978 14,424 2,395(3) 2,478 2,204 154,862 (12,515) 142,347 5,730 3,701 4,390 7,129 726 982 169 22,827 (5,843) 16,984 102 216 7,316 62 13 13 - 7,722 (75) 7,647 4,586 4,125 936 1,901 3,810 8,104 466 4,575 58 148 671 1,070 2,736 620 2,582 3,371 11,147 22,505 64,201 (89) 11,058 (6,245) 16,260 (12,252) 51,949 587 370 4 882 635 Operating liabilities 14,543 6,754(4) 23,620 12,232 945(5) (1) Of which €2 million regarding units classified as “held for sale”. (2) Of which €999 million regarding units classified as “held for sale”. (3) Of which €136 million regarding units classified as “held for sale”. (4) Of which €28 million regarding units classified as “held for sale”. (5) Of which €57 million regarding units classified as “held for sale”. At December 31, 2020(1) Thermal Generation and Trading Enel Green Power Infrastructure and Networks End- user Markets Enel X Services Holding and other Total reporting segment Eliminations and adjustments Total 79,499 31,505 Millions of euro Property, plant and equipment Intangible assets(1) 184 4,883 21,490 3,775 10,747 30,655 36,718 154 516 676 699 383 9 79,498 114 31,505 1 - Non-current and current contract assets Trade receivables Other 4 1 340 - 42 14 - 401 79 480 2,670 1,433 2,053 1,095 6,493 4,034 2,674 756 358 297 755 769 368 16,731 (4,679) 12,052 1,327 8,351 (2,139) 6,212 Operating assets(1) 15,038(2) 38,687(3) 67,715 8,719 1,889(4) 2,620 1,818 136,486 (6,738) 129,748 Trade payables 2,816 2,751 5,405 4,678 426 868 99 17,043 (4,160) 12,883 Non-current and current contract liabilities Sundry provisions Other Operating liabilities 147 152 7,172 42 5 8 - 7,526 (60) 7,466 3,528 1,133 7,624 947 1,434 3,794 400 7,856 2,245 46 179 603 587 9,905 (108) 9,797 1,101 2,607 16,555 (2,323) 14,232 5,284(5) 24,227 7,365 656 2,580 3,293 51,029 (6,651) 44,378 (1) The figures for 2020 have been adjusted to reflect a more accurate allocation. (2) Of which €3 million regarding units classified as “held for sale”. (3) Of which €855 million regarding units classified as “held for sale”. (4) Of which €11 million regarding units classified as “held for sale”. (5) Of which €35 million regarding units classified as “held for sale”. 306 306 Integrated Annual Report 2021 Financial position by geographical segment At December 31, 2021 Millions of euro Italy Iberia Latin America Europe North America Africa, Asia and Oceania Other, eliminations and adjustments Total Property, plant and equipment 27,335 23,075 18,671 3,440 10,853 1,948 150 85,472 Intangible assets 2,313 16,071 11,414 Non-current and current contract assets Trade receivables Other 94 7,372 4,555 5 3,886 2,474 Operating assets 41,669(1) 45,511 Trade payables 9,684 2,509 517 4,414 1,398 36,414 4,333 Non-current and current contract liabilities Sundry provisions Other 4,109 3,109 30 3,395 5,749 4,211 3,945 2,426 4,509 772 - 583 217 5,012 481 438 130 328 Operating liabilities 22,937(4) 13,774 11,298 1,377 557 18 215 259 11,902 1,208 - 120 1,482 2,810 179 13 51 140 2,331(2) 136 - 32 64 730 32,036 4 651 (429) (947) 16,092 8,096 (492)(3) 142,347 (1,367) 16,984 (39) 7,647 744 183 11,058 16,260 232(5) (479)(6) 51,949 (1) Of which €2 million regarding units classified as “held for sale”. (2) Of which €999 million regarding units classified as “held for sale”. (3) Of which €136 million regarding units classified as “held for sale”. (4) Of which €6 million regarding units classified as “held for sale”. (5) Of which €22 million regarding units classified as “held for sale”. (6) Of which €57 million regarding units classified as “held for sale”. At December 31, 2020 Millions of euro Italy Iberia Latin America Europe North America Africa, Asia and Oceania Other, eliminations and adjustments Total Property, plant and equipment 26,762 23,355 16,492 3,255 8,134 Intangible assets 2,047 15,919 11,612 Non-current and current contract assets Trade receivables Other 105 5,948 2,624 10 2,166 1,804 297 3,686 1,368 787 1 436 178 Operating assets 37,486(1) 43,254 33,455(2) 4,657(3) Trade payables 6,881 2,274 3,387 Non-current and current contract liabilities Sundry provisions Other 4,060 3,006 17 2,468 5,033 3,910 3,033 2,542 3,420 318 425 100 330 Operating liabilities 18,442 12,223 9,366 1,173(5) 483 16 181 253 9,067 1,076 - 128 1,289 2,493 1,345 169 2 48 55 1,619(4) 105 - 24 79 156 79,499 488 31,505 49 480 (413) 12,052 (70) 210 6,212 129,748 (1,158) 12,883 (42) 7,466 625 9,797 1,048 14,232 208(6) 473 44,378 (1) Of which €5 million regarding units classified as “held for sale”. (2) Of which €2 million regarding units classified as “held for sale”. (3) Of which €46 million regarding units classified as “held for sale”. (4) Of which €816 million regarding units classified as “held for sale”. (5) Of which €2 million regarding units classified as “held for sale”. (6) Of which €33 million regarding units classified as “held for sale”. Notes to the consolidated financial statements 307 307 The following table reconciles segment assets and liabilities and the consolidated figures. Millions of euro Total assets Equity-accounted investments Non-current financial derivative assets Other non-current financial assets Non-current tax assets included in “Other non-current assets” Other current financial assets Current financial derivative assets Cash and cash equivalents Deferred tax assets Tax assets Financial and tax assets of “Assets held for sale” Segment assets Total liabilities Long-term borrowings Non-current financial derivative liabilities Other non-current financial liabilities Short-term borrowings Current portion of long-term borrowings Other current financial liabilities Current financial derivative liabilities Deferred tax liabilities Income tax liabilities Other tax liabilities Financial and tax liabilities of “Liabilities included in disposal groups held for sale” Segment liabilities at Dec. 31, 2021 at Dec. 31, 2020 206,940 163,453 704 2,772 5,704 2,286 8,645 22,791 8,858 11,034 1,694 105 861 1,236 5,159 1,539 5,113 3,471 5,906 8,578 1,294 548 142,347 129,748 164,598 54,500 3,339 120 13,306 4,031 625 24,607 9,259 712 1,274 876 51,949 121,096 49,519 3,606 - 6,345 3,168 622 3,531 7,797 471 886 773 44,378 308 308 Integrated Annual Report 2021 Information on the consolidated income statement Revenue 10.a Revenue from sales and services – €84,104 million Millions of euro Sale of electricity Transport of electricity Fees from network operators Transfers from institutional market operators Sale of gas Transport of gas Sale of fuel Fees for connection to electricity and gas networks Construction contracts(1) Sale of environmental certificates Sale of value-added services Other sales and services Total IFRS 15 revenue(1) 2021 2020 Change 46,963 34,745 12,218 35.2% 10,732 10,710 22 0.2% 800 833 4,823 599 1,791 787 1,268 107 1,093 855 932 (132) -14.2% 1,395 2,718 611 602 759 819 35 862 764 (562) -40.3% 2,105 (12) 1,189 77.4% -2.0% - 28 3.7% 449 54.8% 72 231 91 - 26.8% 11.9% 70,651 54,952 15,699 28.6% Sale of commodities under contracts with physical settlement 24,314 7,513 16,801 Fair value gain/(loss) on commodity sales contracts with physical settlement closed during the period(2) (10,893) 1,156 (12,049) - - Other revenue Total revenue from sales and services(1) (2) 32 21 11 52.4% 84,104 63,642 20,462 32.2% (1) For comparative purposes only, €87 million in 2020 in respect of the component recognized through profit or loss deriving from the remeasurement at fair value of the financial assets connected with service concession arrangements involving distribution operations in Brazil falling within the scope of IFRIC 12 have been reclassified from financial income to revenue. The latter classification had an impact of the same amount on operating profit. For more details, please see note 7 to the consolidated financial statements. (2) The figures for 2020 have been adjusted, for comparative purposes only, to take account of the effects associated with the change in classification connect- ed with the fair value measurement of outstanding contracts at the end of the period for the purchase and sale of commodities with physical settlement. For more details, please see note 7 to these consolidated financial statements. Revenue from the “Sale of electricity” amounted to €46,963 million, an increase of €12,218 million compared with the previous year (+35.2%). The increase mainly reflects higher sales volumes and prices, mainly in Italy (€7,367 million), Brazil (€2,037 million) and Spain (€2,058 million), where the rise was also due to the recognition of an indemnity paid to Endesa (€186 million) in relation to the CO2 emission rights assigned free of charge under the “Plan Nacional de Asignación de Derechos de Emisión” (PNA). “Transfers from institutional market operators” decreased by €562 million compared with the previous year, mainly due to a decline in compensation for extra-peninsular generation in Spain following an increase in prices. Revenue from the “Sale of gas“ in 2021 amounted to €4,823 million (€2,718 million in 2020), an increase of €2,105 million compared with the previous year. The increase is mainly at- tributable to an increase in quantities sold in Spain. Revenue from the “Sale of fuel” increased by €1,189 million, especially by Enel Global Trading due to the rise in gas prices. The increase in the “Sale of commodities under contracts with physical settlement” (€16,801 million) mainly regards gas sales. This positive effect was partially offset by the deterio- ration in performance of the measurement of contracts set- tled in 2021 (-€12,049 million), mainly involving gas contracts. The following table shows the net fair value gain or loss on contracts for the sale or purchase of commodities with physical settlement measured at fair value through profit or loss within the scope of IFRS 9. Notes to the consolidated financial statements 309 309 Millions of euro Fair value gain/(loss) on contracts for energy commodities with physical settlement (within the scope of IFRS 9) closed in the period 2021 2020 Change Sales contracts Sale of electricity Fair value gain/(loss) on closed contracts Total electricity Sale of gas Fair value gain/(loss) on closed contracts Total gas Sale of environmental certificates Fair value gain/(loss) on closed contracts Total environmental certificates Total revenue Purchase contracts Purchase of electricity Fair value gain/(loss) on closed contracts Total electricity Purchase of gas Fair value gain/(loss) on closed contracts Total gas Purchase of environmental certificates Fair value gain/(loss) on closed contracts Total environmental certificates Total costs 4,368 (1,705) 2,663 19,576 (9,335) 10,241 370 147 517 2,478 1,890 76.3% 353 (2,058) - 2,831 (168) -5.9% 4,723 14,853 791 (10,126) - - 5,514 4,727 85.7% 312 12 324 58 135 193 18.6% - 59.6% 54.8% 13,421 8,669 4,752 3,677 (1,220) 2,457 19,951 (8,057) 11,894 810 145 955 2,828 849 30.0% (47) (1,173) - 2,781 4,661 684 5,345 92 139 231 (324) -11.7% 15,290 (8,741) 6,549 718 6 724 - - - - 4.3% - 15,306 8,357 6,949 83.2% Net revenue/(costs) on contracts for energy commodities with physical settlement (within the scope of IFRS 9) closed in the period (1,885) 312 (2,197) Unrealized fair value gain/(loss) on outstanding contracts for energy commodities with physical settlement (IFRS 9) Sales contracts Electricity Gas Environmental certificates Total Purchase contracts Electricity Gas Environmental certificates Total Net unrealized fair value gain/(loss) on outstanding contracts for energy commodities with physical settlement (IFRS 9) (1,606) (16,285) (495) (18,386) (2,169) (13,801) (508) (197) (668) (67) (1,409) (15,617) (428) (932) (17,454) (108) (2,061) (869) (12,932) (68) (440) (16,478) (1,045) (15,433) (1,908) 113 (2,021) TOTAL REVENUE/(COSTS) ON CONTRACTS WITH PHYSICAL SETTLEMENT (WITHIN THE SCOPE OF IFRS 9) (3,793) 425 (4,218) - - - - - - - - - - - 310 310 Integrated Annual Report 2021 Revenue from contracts with customers (IFRS 15) breaks down into “point in time” and “over time” revenue as indi- cated in the following tables. Millions of euro 2021 Italy Iberia Latin America Europe North America Africa, Asia and Oceania Other, eliminations and adjustments Total Over time Point in time Over time Point in time Over time Point in time Over time Point in time Over time Point in time Over time Point in time Over time Point in time Over time Point in time Total IFRS 15 revenue 29,187 1,178 19,707 402 16,525 245 1,598 654 805 17 194 26 - 113 68,016 2,635 2020 Italy Iberia Latin America Europe North America Africa, Asia and Oceania Other, eliminations and adjustments Total Over time Point in time Over time Point in time Over time(1) Point in time Over time Point in time Over time Point in time Over time Point in time Over time Point in time Over time Point in time Total IFRS 15 revenue 21,107 441 16,355 460 13,520 200 1,418 580 586 51 67 79 16 72 53,069 1,883 (1) For comparative purposes only, €87 million in 2020 in respect of the component recognized through profit or loss deriving from the remeasurement at fair value of the financial assets connected with service concession arrangements involving distribution operations in Brazil falling within the scope of IFRIC 12 have been reclassified from financial income to revenue. The latter classification had an impact of the same amount on operating profit. For more details, please see note 7 to the consolidated financial statements. Notes to the consolidated financial statements 311 311 With regard to the release to profit or loss by time class of “performance obligations”, please see note 27 “Current/ Non-current contract assets/(liabilities)”. The table below gives a breakdown of revenue from sales and services by geographical segment. Millions of euro Italy Europe Iberia France Switzerland Germany Austria Slovenia Romania Greece Bulgaria Belgium Czech Republic Hungary Russia Netherlands United Kingdom Other European countries Americas United States Canada Mexico(2) Brazil(3) Chile Peru Colombia Argentina Panama Costa Rica Guatemala Other Africa Asia Oceania Total 2021 33,304 18,896 970 2,918 1,085 245 195 1,534 121 - 522 435 12 552 96 3,736 1,160 601 33 202 9,381 3,151 1,111 2,188 887 150 14 67 114 371 53 2020 (1) 24,904 16,169 503 99 1,860 66 2 1,322 110 9 18 33 165 533 2,743 399 73 502 25 152 6,753 2,811 1,118 2,022 816 136 22 44 84 129 20 84,104 63,642 (1) The figures for 2020 have been adjusted, for comparative purposes only, to take account of the effects associated with the change in classification connect- ed with the fair value measurement of outstanding contracts at the end of the period for the purchase and sale of commodities with physical settlement. For more details, please see note 7 to these consolidated financial statements. (2) The figures for 2020 have been reallocated more accurately among Mexico, Costa Rica and Guatemala. (3) For comparative purposes only, €87 million in 2020 in respect of the component recognized through profit or loss deriving from the remeasurement at fair value of the financial assets connected with service concession arrangements involving distribution operations in Brazil falling within the scope of IFRIC 12 have been reclassified from financial income to revenue. The latter classification had an impact of the same amount on operating profit. For more details, please see note 7 to the consolidated financial statements. 312 312 Integrated Annual Report 2021 Performance obligations The following table provides information about the Group’s performance obligations arising from contracts with cus- tomers with reference to the main revenue streams only, with a summary of the specific judgments made and the related revenue recognition policies. For information on the use of estimates with revenue from contracts with customers, please see note 2.1 “Use of esti- mates and management judgment”. Nature and timing of satisfaction of performance obligation Accounting policies Type of product/ service Sale/transport of electricity/gas to end users Network connection services An electricity/gas supply agreement signed with an end user includes a single performance obligation (sale and transport of the commodity) because the Group has determined that the contract does not provide distinct goods/services and the promise is satisfied by transferring control over the commodity to the customer when it is delivered at the point of delivery. In order to determine the nature of the promise included in such contracts, the Group carefully analyzes the facts and circumstances applicable to each contract and commodity. However, the Group considers that the performance obligation provided for in a repetitive service contract, such as a supply or transport contract for the provision of electricity/gas to end users, is typically satisfied over time (because the customer simultaneously receives and consumes the benefits of the commodity as it is delivered) as part of a series of distinct goods/services (i.e., each unit of commodity) that are substantially the same and have the same pattern of transfer to the customer. In these cases, the Group applies an output method to recognize revenue in the amount to which it has a right to invoice the customer if that amount corresponds directly with the value to the customer of the performance completed to date. The network connection fees received from customers for connecting them to the electricity/gas distribution networks require a specific Group assessment to take into consideration all terms and conditions of the connection arrangements. This assessment is intended to determine whether the contract includes other distinct goods or services, such as for example the right to obtain ongoing access to the infrastructure in order to receive the commodity or, when the connection fee is a “non-refundable up-front fee” paid at or near contract inception, a material right that gives rise to a performance obligation. In particular, in some countries in which the Group operates, it has determined that the nature of the consideration received represents a “non-refundable up-front fee” whose payment provides a material right to the customer. In order to determine if the period over which this material right should be recognized extends beyond the initial contractual period, the Group takes into consideration the applicable local legal and regulatory framework applicable to the contract and affecting the parties. In such cases, if there is an implied assignment of the material right and an obligation from the initial customer to the new customer, the Group recognizes the connection fee over a period beyond the relationship with the initial customer, considering the concession terms as the period during which the initial customer and any future customer can benefit from the ongoing access without paying an additional connection fee. As a consequence, the fee is recognized over the period for which the payment creates an obligation for the Group to make the lower prices available to future customers (i.e., the period during which the customer is expected to benefit from the ongoing access service without having to pay an “up-front fee” upon renewal). Construction contracts The construction contracts typically include a performance obligation satisfied over time. For these contracts, the Group generally considers it appropriate to use an input method for measuring progress, except when a specific contract analysis suggests the use of an alternative method that better depicts the Group’s performance obligation fulfilled at the reporting date. Revenue from the sale and transport of electricity/gas to end users is recognized when these commodities are delivered to the customer and is based on the quantities provided during the period, even if these have not yet been invoiced. It is determined using estimates as well as periodic meter readings. Where applicable, this revenue is based on the rates and related restrictions established by law or by the Regulatory Authority for Energy, Networks and the Environment (ARERA) and analogous foreign authorities during the applicable period. Revenue from monetary and in-kind fees for connection to the electricity and gas distribution network is recognized on the basis of the satisfaction of the performance obligations included in the contract. The identification of distinct goods or services requires a careful analysis of the terms and conditions of the connection arrangements, which could vary from country to country based on the local context, regulations and law. In order to finalize this assessment, the Group considers not only the characteristics of the goods/services themselves (i.e., the good or service is capable of being distinct) but also the implied promises for which the customer has a valid expectation as it views those promises as part of the negotiated exchange, that is goods/services that the customer expects to receive and has paid for (i.e., the promise to transfer the good or service to the customer is separately identifiable from other promises in the contract). Furthermore, the Group acts as an agent in some contracts for electricity/gas network connection services and other related activities, depending on local legal and regulatory framework. In such cases, it recognizes revenue on a net basis, corresponding to any fee or commission to which it expects to be entitled. For construction contracts that include a performance obligation satisfied over time, the Group recognizes revenue over time by measuring progress toward the complete satisfaction of that performance obligation. The cost-to-cost method is generally considered the best method to depict the Group’s performance obligation fulfilled at the reporting date. The amount due from customers under a construction contract is presented as a contract asset; the amount due to customers under a construction contract is presented as a contract liability. Notes to the consolidated financial statements 313 313 10.b Other income – €3,902 million Millions of euro Grants related to income Grants for environmental certificates Grants related to assets (electricity and gas business) Sundry reimbursements Gains on the disposal of subsidiaries, associates, joint ventures, joint operations and non-current assets held for sale Gains on the disposal of property, plant and equipment and intangible assets Service continuity bonuses Other income Total 2021 2020 Change 33 291 26 305 1,781 66 48 1,352 3,902 12 342 24 371 15 58 40 1,500 2,362 21 (51) 2 (66) 1,766 8 8 (148) 1,540 - -14.9% 8.3% -17.8% - 13.8% 20.0% -9.9% 65.2% “Sundry reimbursements” amounted to €305 million, a decrease of €66 million compared with the previous year, with most of the reduction coming in Italy due to a de- crease in penalties and reimbursements for damages re- corded at e-distribuzione and Enel Energia. Gains on the disposal of entities amounted to €1,781 mil- lion in 2021, an increase of €1,766 million, mainly reflecting the recognition in 2021 of the capital gain on the sale of Enel SpA’s interest in Open Fiber (€1,763 million). “Other income” decreased by €148 million, mainly due to the decline registered by e-distribuzione in other income from the electricity business (€288 million), primarily re- flecting the reimbursement of system charges and grid fees. This negative effect was partially offset by the increase registered at Enel Green Power North America in income from tax partnerships (€44 million) and an increase in in- come from the eco-bonus subsidy relating to energy and seismic upgrading posted by Enel X Italia (€84 million). The following tables show a breakdown of total revenue by business segment based on the approach used by man- agement to monitor the Group’s performance during the two years being compared. Millions of euro 2021 Thermal Generation and Trading Enel Green Power Infrastructure and Networks End- user Markets Enel X Services Holding and other Total reporting segment Eliminations and adjustments Total Total IFRS 15 revenue 17,213 8,843 20,078 38,238 1,394 1,972 138 87,876 (17,225) 70,651 Sale of commodities under contracts with physical settlement Fair value gain/(loss) on commodity sales contracts with physical settlement closed during the period 26,691 (10,895) Other revenue 5 - - 6 - - 15 14 1 - - - 3 - - - 26,705 (2,391) 24,314 - (10,894) 1 (10,893) 14 17 60 (28) 32 Total revenue from sales and services Other income TOTAL REVENUE 33,014 8,849 20,093 38,253 1,397 1,986 155 103,747 (19,643) 84,104 141 33,155 677 9,526 563 455 144 11 1,779 3,770 132 3,902 20,656 38,708 1,541 1,997 1,934 107,517 (19,511) 88,006 314 314 Integrated Annual Report 2021 Millions of euro Thermal Generation and Trading Enel Green Power Infrastructure and Networks 2020 End- user Markets Enel X Services Holding and other Total reporting segment Eliminations and adjustments Total Total IFRS 15 revenue(1) 9,812 7,143 18,462 29,143 1,022 1,835 136 67,553 (12,601) 54,952 Sale of commodities under contracts with physical settlement Fair value gain/(loss) on commodity sales contracts with physical settlement closed during the period(2) Other revenue Total revenue from sales and services 10,192 1,164 6 - - 7 - - 6 15 (7) - - - 4 - - 6 - - 3 10,207 (2,694) 7,513 1,157 (1) 1,156 32 (11) 21 21,174 7,150 18,468 29,151 1,026 1,841 139 78,949 (15,307) 63,642 Other income TOTAL REVENUE(1) (2) 562 21,736 542 7,692 961 357 95 29 15 2,561 (199) 2,362 19,429 29,508 1,121 1,870 154 81,510 (15,506) 66,004 (1) For comparative purposes only, €87 million in 2020 in respect of the component recognized through profit or loss deriving from the remeasurement at fair value of the financial assets connected with service concession arrangements involving distribution operations in Brazil falling within the scope of IFRIC 12 have been reclassified from financial income to revenue. The latter classification had an impact of the same amount on operating profit. For more details, please see note 7 to these consolidated financial statements. (2) The figures for 2020 have been adjusted, for comparative purposes only, to take account of the effects associated with the change in classification connect- ed with the fair value measurement of outstanding contracts at the end of the period for the purchase and sale of commodities with physical settlement. The change in classification had no impact on operating profit. For more details, please see note 7 to these consolidated financial statements. Costs 11.a Electricity, gas and fuel – €49,093 million Millions of euro Electricity Gas Fair value gain/(loss) on contracts for purchase of electricity and gas with physical settlement closed during the period(1) Nuclear fuel Other fuels Total (1) 2021 29,579 27,046 (9,277) 107 1,638 49,093 2020 16,158 7,952 637 117 1,162 26,026 Change 13,421 19,094 (9,914) (10) 476 23,067 83.1% - - -8.5% 41.0% 88.6% (1) The figures for 2020 have been adjusted, for comparative purposes only, to take account of the effects associated with the change in classification connect- ed with the fair value measurement of outstanding contracts at the end of the period for the purchase and sale of commodities with physical settlement. The change in classification had no impact on operating profit. For more details, please see note 7 to these consolidated financial statements. Costs for the purchase of “Electricity” mainly increased due to a rise in volumes purchased in an environment of in- creasing average prices compared with the previous year, mainly attributable to Italy (€8,098 million), Spain (€2,564 million) and Latin America (€2,428 million). The increase in costs for the purchase of “Gas” reflects the increase in quantities handled, mainly due to a rise in gen- eration, as well as the increase in the cost of purchasing gas from third parties. The fair value loss on closed contracts with physical settle- ment changed from a fair value gain in the previous year, with a difference of €9,914 million, of which €8,741 million attributable to gas and €1,173 million to electricity. The increase in “Other fuels” is mainly attributable to the increase in the volume of generation and the rise in com- modity prices. Notes to the consolidated financial statements 315 315 11.b Services and other materials – €19,609 million Millions of euro Wheeling Maintenance and repairs Telephone and postal costs Communication services IT services Leases and rentals Other services Purchase of environmental certificates Fair value gain on contracts for purchase of environmental certificates with physical settlement closed during the period(1) Other materials Total(1) 2021 9,023 1,410 180 127 967 126 4,246 1,279 145 2020 9,619 1,127 172 116 823 396 3,648 673 139 2,106 19,609 1,653 18,366 Change (596) 283 8 11 144 (270) 598 606 6 453 1,243 -6.2% 25.1% 4.7% 9.5% 17.5% -68.2% 16.4% 90.0% 4.3% 27.4% 6.8% (1) The figures for 2020 have been adjusted, for comparative purposes only, to take account of the effects associated with the change in classification connect- ed with the fair value measurement of outstanding contracts at the end of the period for the purchase and sale of commodities with physical settlement. The change in classification had no impact on operating profit. For more details, please see note 7 to these consolidated financial statements. Costs for services and other materials amounted to €19,609 million in 2021, an increase of €1,243 million com- pared with 2020. This change essentially reflected: • a decline in costs for wheeling, mainly in Spain, attribut- able to a decline in the average price applied; • future costs connected with the conversion of plants in Italy for the purposes of the energy transition. More specifically, these costs regard provisions associated with the acceleration of the energy-transition process, which affected almost all of Enel Produzione’s plants with the NextGen project (€426 million). In application of the Group strategy to accelerate the elimination of the use of fossil fuels from the generation process and increasing our green capacity, we have committed our- selves to launching a radical process to decommission and secure Italian generation facilities that use tradi- tional energy sources that are no longer in line with Eu- ropean standards, with a view to converting them into renewable energy facilities or installing storage systems 11.c Personnel expenses – €5,281 million Millions of euro Wages and salaries Social security contributions Italian post-employment benefits Post-employment and other long-term benefits Early retirement incentives Early retirement incentives connected with restructuring agreements Other costs Total 316 316 Integrated Annual Report 2021 and other circular economy initiatives; • an increase in costs for systems assistance, computer maintenance and IT development, mainly in Italy; • a decline in costs for leases and rentals, mainly reflect- ing the closure of a dispute in Spain, which permitted the reversal of provisions previously recognized in the amount of about €300 million; • an increase in costs for the purchase of environmen- tal certificates, attributable to a significant increase in the prices of CO2, the increase in production at thermal generation plants and an expansion of trading in emis- sion allowances; • an increase of €598 million in “Other services”, essen- tially reflecting the increase in costs for services con- nected with the electricity and gas business (€154 mil- lion), those related to the value-added services busi- ness (€150 million) and expenses for professional and technical services (€147 million). 2021 3,238 853 104 85 10 806 185 2020 3,133 824 103 (485) 152 882 184 5,281 4,793 Change 105 29 1 570 (142) (76) 1 488 3.4% 3.5% 1.0% - -93.4% -8.6% 0.5% 10.2% Personnel expenses amounted to €5,281 million in 2021, an increase of €488 million. The Group’s workforce decreased by 438 employees, mainly reflecting the negative balance between new hires and terminations (-461 employees) due to early-retirement incentive policies and changes in the consolidation scope (+23 employees), essentially attributable to: • the sale of Enel Green Power Bulgaria; • the acquisition of CityPoste Payment SpA in Italy. The increase in “Wages and salaries” substantially reflects the cost incurred as a result of new hiring at companies in Italy, the United States and Argentina. The €570 million increase in “Post-employment and oth- er long-term benefits” is mainly attributable to the 2020 modification in Spain of the electricity discount benefit for employees following the renewal of the 5th Endesa Collec- tive Bargaining Agreement, which led to the release of the associated provision in the amount of €515 million. Expenses for early retirement incentives in 2021 amounted to €816 million, down €218 million, with the change largely accounted for by Spain (€732 million) due to the effect of the accrual in 2020 to the provision for the Plan de Salida prompted by elimination of the extinguishment option of the individual agreement concerning the suspension of employment relationships for certain individual contracts as a result of the signing of the new collective bargaining agreement mentioned earlier, only partly offset by an in- crease in costs for early retirement incentives in Italy (€480 million) associated with corporate restructuring programs. The table below shows the average number of employees by category, along with a comparison with the previous year, and the headcount as of December 31, 2021. No. Senior managers Middle managers Office staff Blue collar Total Average(1) Headcount(1) 2021 1,386 11,797 35,449 17,344 65,976 2020 1,397 11,258 36,027 18,396 67,078 at Dec. 31, 2021 1,377 12,242 35,556 17,104 66,279 (1) For companies consolidated on a proportionate basis, the headcount corresponds to Enel’s percentage share of the total. 11.d Net impairment losses/(reversals) on trade receivables and other receivables – €1,196 million Millions of euro Impairment losses on trade receivables Impairment losses on other receivables Total impairment losses on trade receivables and other receivables Impairment gains on trade receivables Impairment gains on other receivables Total impairment gains on trade receivables and other receivables NET IMPAIRMENT LOSSES/(REVERSALS) ON TRADE RECEIVABLES AND OTHER RECEIVABLES 2021 1,361 94 1,455 (258) (1) (259) 1,196 2020 1,505 46 1,551 (194) (72) (266) 1,285 Change (144) 48 (96) (64) 71 7 -9.6% - -6.2% -33.0% 98.6% 2.6% (89) -6.9% The item, equal to €1,196 million, includes impairment losses and gains on trade receivables and other receiva- bles. The net impairment losses on trade receivables de- creased by a total of €208 million, essentially reflecting the effect of the recognition in 2020 of greater impairment losses on trade receivables in respect of traders. Notes to the consolidated financial statements 317 317 11.e Depreciation, amortization and other impairment losses – €8,691 million Millions of euro Property, plant and equipment Investment property Intangible assets Other impairment losses Other reversals of impairment losses Total 2021 4,414 3 1,357 2,926 (9) 8,691 2020 4,118 2 1,223 1,857 (37) 7,163 Change 296 1 134 1,069 28 1,528 7.2% 50.0% 11.0% 57.6% 75.7% 21.3% The increase in “Depreciation, amortization and other im- pairment losses” in 2021 essentially reflected: • an increase in depreciation and amortization in Italy (€102 million) due to an acceleration of the depreciation rates for first-generation electronic meters (1G) in order to reflect the planned installation schedule for 2G me- ters provided for in the Open Meter plan; • an increase in depreciation and amortization in Spain for new plants entering service (€72 million); • impairment losses recognized in 2021 on certain plants or CGUs in Italy (€989 million), Spain (€1,488 million), Mexico (€155 million), Chile (€32 million) and Australia (€30 million); • the impairment loss recognized on Group's headquar- ters building in Rome (€45 million); • the impairment losses recognized in Costa Rica (€126 million) on the hydroelectric plant operated under a concession arrangement by PH Chucas. These effects were partially offset by: • the effect of the impairment losses recognized in 2020 on the Bocamina II plant in Chile (€737 million); • the effect of the impairment losses recognized in 2020 on the Mexico, Argentina and Australia CGUs in the total amount of €750 million. 11.f Other operating costs – €2,095 million Millions of euro System charges - emissions allowances Charges for energy efficiency certificates Charges for purchases of green certificates Losses on disposal of property, plant and equipment and intangible assets Taxes and duties Other Total 2021 2020 Change 41 239 64 75 1,132 544 2,095 90 277 61 65 1,130 579 2,202 (49) (38) 3 10 2 (35) (107) -54.4% -13.7% 4.9% 15.4% 0.2% -6.0% -4.9% Other operating costs decreased by €107 million com- pared with the previous year, mainly due to a reduction in environmental compliance charges and association dues in Italy. 11.g Capitalized costs – €(3,117) million Millions of euro Personnel Materials Other Total 2021 (1,022) (1,120) (975) (3,117) 2020 (836) (846) (703) (2,385) Change (186) (274) (272) (732) -22.2% -32.4% -38.7% -30.7% Capitalized costs increased by €732 million, mainly due to greater investment in distribution plants in Latin America and distribution grids associated with the development of the Grid Blue Sky project and to the installation of sec- ond-generation meters in Italy in 2021. 318 318 Integrated Annual Report 2021 12. Net results from commodity contracts – €2,522 million Millions of euro Commodity derivatives - income from settled derivatives - expense from settled derivatives Net income/(expense) from settled commodity derivatives - income from outstanding derivatives - expense from outstanding derivatives Net income from outstanding commodity derivatives Outstanding contracts for energy commodities with physical settlement - results from outstanding contracts to sell energy commodities with physical settlement(1) - results from outstanding contracts to purchase energy commodities with physical settlement(1) Net results from outstanding contracts for energy commodities with physical settlement(1) NET RESULTS FROM COMMODITY CONTRACTS(1) 2021 2020 Change 11,456 9,331 2,125 4,572 2,267 2,305 4,346 4,912 (566) 634 280 354 7,110 4,419 2,691 3,938 1,987 1,951 (18,386) (932) (17,454) 16,478 1,045 15,433 (1,908) 2,522 113 (99) (2,021) 2,621 - 90.0% - - - - - - - - (1) The figures for 2020 have been adjusted, for comparative purposes only, to take account of the effects associated with the change in classification connect- ed with the fair value measurement of outstanding contracts at the end of the period for the purchase and sale of commodities with physical settlement. The change in classification had no impact on operating profit. For more details, please see note 7 to these consolidated financial statements. Net results from commodity came to €2,522 million in 2021 (net expense of €99 million in 2020), and breaks down as follows: • net income from commodity derivatives totaling €4,430 million (net expense of €212 million in 2020), including derivatives designated as cash flow hedges and de- rivatives measured at fair value through profit or loss. More specifically, net income from derivatives settled in the period amounted to €2,125 million (net expense of €566 million in 2020) and the net fair gain on outstand- ing derivatives came to €2,305 million (net fair value gain of €354 million in 2020); • net fair value loss on energy commodity contracts with physical settlement still outstanding at the reporting date amounting to €1,908 million (net fair value gain of €113 million in 2020). For more information on derivatives, please see note 49 “Derivatives and hedge accounting”. 13. Net financial income/(expense) from derivatives – €1,461 million Millions of euro Income: - income from derivatives designated as hedging derivatives - income from derivatives at fair value through profit or loss Total income Expense: - expense from derivatives designated as hedging derivatives - expense from derivatives at fair value through profit or loss Total expense NET FINANCIAL INCOME/(EXPENSE) FROM DERIVATIVES 2021 2020 Change 2,097 621 2,718 (599) (658) (1,257) 1,461 639 676 1,315 (1,945) (311) (2,256) (941) 1,458 (55) 1,403 1,346 (347) 999 2,402 - -8.1% - 69.2% - 44.3% - In 2021, net income from derivatives on interest and ex- change rates amounted to €1,461 million (net expense of €941 million in 2020) and breaks down as follows: • net income from derivatives designated as hedging de- rivatives in the amount of €1,498 million (net expense of €1,306 million in 2020), mainly in regard of cash flow hedges; • net expense from derivatives at fair value through profit or loss in the amount of €37 million (net income of €365 million in 2020). The net balances recognized in 2021 and 2020 on both hedging derivatives and those at fair value through profit or loss mainly referred to the hedging of currency risk. For more information on derivatives, see note 49 “Derivatives and hedge accounting”. Notes to the consolidated financial statements 319 319 14. Net other financial income/(expense) – €(4,212) million Other financial income Millions of euro Interest income from financial assets (current and non-current): 2021 2020 Change - interest income at effective rate on non-current securities and financial assets - interest income at effective rate on current financial investments Total interest income at the effective interest rate Exchange gains Income on equity investments Income from hyperinflation Other income(1) 116 89 205 110 69 179 1,219 2,182 6 824 452 23 529 292 TOTAL OTHER FINANCIAL INCOME 2,706 3,205 6 20 26 (963) (17) 295 160 (499) 5.5% 29.0% 14.5% -44.1% -73.9% 55.8% 54.8% -15.6% (1) For comparative purposes only, €87 million in 2020 in respect of the component recognized through profit or loss deriving from the remeasurement at fair value of the financial assets connected with service concession arrangements involving distribution operations in Brazil falling within the scope of IFRIC 12 have been reclassified from financial income to revenue. The latter classification had an impact of the same amount on operating profit. For more details, please see note 7 to these consolidated financial statements. Other financial income amounted to €2,706 million, a de- crease of €499 million compared with the previous year. The decline mainly reflects a decrease in income from ex- change gains of €963 million, essentially attributable to the impact of exchange rate developments on net finan- cial debt denominated in currencies other than the euro. This effect was partially offset by the following factors: • an increase in income from hyperinflation (€295 mil- lion), recognized by the Argentine companies as a re- sult of the application of IAS 29 on financial reporting in hyperinflationary economies; for more information, see note 4 of these consolidated financial statements; • the recognition of financial income of €73 million in Spain, largely connected with interest on arrears ac- crued in respect of Endesa’s right to be compensated for the reduction in remuneration received in the past with regard to the assignment of CO2 emission rights under the “Plan Nacional de Asignación de Derechos de Emisión” (PNA); • an increase in income deriving from the impairment loss on hedged liabilities in fair value hedge relation- ships (€57 million); • an increase in interest income at the effective rate (€26 million), mainly relating to short-term financial in- vestments. Other financial expense Millions of euro Interest expense on financial debt (current and non-current): - interest on bank borrowings - interest expense on bonds - interest expense on other borrowings Total interest expense Financial expense on debt management transactions Exchange losses Adjustment to post-employment and other employee benefits Adjustment to other provisions Expense from equity investments Expense from hyperinflation Other expenses TOTAL OTHER FINANCIAL EXPENSE 320 320 Integrated Annual Report 2021 2021 2020 Change 346 1,881 137 2,364 702 2,559 107 129 - 804 253 291 1,887 149 2,327 - 1,245 109 150 1 472 653 6,918 4,957 55 (6) (12) 37 702 1,314 (2) (21) (1) 332 (400) 1,961 18.9% -0.3% -8.1% 1.6% - - -1.8% -14.0% - 70.3% -61.3% 39.6% “Other financial expense” amounted to €6,918 million, an overall increase of €1,961 million compared with 2020, es- sentially reflecting the following factors: • the recognition of expense on debt management trans- actions, regarding: – Enel Finance International in the amount of €634 million for the recognition of financial expense on the cash consideration paid in connection with voluntary non-binding tender offer (“tender offer”) for the re- purchase, and subsequent cancellation, of a number of series of outstanding conventional bonds; – Enel SpA in the amount of €68 million for the recog- nition of financial expense connected with the con- sent solicitation for non-convertible subordinated hybrid bonds converted into perpetual hybrid bonds. This expense represents the difference between the fair value of the hybrid instrument and the carrying amount of the bond. With regard to the tender offer and consent solicita- tion, the amount of the amortized cost adjustment for the bonds involved in these transactions was released to profit or loss, which produced an increase in interest expense compared with 2020. However, the aforemen- tioned debt management transactions, together with the new sustainability-linked bond issues, have reduced the Group’s borrowing costs, providing an important tool for protection against potential rate increases; • an increase in exchange losses in the amount of €1,314 million, primarily attributable to the impact of exchange rate developments on net financial debt denominated in currencies other than the euro; • an increase in expense from hyperinflation of €332 mil- lion, recognized by the Argentine companies as a re- sult of the application of IAS 29 on financial reporting in hyperinflationary economies; for more information, see note 4 of these consolidated financial statements. These effects were substantially offset by the reduction in financial expense associated with the impairment loss on the financial asset connected with the sale of Slovak Power Holding (€472 million). 15. Share of profit/(loss) of equity-accounted investments – €571 million Millions of euro Share of profit of associates Share of loss of associates Total 2021 624 (53) 571 2020 131 (430) (299) Change 493 377 870 - 87.7% - The share of profit/(loss) of equity-accounted investments improved by €870 million compared with the previous year. The change was essentially due to the impairment loss on the investment in Slovak Power Holding (€908 million), partly offset by the change in the share of profit/(loss) at- tributable to owners of the Parent of, mainly, the Portu- guese company Tejo Energia Produção e Distribuição de Energia Eléctrica (€14 million). 16. Income taxes – €1,643 million Millions of euro Current taxes Adjustments for income taxes relating to prior years Total current taxes Deferred tax expense Deferred tax income TOTAL 2021 2,023 145 2,168 313 (838) 1,643 2020 1,898 (168) 1,730 180 (69) 1,841 Change 125 313 438 133 (769) (198) 6.6% - 25.3% 73.9% - -10.8% Notes to the consolidated financial statements 321 321 The tax rate for 2021 came to 30%, compared with 34% in 2020. The reduction essentially reflects the combined effect of the following permanent differences: • a decrease in the tax impact of extraordinary items com- pared with the previous year (€431 million), taking account of the taxation associated with the revaluation of the as- sets of Slovenské elektrárne; • the application of the preferential “participation exemp- tion” mechanism to the capital gain realized on the sale of the investment in Open Fiber (€401 million); • the adjustments of deferred and current taxation following the tax reforms approved by the Argentine and Colombian governments, which increased the tax rate from 25% to 35% in Argentina and from 30% to 35% in Colombia; • the adjustment of the tax credit held by Enel Iberia (€211 • the tax effect of the application of hyperinflation account- ing in Argentina (€49 million); • the non-recognition of part of the deferred tax assets as- sociated with the impairment loss recognized on PH Chu- cas due to the uncertainty about their future recoverability (€27 million); • the reversal of the tax credit of Enel Green Power SpA (€25 million) following the reorganization of the Enel Green Power Business Line in Latin America, which was complet- ed in April 2021. For more information on changes in deferred tax assets and liabilities, see note 24. The following table provides a reconciliation of the theoretical tax rate and the effective tax rate. million); Millions of euro Pre-tax profit/(loss) Theoretical taxes 2021 5,500 1,320 24% Change in tax effect on impairment losses, capital gains and negative goodwill Net effect on deferred taxation recognized with timing mismatch Tax reforms in Argentina and Colombia Adjustment of tax credit of Enel Iberia Preferential tax treatment of Open Fiber capital gain Deferred tax assets not recognized on tax losses Sundry tax effects of hyperinflation accounting in Argentina Reversal of tax credit for Astrid operation IRAP Other differences, effect of different tax rates abroad compared with the theoretical rate in Italy, and other minor items Total (229) 70 166 211 (401) 75 49 25 276 81 1,643 24% 2020 5,463 1,311 202 16 - - - - - - 249 63 1,841 322 322 Integrated Annual Report 2021 17. Basic and diluted earnings/(loss) per share Both of these indicators are calculated on the basis of the average number of ordinary shares for the year, equal to 10,166,679,946, adjusted by the average number of treas- ury shares held. The number of treasury shares, with a par value of €1 each, held at December 31, 2021 was equal to 4,889,152 (3,269,152 at December 31, 2020). Millions of euro Profit for the year attributable to owners of the Parent (basic) of which from: - continuing operations - discontinued operations Effect of preference rights on dividends (e.g. preference shares) Dividends on equity instruments (e.g., hybrid bonds) Other Profit for the year attributable to ordinary owners of the Parent (basic) of which from: - continuing operations - discontinued operations Number of shares (units) Number of ordinary shares issued at 1 January Effect of treasury shares held Effect of share options exercised Other Weighted average number of ordinary shares outstanding (total) for basic earnings per share Profit for the year attributable to ordinary owners of the Parent (basic) Effect of dilution: - interest on convertible bonds - other Profit for the year attributable to ordinary owners of the Parent (diluted) of which: - continuing operations - discontinued operations Number of shares (units) 2021 3,189 3,189 - - (71) - 3,118 3,118 - 2020 2,610 2,610 - - - - 2,610 2,610 - 10,166,679,946 (4,111,452) - - 10,166,679,946 (2,067,594) - - 10,162,568,494 10,164,612,352 3,118 - - 3,118 3,118 - 2,610 - - 2,610 2,610 - Weighted average number of ordinary shares outstanding (total) for basic earnings per share 10,162,568,494 10,164,612,352 Effect of conversion of convertible notes Other - - - - Weighted average number of ordinary shares outstanding (total) for diluted earnings per share 10,162,568,494 10,164,612,352 Basic earnings per share Basic earnings per share Basic earnings per share from continuing operations Basic earnings/(loss) per share from discontinued operations Diluted earnings per share Diluted earnings per share Diluted earnings per share from continuing operations Diluted earnings/(loss) per share from discontinued operations 0.31 0.31 - 0.31 0.31 - 0.26 0.26 - 0.26 0.26 - Notes to the consolidated financial statements 323 323 Information on the statement of consolidated financial position 18. Property, plant and equipment – €84,572 million The breakdown of and changes in property, plant and equipment for 2021 is given below. Millions of euro Land Buildings Industrial and commercial equipment Plant and machinery Other assets Leased assets Leasehold improvements Assets under construction and advances Total Cost net of accumulated impairment losses 637 10,263 159,411 523 1,487 2,994 Accumulated depreciation - 5,456 97,807 Balance at Dec. 31, 2020 637 4,807 61,604 Capital expenditure Assets entering service Exchange differences Change in the consolidation scope Disposals Depreciation Impairment losses Reversals of impairment losses Other changes Reclassifications from/to assets held for sale Total changes Cost net of accumulated impairment losses 3 28 (16) - (1) - (8) - - - 6 39 884 113 - (3) (190) (191) - 6 - 1,883 4,741 (2) 129 (110) (3,766) (2,425) 8 1,312 - 658 1,770 380 143 22 8 1 - (1) (22) (1) - 1 - 8 1,155 819 332 2,175 73 55 (7) (2) (11) (88) - - 12 (1) 31 1 8 35 8 (19) (304) (4) - 731 (2) 454 643 11,115 163,443 547 1,551 3,722 Accumulated depreciation - 5,650 100,069 Balance at Dec. 31, 2021 643 5,465 63,374 396 151 1,188 1,093 363 2,629 443 319 124 9 15 1 - - 8,896 184,654 - 105,936 8,896 78,718 8,404 10,434 (5,739) 103 147 (15) - 228 282 (160) (30) - (4,400) - - 9 - 4 482 354 128 (155) (2,784) - 8 178 2,249 - (3) 2,923 5,854 11,819 193,322 - 108,750 11,819 84,572 “Plant and machinery” included assets to be relinquished free of charge with a carrying amount of €7,946 million at December 31, 2021 (€8,083 million at December 31, 2020), largely regarding power plants in Iberia and Latin America amounting to €3,672 million at December 31, 2021 (€3,808 million at December 31, 2020), and the electricity distri- bution grid in Latin America totaling €3,506 million at De- cember 31, 2021 (€3,626 million at December 31, 2020). For more information on “Leased assets”, please see note 20 below. The types of capital expenditure made during 2021 are summarized below by class of asset, comprising the var- ious categories of property, plant and equipment and in- tangible assets, including the portion classified as held for sale. These expenditures, totaling €12,201 million at De- cember 31, 2021, increased by €2,653 million on 2020, in- creases that were particularly concentrated in solar power plants. 324 324 Integrated Annual Report 2021 Millions of euro Power plants: - thermal - hydroelectric - geothermal - nuclear - alternative energy sources Total power plants Electricity distribution grids(1) Enel X (e-Mobility, e-City, e-Industries, e-Home) Retail customers Other TOTAL(2) 2021 2020 Change 550 402 120 157 4,947 6,176 4,389 367 643 626 452 332 145 137 4,007 5,073 3,288 303 460 424 98 70 (25) 20 940 1,103 1,101 64 183 202 12,201 9,548 2,653 21.7% 21.1% -17.2% 14.6% 23.5% 21.7% 33.5% 21.1% 39.8% 47.6% 27.8% (1) The figure for 2021 does not include €907 million in respect of infrastructure investments within the scope of IFRIC 12 (€649 million in 2020). (2) The figure for 2021 includes €111 million regarding units classified as “held for sale”. The Enel Group, in line with the Paris Agreement on CO2 emissions reductions and guided by energy efficiency and energy-transition objectives, has invested above all in generation plants that exploit alternative energy sources. Capital expenditure on generation plants mainly regards solar plants and wind farms in the United States, Colom- bia, Iberia, Italy, India, Chile and Russia. In order to respond to ever more variable climate devel- opments and, therefore, enhance the resilience of grids, the Group continued to invest in the Distribution Busi- ness Line (€4,389 million). The €1,101 million increase is mainly attributable to greater investments in Italy, Brazil and Iberia for the Grid Blue Sky project (a new platform operating model that envisages the redesign of systems, processes and work organization to leverage assets more effectively, including through the use of artificial intelli- gence) and for quality and remote control activities. In Italy, following the introduction of measures to revive the economy and to encourage energy upgrading and seismic resilience, Enel X has undertaken greater in- vestments in the development of the e-Home business associated with the Vivi Meglio initiative, while in Spain e-Home posted an increase as a result of greater sales volumes compared with 2020. In North America and Ko- rea, its investments in storage increased. Exchange gains amounted to €228 million. The “Change in the consolidation scope” in 2021 mainly refers to the consolidation of the Australian renewables companies, which had previously been equity-account- ed, following changes in governance arrangements with- out the purchase of additional interests, as well as the acquisition of 30 renewable energy companies by Enel Green Power España. “Impairment losses” amounted to €2,784 million and are mainly attributable to the energy-transition process ini- tiated by the Group, which in 2021 led to the recognition of impairment losses on the Italian thermal generation plants of Torrevaldaliga Nord, Fusina, La Spezia and Brin- disi, the Spanish generation plants of Baleares, Canarias, Ceuta and Melilla and the Bocamina II plant in Chile. This item was also affected by the impairment loss on as- sets in Australia and Mexico. “Reclassifications from/to assets held for sale” refer mainly to the property and other assets of the Italian companies Enel X Paytipper SpA, Paytipper Network Srl and CityPoste Payment SpA. “Other changes” include the provision for plant retirement and site restoration costs in the amount of €861 million, mainly in Spain and Italy, new leases of €723 million, im- pairment losses on the property, plant and equipment of the Argentine companies operating in a hyperinflation- ary economy in the amount of €576 million and the effect of capitalizing interest on loans specifically dedicated to capital expenditure on property, plant and equipment of €182 million (€154 million in 2020). The following table re- ports capitalized financial expense on property, plant and equipment and intangible assets, including the portion classified as held for sale, and that on other non-current assets. Notes to the consolidated financial statements 325 325 Millions of euro Enel Green Power Enel Green Power Brazil Enel Green Power North America Enel Green Power México Enel Green Power South Africa Enel Américas Group Enel Chile Group Endesa Group(1) Enel Russia Group EGP India Group EGP Australia Group Enel Green Power Colombia Enel Produzione Nuove Energie Enel Green Power Italia Enel Green Power Chile Enel Finance International Total(2) 2021 Rate % 2020 Rate % Change - - 17 10 61 23 80 4 18 8 1 - 2 1 5 - 12 242 0.2% 4.3% 6.3% 3.7% 7.0% 1.5% 8.5% 8.3% 0.2% 2.1% 0.5% 3.3% 1.8% - 12 10 23 47 7 21 3 10 1 1 2 4 1 1 4 15 162 - 2.4% 0.2% 4.1% 6.3% 5.8% 7.2% 1.7% 7.2% 7.5% 3.4% 1.3% 4.3% 0.5% 3.3% 4.6% 1.8% - (12) 7 (13) 14 16 59 1 8 7 - (2) (2) - 4 (4) (3) 80 - - 70.0% -56.5% 29.8% - - 33.3% 80.0% - - - -50.0% - - - -20.0% 49.4% (1) The amount for the EGP Spain Group is included in that for the Endesa Group. (2) The total for 2021 also includes -€5 million in capitalized financial expense in respect of intangible assets (€7 million in 2020), €4 million in other non-current assets (€1 million in 2020) and €61 million pertaining to assets held for sale. At December 31, 2021, contractual commitments to pur- chase property, plant and equipment amounted to €1,437 million. 326 326 Integrated Annual Report 2021 19. Infrastructure within the scope of “IFRIC 12 - Service concession arrangements” Service concession arrangements, which are recognized in accordance with IFRIC 12, regard certain infrastructure serving concessions for electricity distribution in Brazil, Costa Rica and Colombia. The following table summarizes the salient details of those concessions. Millions of euro Grantor Activity Country Concession period Concession period remaining Renewal option(1) Amount recognized among contract assets at Dec. 31, 2021 Amount recognized among financial assets at Dec. 31, 2021 Amount recognized among intangible assets at Dec. 31, 2021 Enel Distribuição Rio de Janeiro Enel Distribuição Ceará Enel Green Power Mourão Enel Green Power Paranapanema Enel Distribuição Goiás Enel Green Power Volta Grande Enel Distribuição São Paulo PH Chucas USME ZE SAS Fontibon ZE SAS Total Brazilian government Brazilian government Brazilian government Brazilian government Brazilian government Brazilian government Brazilian government Costa Rican Electricity Institute Empresa de Transporte del Tercer Milenio - Transmilenio SA Empresa de Transporte del Tercer Milenio - Transmilenio SA Electricity distribution Electricity distribution Electricity generation Electricity generation Electricity distribution Electricity generation Electricity distribution Brazil 1997-2026 5 years Brazil 1998-2028 7 years Brazil 2016-2046 25 years Brazil 2016-2046 25 years Brazil 2015-2045 24 years Brazil 2017-2047 26 years Brazil 1998-2028 7 years Hydroelectric plant Costa Rica 2012-2031 10 years No No No No No No No No e-Mobility Colombia 2021-2035 16 years No e-Mobility Colombia 2021-2035 16 years No 112 63 - - 252 - 91 - - - 838 620 5 23 69 243 1,001 101 6 47 404 395 - - 643 - 609 47 - - 518 2,953 2,098 (1) There is no automatic renewal option, but the Group concession holders can participate in the renewal procedures in accordance with the rules established by the grantors. The assets classified under financial assets are measured at fair value at the end of the concessions. For more infor- mation, see note 50 “Assets and liabilities measured at fair value”. 20. Leases The table below shows changes in right-of-use assets in 2021. Millions of euro Total at Dec. 31, 2020 Increases Exchange differences Depreciation Other changes Total at Dec. 31, 2021 Leased land Leased buildings Leased plant Other leased assets 707 442 37 (38) (1) 1,147 551 86 1 (114) (7) 517 479 1 (2) (34) (3) 441 438 203 (1) (118) 2 524 Total 2,175 732 35 (304) (9) 2,629 Lease liabilities and changes during the year are shown in the table below. Notes to the consolidated financial statements 327 327 Millions of euro Total at Dec. 31, 2020 Increases Payments Other changes Total at Dec. 31, 2021 of which medium to long term of which short term Note that in 2021, despite the effects of the pandemic, no changes or renegotiations were made to leases. Millions of euro Depreciation of right-of-use assets Interest expense on lease liabilities Expense relating to short-term leases (included in costs for services and other materials) Expense relating to leases of low-value assets (included in costs for services and other materials) Variable lease payments (included in costs for services and other materials) Total 21. Investment property – €91 million Millions of euro Cost net of accumulated impairment losses Accumulated depreciation Balance at Dec. 31, 2020 Exchange differences Depreciation Impairment losses Other changes Total changes Cost net of accumulated impairment losses Accumulated depreciation Balance at Dec. 31, 2021 2,068 526 (165) 118 2,547 2,288 259 2021 304 72 46 - 22 444 159 56 103 (1) (3) (4) (4) (12) 129 38 91 Investment property at December 31, 2021 amounted to €91 million, a decrease of €12 million on the previous year. erty or for repairs, maintenance or enhancements. The change in 2021 was mainly due to impairment losses recognized on a number of assets in Italy and Spain. The Group’s investment property consists of properties in Italy, Spain, Brazil and Chile, which are free of restrictions on their sale or the remittance of income and proceeds of disposal. In addition, the Group has no contractual obliga- tions to purchase, construct or develop investment prop- For more information on the valuation of investment prop- erty, see notes 50 “Assets and liabilities measured at fair value”, and 50.2 “Assets not measured at fair value in the statement of financial position”. 328 328 Integrated Annual Report 2021 22. Intangible assets – €18,070 million A breakdown of and changes in intangible assets for 2021 are shown below. Industrial patents & intellectual property rights Concessions, licenses, trademarks and similar rights Development expenditure Service concession arrangements Other Leasehold improvements Assets under development and advances Contract costs Total 44 23 21 4 (1) (1) - - (2) (1) - 1 (1) (1) 43 23 20 2,985 12,988 5,452 4,821 2,418 567 91 335 (9) - - 1,568 11,420 3,344 3,326 2,108 1,495 92 10 (238) 1 (4) - - 23 - (8) 117 202 12 27 1 (289) (162) (305) (369) (1) 1 49 (3) 174 3,512 2,771 741 - - 2 - (299) 12,842 1,721 11,121 (126) (10) - 406 - (7) - (84) (10) (111) 5,781 5,092 3,683 3,708 2,098 1,384 10 4 6 - - - - - - - - (6) - (6) - - - 1,337 1,581 29,218 - 867 11,550 1,337 714 17,668 874 (547) (6) 85 (1) - - - 18 - 478 1,656 1 1 - - - (218) 113 (12) (248) (1,375) - - 1 (138) 1 464 (1) (89) 423 232 402 1,760 2,063 31,093 - 1,117 13,023 1,760 946 18,070 Millions of euro Cost net of accumulated impairment losses Accumulated amortization Balance at Dec. 31, 2020 Capital expenditure Assets entering service Exchange differences Change in the consolidation scope Disposals Amortization Impairment losses Reversals of impairment losses Other changes Reclassifications from/to assets held for sale Total changes Cost net of accumulated impairment losses Accumulated amortization Balance at Dec. 31, 2021 Enel’s intellectual property (IP) portfolio comprises a set of critical information for sustainable growth. The Open In- novability® ecosystem generates innovation through the creation and sharing of internal and external solutions that give life to ideas that require appropriate forms of le- gal protection. Intellectual property plays a dual role: first, it enables control over inventive solutions, technologies and knowledge generated by both the Group and the in- novation ecosystems of which Enel is a part with the in- volvement of universities, research bodies, suppliers, pro- grammers and consultants; second, intellectual property rights enable the safe and sustainable propagation of the technological solutions through which electrification, plat- formization and stewardship programs are implemented. At December 31, 2021, the Group had applied for 892 patents in 146 technological families. Of these, 749 have been granted and 143 are pending. The portfolio ensures protection in all the markets in which the Group is pres- ent. Enel’s portfolio also includes 15 utility models and 170 design registrations. Together with patents, utility models and designs, IP rights also include industrial secrets of both a technical and commercial nature which are constantly codified and maintained in line with the provisions of the Trade Secrets Management procedure (see below). The Group also owns 1,576 trademarks, of which 1,455 have already been registered, with 121 applications pending. The Enel Green Power and Thermal Generation Global Business Line is involved in the development of innova- tive technical solutions in solar generation that seek (i) to increase the photovoltaic output of plants by increasing charge transfer mechanisms at the micro and nanometric level in correspondence with different layers both in single and heterojunction cells and in tandem systems and (ii) to create an innovative system for the rapid and automatable installation of photovoltaic panels on prefabricated sup- port structures, generating significant reductions in instal- lation times while increasing in the precision and scalability of installation and, therefore, the Group’s competitiveness at the international level. These solutions cover a total of 11 patent families currently comprising 28 national and international patent applications pending and 7 national patents granted. The patent assets of Global Infrastructure and Networks contribute significantly to the strategy of creating plat- Notes to the consolidated financial statements 329 329 forms and exploiting network externalities in the services market, as well as to the automation of user management. The Grid Blue Sky project, whose launch was announced last year, is contributing to the creation of a new global op- erating platform for the Group’s grids. In consideration of the high intensity of IP generated, further analysis of the project was conducted, which is discussed in more detail later in this section. In the Enel X Global Business Line, the development of solutions with an impact on IP assets essentially regarded applications in the telemedicine business and urban livea- bility platforms. The Smart Axistance eWell app is an espe- cially important example of the former, a health program designed and managed by specialists from the Policlinico Gemelli Foundation and delivered through a telemedicine platform and an app, both created by Enel X and protected by copyright. Urban liveability solutions include the 15 Min- utes City Index, an urban planning indicator developed in collaboration with the University of Florence, for which Enel X is the holder of a trade secret and an Italian patent ap- plication. Using open data, the 15 Minutes City Index evalu- ates essential services (public transport, hospitals, schools, etc.), identifying underserved areas for each municipality and individual micro-district (with respect to population density), thereby supporting urban planning. As regards the electric mobility business, the IP portfolio comprises a diversified range of forms of protection, including patents for inventions, designs, trade secrets, utility models and copyrights with a technological content. Notable exam- ples of these include: (i) the patent family for bidirection- al high-power charging infrastructures, with applications Millions of euro initially deposited in the United States and subsequently initiated at the international level; (ii) the trade secrets con- nected with strategic mobility platforms; (iii) the copyright on the Juice Pass app; (iv) the community design to protect the aesthetic form of Juice Media, an innovative product that enables the simultaneous offer of electric charging and multimedia advertising services in a single structure; and (v) the Juice Pole Mini designs, which are protected in Europe, India, Chile, Norway, the United States, Canada and the United Kingdom. The Group is also using copyright and trade-secret pro- tections for the innovative IP-dense solutions it is develop- ing concerning climate models and advanced quantitative models for the analysis of energy systems in order to sup- port decarbonization and electrification in the main geo- graphical areas in which we operate, using an integrated and future-oriented vision. At an organizational and communication level, during 2021, Enel followed up on two lines of actions intended at achieving strategic, responsible and sustainable manage- ment of its intellectual property. On the one hand, a new Intellectual Property Management procedure was adopted at the Group level. On the other, in the wake of the survey of the Group’s IP portfolio in 2020, an intellectual property reporting project was continued, to be incorporated within the broader scope of the Enel Group’s non-financial re- porting. The following table reports service concession arrange- ments that do not fall within the scope of IFRIC 12 and had a balance as at December 31, 2021. Grantor Activity Country Concession period Concession period remaining Renewal option at Dec. 31, 2021 Initial fair value Endesa Distribución Eléctrica Codensa - Electricity distribution Republic of Colombia Electricity distribution Spain Indefinite Indefinite Colombia Indefinite Indefinite Enel Distribución Chile (formerly Chilectra) Republic of Chile Electricity distribution Chile Indefinite Indefinite Republic of Peru Electricity distribution Peru Indefinite Indefinite - - - - 5,678 5,673 1,176 1,839 1,254 1,667 525 548 Romanian Ministry for the Economy Electricity distribution Romania 2005-2054 33 years Yes 119 191 Enel Distribución Perú (formerly Empresa de Distribución Eléctrica de Lima Norte) E-Distribuţie Muntenia Assets with an indefinite useful life amounted to €8,633 million (€8,892 million at December 31, 2020), essentially accounted for by concessions for distribution activities in Spain (€5,678 million), Colombia (€1,176 million), Chile (€1,254 million) and Peru (€525 million), for which there was no statutory or currently predictable expiration date. 330 330 Integrated Annual Report 2021 On the basis of the forecasts developed, cash flows for each CGU, with which the various concessions are asso- ciated, were sufficient to recover the carrying amount. The change during the year was essentially attributable to changes in exchange rates. For more information on ser- vice concession arrangements, see note 19. The change in the consolidation scope for 2021 mainly reflected the acquisition by Enel Green Power España of 100% of 30 renewables companies in Spain. 23. Goodwill – €13,821 million Impairment losses amounted to €138 million in 2021 and mainly regarded impairment losses recognized on the PH Chucas hydro plant. For more information, see note 11.e. “Other changes” reported the design costs connected with the acquisition of a number of Brazilian vehicle companies. Millions of euro at Dec. 31, 2020 Change in consol. scope Exchange differences Impairment losses Offsetting cost with accum. impairment losses Other changes Cumulative impairment Cost Net carrying amount 11,177 (2,392) 8,785 1,205 275 564 530 1,273 25 18 70 184 84 46 - 580 20 407 - 1,205 (253) - - - - (18) - - - (3) - - - (13) 22 564 530 1,273 25 - 70 184 84 43 - 580 20 394 Iberian Peninsula Chile Argentina Peru Colombia Brazil Central America Mexico Enel Green Power North America Enel X North America Enel X Asia Pacific Enel X Rest of Europe(1) Enel X Italy Market Italy(2) Enel Green Power Italy Romania Total 16,458 (2,679) 13,779 (1) (2) Includes Tynemouth and Viva Labs. Includes Enel Energia. - 2 - - - - (1) - - - - - - - - - 1 - 2 - 2 (3) 30 1 - - 15 - - - - - (7) 40 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - at Dec. 31, 2021 Cumulative impairment Cost Net carrying amount 11,177 (2,392) 8,785 1,209 275 566 527 1,303 25 18 70 199 84 46 - 580 21 400 - 1,209 (253) - - - - (18) - - - (3) - - - 22 566 527 1,303 25 - 70 199 84 43 - 580 21 (13) 387 - - - - - - - - - - - - - - 1 - 1 16,500 (2,679) 13,821 Notes to the consolidated financial statements 331 331 Goodwill matrix at December 31, 2021 Thermal Generation and Trading Enel Green Power Infrastructure and Networks End-user Markets Enel X Services Other Total 44 3,234 7,773 2,444 (1) (2) Includes Enel Energia. Includes Tynemouth and Viva Labs. Goodwill matrix at December 31, 2020 Millions of euro Enel Green Power Italy Market Italy(1) Iberian Peninsula Argentina Brazil Chile Colombia Peru Central America Romania Enel Green Power North America Enel X North America Enel X Asia Pacific Enel X Rest of Europe(2) Millions of euro Enel Green Power Italy Market Italy(1) Iberia Argentina Brazil Chile Colombia Peru Central America Romania Enel Green Power North America Enel X North America Enel X Asia Pacific Enel X Rest of Europe(2) - - - - - - - 44 - - - - - - 21 - - - 1,190 5,788 - 580 1,807 3 423 996 304 202 25 - 70 - - - 19 880 213 223 320 - 330 - - - - - - - - - - 57 - - - - - - - - - - - - - - - 199 84 43 326 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Thermal Generation and Trading Enel Green Power Infrastructure and Networks End-user Markets Enel X Services Other - - - - - - - 43 - - - - - - 20 - - - 1,190 5,788 - 580 1,807 3 397 992 307 201 25 - 70 - - - 19 876 213 223 320 - 336 - - - - - - - - - - 58 - - - - - - - - - - - - - - - 184 84 43 311 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Total 21 580 8,785 22 1,303 1,209 527 566 25 387 70 199 84 43 13,821 Total 20 580 8,785 22 1,273 1,205 530 564 25 394 70 184 84 43 13,779 Total 43 3,205 7,775 2,445 (1) (2) Includes Enel Energia. Includes Viva Labs. The increase of €42 million in goodwill was mainly attrib- utable to “Exchange differences” of €40 million, with the main changes regarding Brazil and the United States. The criteria used to identify the cash generating units (CGUs) are based on revenue separation, which is con- sidered the main criterion in view of the nature of our business, taking due account of the operational rules and regulations of the markets in which they operate and the corporate organization. For the purposes of impairment testing of goodwill, the CGUs are grouped on the basis of expected synergies, consistent with management’s strate- gic and operational vision, within the operating segments identified for segment reporting purposes. 332 332 Integrated Annual Report 2021 Note also that in 2021, the existing CGUs underwent ex- tensive analysis to assess the possible presence of signifi- cant changes pursuant to IAS 36, paragraph 72. This analysis led to a modification of existing CGUs for Spain only, where in the Peninsular Territories the charac- teristics of the market as well as the planning and man- agement levels of certain plants enabled the full imple- mentation of the strategy of integrating generation and commercial portfolios, leveraging the entire value chain. The situation differs for assets in the Non-Peninsular Terri- tories, which are subject to specific regulation by virtue of the special features of their market. Under local regulations, the remuneration of the power generation companies for their operations in these terri- tories must be based on rates governed using parameters established by the regulator. Therefore, given the difference between local regulations and those applicable on the Iberian Peninsula, where plant assets are managed on a fully commercial basis, it is clear that pursuant to IAS 36, paragraph 72, it was necessary to modify the existing CGU for Spain in 2021. More specifical- ly, two separate CGUs have been identified: • one comprises mainland Iberia (Iberian Peninsula); • the other comprises the Non-Peninsular Territories (Iberia NPT), for which the related cash flows are largely independent of those generated in the peninsular area, given the regulation of the related market. Therefore, at December 31, 2021, the CGUs independently underwent impairment testing and an impairment loss of €1,488 million was recognized for plants in the Non-Pen- insular Territories. The recoverable amount of the goodwill recognized was estimated by calculating the value in use of the CGUs us- ing discounted cash flow models, which involve estimating expected future cash flows and applying an appropriate discount rate, selected on the basis of market inputs such as risk-free rates, betas and market-risk premiums. Cash flows were determined on the basis of the best in- formation available at the time of the estimate, taking ac- count of the specific risks of each CGU, and drawn: • for the explicit period, from the Business Plan approved by the Board of Directors of the Parent on November 22, 2021, containing forecasts for volumes, revenue, oper- ating costs, capital expenditure, industrial and commer- cial organization and developments in the main mac- roeconomic variables (inflation, nominal interest rates and exchange rates) and commodity prices. The explicit period of cash flows considered in impairment testing was three years; • for subsequent years, from assumptions concerning long-term developments in the main variables that de- termine cash flows, the average residual useful life of assets or the duration of the concessions. More specifically, the terminal value is calculated based on the specific characteristics of the businesses related to the various CGUs subject to impairment testing: • perpetuity, for the businesses of large-hydro (LH) power generation and of distribution, in which the licenses and public concessions are of a long-term nature and are easily renewable; as well as for the Enel X businesses, as they feature the development of specific know-how that is sustainable over the long term; • annuity, for CGUs that are predominantly characterized by retail business, for which the residual life is, there- fore, essentially correlated with the average duration of the customer relationships; as well as for businesses of conventional thermal power generation (Generation and Trading). This method is also used for the renewable en- ergy (Enel Green Power) businesses to take account of: (i) the value resulting from the remaining useful lives of the plants; and (ii) the residual value, in the event of plant decommissioning, associated with licensing rights, the competitiveness of the production facilities (in terms of natural resources), and network interconnectivity. The nominal growth rate (g-rate) is equal to the long-term rate of growth in electricity and/or inflation (depending on the country and business involved) and in any case no higher than the average long-term growth rate of the ref- erence market. The analysis of the impact of climate change on factors relevant to the business is a complex activity that requires the construction of a scenario framework and coherent analysis of the various dimensions involved. More informa- tion is available in the section at the end of this note en- titled “Analysis of energy transition scenarios and climate change impacts used in the valuation models”. The Group confirmed its strategic direction based on the trends associated with the energy transition. The use of capital has been focused on decarbonization through the development of generation assets that use renewable sources, on the enabling infrastructures linked to the de- velopment of networks and on the implementation of plat- form models, making the most of technological and digi- tal evolution, which will foster the electrification of energy consumption, as well as the development of new services for end users. Specifically, in 2021 Enel’s decarbonization roadmap was updated to capture the acceleration in the spread of renewables and the reduction in thermal gen- eration capacity envisaged in the new 2022-2024 Strate- gic Plan and in the 2030 ambitions presented at the 2021 Capital Markets Day, setting the following objectives in line with the Paris Agreement: Notes to the consolidated financial statements 333 333 Time horizon Short term Medium term 2024 2030 Greenhouse gas (GHG) reduction target • Direct emissions of Scope 1 greenhouse gases to 140 gCO2eq/ kWh (-36% compared with 2021) • Direct emissions of Scope 1 greenhouse gases to 82 gCO2eq/ kWh (-80% compared with 2017, consistent with the 1.5 °C path as certified by the SBTi) • 55% reduction in indirect Scope 3 emissions associated with gas consumption by end users compared with 2017 Long term 2040 • Full decarbonization of energy mix Note also that the Group took account of the impacts of climate change in the long term. More specifically: • we consider a long-term growth rate in the estimation of the terminal value that is in line with the change in electricity demand over the 2022-2050 period, based on the specific features of the businesses concerned, adopting certain assumptions concerning the increase in temperature due to climate change and trends con- nected with the energy transition; • we assume that the Group will incur the costs provi- sioned for decommissioning of fossil fuel generation plants in line with the goal of zero direct (Scope 1) and indirect emissions from retail activities (Scope 3); • we perform a sensitivity analysis of the estimation of the long-term growth rate, as detailed below. The value in use calculated as described above was found to be greater than the amount recognized on the state- ment of financial position for all CGUs, with the exception indicated below. In order to verify the robustness of the value in use of the CGUs, sensitivity analyses were conducted for the main value drivers, in particular WACC, the long-term growth rate and margins, the outcomes of which fully supported that value. The table below reports the composition of the main goodwill values for the companies within each CGU, along with the discount rates applied and the time horizon over which the expected cash flows have been discounted. 334 334 Integrated Annual Report 2021 Millions of euro Amount of goodwill Growth rate(1) Pre-tax WACC discount rate(2) Explicit period of cash flows at Dec. 31, 2021 Terminal value(3) Amount of goodwill Growth rate(1) Pre-tax WACC discount rate(2) Explicit period of cash flows at Dec. 31, 2020 Iberian Peninsula 8,785 1.64% 3.93% 3 years Chile 1,209 2.02% 6.58% 3 years Argentina 22 24.11% 46.75% 3 years Peru 566 2.31% 6.64% 3 years Colombia 527 3.11% 8.82% 3 years Brazil 1,303 3.30% 9.09% 3 years Perpetuity/25 years EGP/14 years G&T Perpetuity/25 years EGP/6 years G&T Perpetuity/8 years G&T Perpetuity/23 years EGP/9 years G&T Perpetuity/28 years EGP/16 years G&T Perpetuity/26 years EGP/7 years G&T 8,785 1.65% 4.06% 3 years 1,205 1.97% 6.95% 3 years 275 11.79% 41.61% 3 years 564 2.30% 6.73% 3 years 530 3.04% 8.54% 3 years 1,273 3.25% 9.35% 3 years Terminal value(3) Perpetuity/24 years EGP/11 years G&T Perpetuity/25 years EGP/7 years G&T Perpetuity/1 year G&T/5 years LH Perpetuity/24 years EGP/10 years G&T Perpetuity/28 years EGP/17 years G&T Perpetuity/26 years EGP/8 years G&T Central America Enel Green Power North America 25 70 2.03% 7.85% 3 years 19 years 2.03% 5.01% 3 years 26 years 25 70 1.97% 8.15% 3 years 22 years 1.97% 5.49% 3 years 25 years Enel X North America 199 2.03% 7.62% 3 years Perpetuity 184 1.97% 8.25% 3 years Perpetuity Enel X Asia Pacific Enel X Rest of Europe Enel Green Power Italy 84 43 21 2.03% 2.03% 8.81% 3 years Perpetuity 8.24% 3 years Perpetuity 1.52% 4.94% 3 years Perpetuity/23 years 84 39 20 2.02% 2.02% 9.07% 3 years Perpetuity 8.70% 3 years Perpetuity 1.38% 5.44% 3 years Perpetuity/24 years Market Italy 580 1.48% 9.14% 3 years 15 years 580 1.30% 9.98% 3 years 15 years Romania 387 2.06% 7.56% 3 years Perpetuity/25 years 394 2.35% 7.98% 3 years Perpetuity/26 years CGUs with no recognized goodwill but that underwent impairment testing given the presence of the indicators provided for in IAS 36 Iberia NPT (Non- Peninsular Territories)(4) Australia(5) Mexico(6) - - - - 3.42% 5 years 5 years n.a. n.a. n.a. n.a. n.a. 0.91% 3.36% 5.50% 3 years 8.77% 3 years 25 years 24 years - 18 1.35% 1.43% 4.42% 3 years 8.83% 3 years 26 years 25 years (1) Perpetual growth rate for cash flows after the explicit forecast 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 (G&T = Generation & Trading, EGP = Enel Green Power, LH = Large Hydro). (4) With Iberia NPT, it became necessary to perform the test following the deterioration in local market and regulatory conditions. (5) With regard to Australia, it became necessary to perform the test following the deterioration in macroeconomic conditions. (6) With regard to Mexico, it became necessary to perform the test following the deterioration in industrial and commercial performance. At December 31, 2021, in the impairment tests performed on the CGUs with no goodwill recognized, a post-tax im- pairment loss of €1,116 million was found for the Iberia NPT CGU, one of €113 million for the Mexico CGU and one of €21 million for the Australia CGU. Notes to the consolidated financial statements 335 335 Analysis of energy transition scenarios and climate change impacts used in the valuation models Analyzing the impact of climate change on factors relevant to our business is a complex endeavor that requires the construction of a scenario framework and consistent anal- yses along the various dimensions involved. In particular, the transition scenarios describe the possi- ble industrial and technological configurations in specific contexts of social, economic and policy evolution, cor- responding to different greenhouse gas (GHG) emission trends, while the physical scenarios describe the possible future trends in variables. In 2021, Enel revised the medium- and long-term energy transition scenarios, within the overall framework ensuring their consistency with the climate scenario, and defined three alternative scenario narratives. • Paris scenario – calls for achieving the objectives of the Paris Agreement, so it is a level of climate ambition that is significantly higher than business as usual. The greater ambition is supported by greater electrification of energy consumption and a growing development of renewables. • Slow Transition scenario – characterized by a slower en- ergy transition that does not achieve the objectives of the Paris Agreement. This scenario involves a slower in- crease in renewables and in the electrification process that of the Paris scenario, particularly over the short term (i.e., delays in implementation of the energy tran- sition). • Best Place scenario: designed to test assumptions that improve upon the Paris scenario. Here, too, the objec- tives of the Paris Agreement are achieved, but the sce- nario considers a wider range of technology options, such as a greater penetration of green hydrogen (i.e., produced using renewable energy) used more widely in hard-to-abate sectors, thereby facilitating the decar- bonization process towards net zero emissions. At Enel, we have selected the Paris scenario, which calls for achieving the Paris Agreement objectives, as the bench- mark for long-term planning, unlike last year when the benchmark was the stated-policies scenario. We did this on the belief that the world’s governments, businesses, organizations, and people will work together effectively to mitigate greenhouse gas emissions. The increased com- mitment to net zero emissions in 2021 among nations that currently account for 88% of global emissions(25) and the success of COP26 support the decision to select a sce- nario that achieves the Paris objectives as Enel’s long-term benchmark. As for the possibility of assuming achievement of the more challenging Paris Agreement objective, i.e., to stabilize average global temperatures to within +1.5 °C, as a benchmark for long-term planning, there remain evident uncertainties that a number of countries could remain on business-as-usual trajectories, thereby slowing the decar- bonization process towards net zero emissions by 2050. Given this external environment, the Enel Group imple- ments a business model that is in line with the highest am- bition of the Paris Agreement and so is consistent with an increase in average global temperatures of 1.5 °C by 2100. Enel has set a long-term objective of reaching zero direct emissions (Scope 1) with fully renewable power generation and zero emissions connected with the retail sale of ener- gy (Scope 3). The assumptions for trends in commodities prices feed- ing the Paris scenario are consistent with the external sce- narios that achieve the objectives of the Paris Agreement. More specifically, we assume sustained growth in the price of CO2 through 2030, caused by a gradual reduction in the supply of permits as demand increases, as well as stabili- zation in the price of coal due to declining demand. As for gas, we expect pricing pressures to lessen in the coming years as we see a realignment between global supply and demand. Finally, we are forecasting a gradual stabilization in oil prices, with demand expected to peak by around 2030. (25) At December 28, 2021. 336 336 Integrated Annual Report 2021 In the following tables, the values for “Enel scenario” rep- resent the assumptions in the Group’s baseline scenario used for various applications, including planning activities and determining impairment. Brent ($/barrel) ~68 ~70 ~62 API2 ($/ton) ~72 ~73 ~67 ~65 43.2 ~45 50.3 Enel scenario Average benchmark(1) Max benchmark Min benchmark 2020(2) 2030 2020(2) 2030 CO2 EU - ETS (€/ton) ~127 TTF (€/MWh) ~42 ~95 ~87 24.7 9.3 ~53 ~21 ~20 ~13 2020(2) 2030 2020(2) 2030 (1) Sources: IEA, Sustainable Development Scenario and Net Zero Scenario; BNEF; IHS green case scenario, Enerdata green scenario. N.B. The scenarios used as benchmarks have been published at various points throughout the year and may not be up to date with the latest market trends. (2) Actuals. The two alternative scenarios, i.e., Slow Transition and Best Place, are used for strategic stress testing, risk assess- ment, and the identification of business opportunities. The Group has selected three of the global climate path- ways developed by the Intergovernmental Panel on Climate Change (IPCC): • SSP1-RCP 2.6: compatible with a range of global warm- ing below 2 °C from pre-industrial levels (1850-1900) by 2100. In the analyses that consider both physical and transition variables, the Group associates this scenario with the Paris and Best Place scenarios. • SSP2-RCP 4.5: compatible with an intermediate sce- nario that calls for an average temperature increase of about 2.7 °C by 2100 from pre-industrial levels. This sce- nario forecasts global warming in line with the estimates of temperature increases that consider current policy around the world(26); in the analyses that consider both physical and transition variables, the Group associates the SSP2-RCP 4.5 scenario with the Slow Transition scenario. • SSP5-RCP 8.5: compatible with a scenario where no particular measures to combat climate change are im- plemented. This scenario forecasts an increase in global temperatures of about +4.4 °C from pre-industrial lev- els by 2100. The following describes the overall effects of the transition scenarios and physical scenarios for electricity demand in the main countries in which the Group operates. (26) Climate Action Tracker Thermometer, estimates of global heating at 2100 considering existing “Policies and action” and “2030 targets only” (November 2021 update). Notes to the consolidated financial statements 337 337 Italy and Spain Integrated energy system models enable the quantifica- tion of individual demands for service in a country. This level of detail therefore makes it possible to discriminate the specific effects that a change in temperature can have on energy requirements. Similarly to the previous year, the speed of the energy transition has had a much greater impact on electricity demand than the increase in temperature as a result of climate change. Decarbonization policies, together with technological innovation, social responsibility, and con- sequent changes in consumer behavior, will play an active role in trends in electricity demand and in the energy mix generally. However, analysis makes it clear that an increase in temperature as a result of climate change will lead to an increase in electricity demand, even if limited within a range of one percentage point for both Italy and Spain. Considering the integrated view, the potential effect of more ambitious transition scenarios has a more significant impact on electricity demand than the increase in temper- ature resulting from climate change. Although the trends in degree days (both HDD and CDD)(27) in the various climate scenarios are similar between the two countries, the percentage differences in electricity demand in Spain for the three scenarios are lower than in Italy. The essential difference concerns the energy system by 2030, for which Spain’s existing national energy plan is already very ambitious and in line with RCP 2.6, meaning that the Slow Transition scenario is closer to the Paris sce- nario. Therefore, we expect less volatility in energy system trends and in electricity demand over the 2031-2050 pe- riod. Italy - Average impact on electricity demand (2031-2050) of the three transition scenarios paired with RCP 2.6 and 4.5 Paris RCP 2.6 to Slow Transition RCP 4.5 Paris RCP 2.6 to Best Place RCP 2.6 Italy 19% 19% Baseline RCP 2.6 Paris 0.8% Baseline RCP 2.6 Paris -2.1% -1.3% Temperature effect Transition effect Baseline RCP 4.5 Slow Transition Temperature effect Transition effect Baseline RCP 2.6 Best Place (27) Heating Degree Days (HDD); Cooling Degree Days (CDD). 338 338 Integrated Annual Report 2021 Spain - Average impact on electricity demand (2031-2050) of the three transition scenarios paired with RCP 2.6 and 4.5 Paris RCP 2.6 to Slow Transition RCP 4.5 Paris RCP 2.6 to Best Place RCP 2.6 Spain 15% 15% Baseline RCP 2.6 Paris 0.5% Baseline RCP 2.6 Paris -1.6% -1.1% Temperature effect Transition effect Baseline RCP 4.5 Slow Transition Temperature effect Transition effect Baseline RCP 2.6 Best Place In order to investigate the effect of temperature on tran- sition scenarios further and at the same time expand the range of assumptions regarding climate change, a sensitivi- ty analysis was carried out by associating the Slow Transition scenario with RCP 8.5, in addition to RCP 4.5. An assumption of a further temperature increase, without changing the en- ergy transition, results in a more limited change in demand equal to -0.8% for Italy and -0.6% for Spain. Effect of temperature and transition on electricity demand, average over specified period of temperature and transition contributions for different combinations of transition scenarios and climate pathways Paris to Slow Transition RCP 4.5 Paris to Slow Transition RCP 8.5 Paris to Best Place Temperature effect from RCP 2.6 to RCP 4.5 Transition effect Total impact Transition effect Temperature effect from RCP 2.6 to RCP 8.5 Total impact Transition effect Temperature effect from RCP 2.6 to RCP 2.6 Total impact Italy 2022-2030 2031-2050 -1.3% -2.1% 0.0% 0.8% -1.3% -1.3% -1.3% -2.1% 0% 1.3% -1.3% -0.8% 2.7% 19.0% 0.0% 0.0% 2.7% 19.0% Spain 2022-2030 2031-2050 -0.9% -1.6% 0.0% 0.5% -0.9% -1.1% -0.9% -1.6% 0.0% 0.9% -0.9% -0.6% 3.1% 15.2% 0.0% 0.0% 3.1% 15.2% As a final consideration, however, note that, in the future, greater than forecast electrification of residential heating could change both the sign and the size of the tempera- ture effect in both countries. It is therefore necessary to monitor developments in the share of electrification of heating during the annual review. Notes to the consolidated financial statements 339 339 Latin America In Latin American countries, the impact of temperature trends, quantified through the heating degree days (HDD) and cooling degree days (CDD) metrics, was estimated us- ing econometric forecasting models based on historical elasticity. The analysis shows that Brazil could experience a signifi- cant increase in demand due to the increase in tempera- ture, with an estimated increase of between 0.8% and 1.5% in prospective demand (calculated as the average of the demand forecasts in the 2030-2050 period). The driving factor would be the greater demand for cooling expect- ed in the country. This change is also confirmed using a system modeling approach. However, these forecasts are subject to a significant degree of uncertainty given the vol- atility of Brazilian economic growth. Argentina could also experience an increase in demand linked to an increase in temperature, estimated at between 0.3% and 0.6% of prospective demand. Similarly to Brazil, this forecast depends largely on the impact of macroeco- nomic developments in this country on electricity demand. The same considerations can also be extended to the oth- er countries in which the Group is present. In particular, in the rest of Latin America, where we again observe the positive elasticity of electricity demand to temperatures, the expected rise in temperature would still have less im- pact than economic growth. In fact, in Chile and Colombia, historical evidence still shows a strong coupling between the growth of electricity demand and GDP growth, with demand from the industrial sector accounting for around 50% of electricity consumption. Furthermore, the variabil- ity of the macroeconomic context could have repercus- sions on the electrification of the residential and service sectors, which represent the most immediate drivers of the increase in electricity demand in the event of an in- crease in temperatures. The following table summarizes the main temperature ef- fects in the Latin American countries, with ranges obtained by applying a 95% confidence interval to our baseline case: . Upper bound Lower bound Country Argentina Brazil Chile Colombia Country Argentina Brazil Chile Colombia Temperature effect (annual average) from RCP 2.6 to RCP 4.5 from RCP 2.6 to RCP 8.5 TWh 0.68 7.92 0.05 0.08 % 0.3 0.8 0.0 0.1 TWh 1.37 15.83 0.10 0.17 % 0.6 1.5 0.1 0.1 Temperature effect (annual average) from RCP 2.6 to RCP 4.5 from RCP 2.6 to RCP 8.5 TWh 0.57 2.48 0.01 0.02 % 0.3 0 0.0 0.0 TWh 1.15 4.96 0.01 0.05 % 0.5 0 0.0 0.0 Effect of the variation in temperature on electricity demand in the main Latin American countries in which the Group operates (average 2030-2050). 340 340 Integrated Annual Report 2021 Notes to the consolidated financial statements 341 341 24. Deferred tax assets and liabilities – €11,034 million and €9,259 million The following tables detail changes in deferred tax assets and liabilities by type of timing difference and calculated based on the tax rates established by applicable regula- tions, as well as the amount of deferred tax assets offset- table, where permitted, with deferred tax liabilities. Increase/ (Decrease) taken to profit or loss Increase/ (Decrease) taken to equity Change in the consolidation scope Exchange differences Other changes Reclassifications of assets held for sale at Dec. 31, 2020 2,123 342 1,725 340 508 561 898 2,763 8,578 249 53 (16) (133) 835 - 1 - 1,622 (9) (6) 1,608 5,442 141 3 470 1,885 7,797 (107) 275 309 1,150 10 1,163 - - - - - - - - - 10 10 (7) 11 (4) (27) 10 5 2 13 19 (83) 7 19 (57) 18 7 (4) (8) (3) 54 7 4 65 at Dec. 31, 2021 2,469 2,035 785 2,248 871 2,626 11,034 - - - - - (3) (3) (19) 5,538 - (9) (28) 1,527 2,194 9,259 6,346 4,230 341 Millions of euro Deferred tax assets: - differences in the carrying amount of property, plant and equipment and intangible assets - 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 “Deferred tax assets” recognized at December 31, 2021, as the recovery of such assets is considered reasonably certain, totaled €11,034 million (€8,578 million at Decem- ber 31, 2020). Deferred tax assets increased by €2,456 million during the year, essentially due to the recognition of greater de- ferred tax assets associated with the following factors: • impairment losses, mainly in Italy and Spain; • developments in the fair value of cash flow hedge de- rivatives; • provisions for retirement, renovation and digitalization, mainly in Italy. Noted that deferred tax assets (in the amount of €187 million) were not recorded on prior and current-year tax losses in the amount of €754 million because, on the ba- sis of current estimates of future taxable income, it is not highly likely that such assets will be recovered. “Deferred tax liabilities” amounted to €9,259 million at December 31, 2021 (€7,797 million at December 31, 2020). They essentially include the determination of the tax effects of the adjustments to assets acquired as part of the final allocation of the cost of acquisitions made in the various years and the deferred taxation in respect of the differences between depreciation charged for tax purposes, including accelerated depreciation, and de- preciation based on the estimated useful lives of assets. Deferred tax liabilities increased by a total of €1,462 mil- 342 342 Integrated Annual Report 2021 lion due, in particular, to: • developments in the fair value of cash flow hedge de- rivatives; • tax reforms in Argentina and Colombia. These effects were partially offset by the reversals of de- ferred taxes following the depreciation, amortization and impairment of the amounts allocated in the past to prop- erty, plant and equipment and intangible assets at the time of the acquisition of control as a result of purchase price allocation. 25. Equity-accounted investments – €704 million The following table shows changes in the main invest- ments in joint ventures and associates accounted for using the equity method. Millions of euro Joint ventures Slovak Power Holding EGPNA Renewable Energy Partners Zacapa Topco Sàrl Project Kino companies Tejo Energia Produção e Distribuição de Energia Eléctrica Rocky Caney Holding Drift Sand Wind Project Front Marítim del Besòs Enel Green Power Bungala Rusenergosbyt Energie Electrique de Tahaddart Transmisora Eléctrica de Quillota PowerCrop Associates CESI Tecnatom Suministradora Eléctrica de Cádiz Compañía Eólica Tierras Altas Cogenio Srl Other Total Impact on profit or loss % held Change in consolidation scope Dividends Reclassifications from/to assets held for sale Other changes % held at Dec. 31, 2021 at Dec. 31, 2020 104 50.0% 115 20.0% 115 20.6% 40 20.0% 46 43.8% 45 35 33 31 46 20.0% 50.0% 61.4% 51.0% 49.5% 22 32.0% 9 2 50.0% 50.0% 60 28 42.7% 45.0% 12 33.5% 8 37.5% 20.0% 12 98 861 523 8 (1) (19) (17) 5 3 - - 44 1 - 4 - (2) 3 1 2 16 571 - - - - - - - - (31) - - - - - - - - - - - - - (16) - - - - (42) (2) (6) (2) - - (5) (1) (1) 4 (27) (16) (91) - - (2) - - - - - - - - - (1) - - - - - (1) (4) (627) - 50.0% (2) 2 - (1) - 2 - - 3 (3) (3) (3) (1) 1 - - (1) 27 (606) 121 114 21 20.0% 20.6% 20.0% 12 43.8% 20.0% 50.0% 61.4% 100.0% 49.5% 32.0% - 50.0% 42.7% 45.0% 33.5% 37.5% 20.0% 50 40 33 - 51 18 - - 59 27 10 8 12 128 704 The investment in Slovak Power Holding is accounted for using the equity method. Under the provisions of specif- ic agreements, its carrying amount can be adjusted to a lower amount resulting from the application of a price formula that governs the possible sale of the investment itself and which is subject to multiple conditions to be assessed based on different scenarios’ probability of oc- currence. At December 31, 2020, the fair value calculat- ed using that price formula (€104 million) was lower than the amount obtained using the equity method. In 2021, due to the recognition of a significant reduction in the OCI reserves relating to hedging derivatives (€687 million) and the recognition through profit or loss of the profit or loss (€555 million) for the period and previous years not previously recognized (due to the adjustments to the low- er fair value), the carrying amount of the investment was reduced to zero. In addition, a provision for impairment losses on investments of €28 million was established. Apart from these developments, the change in equity-ac- counted investments is mainly attributable to: • dividends distributed in the period in the amount of €91 million, mainly by Rusenergosbyt and Tejo Energia Produção e Distribuição de Energia Eléctrica; Notes to the consolidated financial statements 343 343 • the effects of changes in the consolidation scope, mainly relating to the consolidation of companies be- longing to the Enel Green Power Bungala Group, previ- ously measured using the equity method (€31 million). These negative effects were offset by the “Impact on profit or loss” item, which includes the profit or loss rec- ognized by the companies in proportion to the share held in these companies by the Enel Group. It is mainly accounted for by the profit contributed by Rusenergos- byt (€44 million). The following tables provide a summary of financial information for the main joint ventures and associates of the Group not classified as held for sale in accordance with IFRS 5. Millions of euro Non-current assets Current assets Total assets Non-current liabilities Current liabilities Total liabilities Equity at Dec. 31, 2021 at Dec. 31, 2020 at Dec. 31, 2021 at Dec. 31, 2020 at Dec. 31, 2021 at Dec. 31, 2020 at Dec. 31, 2021 at Dec. 31, 2020 at Dec. 31, 2021 at Dec. 31, 2020 at Dec. 31, 2021 at Dec. 31, 2020 at Dec. 31, 2021 at Dec. 31, 2020 6,762 871 - 25 4 25 24 23 2 6,922 729 - 21 5 17 23 18 2 5,369 143 120 14 10 - 26 48 3 802 90 106 33 6 - 33 45 2 12,131 1,014 120 39 14 25 50 71 5 7,724 819 106 54 11 17 56 63 4 1,917 555 24 102 57 201 69 29 20 3,765 551 16 156 69 210 62 36 20 Joint ventures Slovak Power Holding Zacapa Topco Sàrl Rusenergosbyt Tejo Energia Produção e Distribuição de Energia Eléctrica Energie Electrique de Tahaddart Associates CESI Tecnatom Suministradora Eléctrica de Cádiz Compañía Eólica Tierras Altas 12,194 1,393 10,813 1,253 3 34 49 198 61 64 19 2 82 62 202 60 67 21 1,854 176 141 107 22 28 58 36 6 676 117 120 128 18 25 58 32 3 14,048 1,569 144 141 71 226 119 100 25 11,489 1,370 122 210 80 227 118 99 24 Millions of euro Total revenue Pre-tax profit/(loss) Profit/(Loss) from continuing operations 2021 2020 2021 2020 2021 2020 Joint ventures Slovak Power Holding Zacapa Topco Sàrl Rusenergosbyt Tejo Energia Produção e Distribuição de Energia Eléctrica Energie Electrique de Tahaddart Associates CESI Tecnatom Suministradora Eléctrica de Cádiz Compañía Eólica Tierras Altas 3,417 267 2,288 126 36 140 97 14 13 2,954 221 2,198 114 33 122 78 25 8 190 15 112 (7) 7 (7) 7 10 4 163 7 112 17 5 (14) (5) 21 - 137 (4) 90 (16) 4 (8) 7 8 3 120 (3) 90 8 3 (16) (5) 14 - 344 344 Integrated Annual Report 2021 Millions of euro Non-current assets Current assets Total assets Non-current liabilities Current liabilities Total liabilities Equity at Dec. 31, 2021 at Dec. 31, 2020 at Dec. 31, 2021 at Dec. 31, 2020 at Dec. 31, 2021 at Dec. 31, 2020 at Dec. 31, 2021 at Dec. 31, 2020 at Dec. 31, 2021 at Dec. 31, 2020 at Dec. 31, 2021 at Dec. 31, 2020 at Dec. 31, 2021 at Dec. 31, 2020 6,762 871 - 25 4 25 24 23 2 6,922 729 - 21 5 17 23 18 2 5,369 143 120 14 10 - 26 48 3 802 90 106 33 6 - 33 45 2 12,131 1,014 120 39 14 25 50 71 5 7,724 819 106 54 11 17 56 63 4 1,917 555 24 102 57 201 69 29 20 3,765 551 16 156 69 210 62 36 20 Joint ventures Slovak Power Holding Zacapa Topco Sàrl Rusenergosbyt Tejo Energia Produção e Distribuição de Energia Eléctrica Energie Electrique de Tahaddart Associates CESI Tecnatom Suministradora Eléctrica de Cádiz Compañía Eólica Tierras Altas 12,194 1,393 10,813 1,253 3 34 49 198 61 64 19 2 82 62 202 60 67 21 1,854 176 141 107 22 28 58 36 6 676 117 120 128 18 25 58 32 3 14,048 1,569 144 141 71 226 119 100 25 Millions of euro Total revenue Pre-tax profit/(loss) operations Profit/(Loss) from continuing 2021 2020 2021 2020 2021 2020 Joint ventures Slovak Power Holding Zacapa Topco Sàrl Rusenergosbyt Tejo Energia Produção e Distribuição de Energia Eléctrica Energie Electrique de Tahaddart Associates CESI Tecnatom Suministradora Eléctrica de Cádiz Compañía Eólica Tierras Altas 3,417 267 2,288 126 36 140 97 14 13 2,954 221 2,198 114 33 122 78 25 8 190 15 112 (7) 7 (7) 7 10 4 163 7 112 17 5 (14) (5) 21 - 137 (4) 90 (16) (8) 4 7 8 3 11,489 1,370 122 210 80 227 118 99 24 120 (3) 90 8 3 (16) (5) 14 - Notes to the consolidated financial statements 345 345 26. Derivatives Millions of euro Non-current Current Derivative financial assets Derivative financial liabilities 2,772 3,339 1,236 3,606 22,791 24,607 3,471 3,531 at Dec. 31, 2021 at Dec. 31, 2020 at Dec. 31, 2021 at Dec. 31, 2020 For more information on derivatives classified as non-cur- rent financial assets, please see note 49 for hedging deriv- atives and trading derivatives. 27. Current/Non-current contract assets/(liabilities) Millions of euro Non-current Current Contract assets Contract liabilities at Dec. 31, 2021 at Dec. 31, 2020 at Dec. 31, 2021 at Dec. 31, 2020 530 6,214 304 6,191 121 1,433 176 1,275 Non-current assets deriving from contracts with custom- ers (contract assets) refer mainly to assets under develop- ment resulting from public-to-private service concession arrangements recognized in accordance with IFRIC 12 and which have an expiration of beyond 12 months (€517 mil- lion). These cases arise when the concession holder has not yet obtained full right to recognize the asset from the grantor, in that there remains a contractual obligation to ensure that the asset is completed and can be remunerat- ed through rates. The figure at December 31, 2021 includes investments for the year in the amount of €907 million. Current contract assets mainly concern construction con- tracts in progress (€98 million) to be invoiced, payments on which are subject to the fulfillment of a performance obligation. The carrying amount at December 31, 2021 of non-cur- rent contract liabilities is mainly attributable to distribution operations in Italy (€3,252 million), Spain (€2,521 million) and Romania (€438 million) as a result of the accounting treatment of revenue from connections of new customers, which are deferred over the average duration of the asso- ciated contracts. Current contract liabilities include the contractual liabilities related to revenue from connections to the electricity grid expiring within 12 months in the amount of €1,016 million, mainly recognized in Italy and Spain, as well as liabilities for construction contracts in progress (€392 million). As required under IFRS 15, the following table reports the reversal to profit or loss of contract liabilities by time band. Millions of euro Within 1 year Within 2 years Within 3 years Within 4 years Within 5 years More than 5 years Total at Dec. 31, 2021 at Dec. 31, 2020 1,433 498 480 479 477 4,280 7,647 1, 275 481 461 460 459 4,330 7,466 346 346 Integrated Annual Report 2021 28. Other non-current financial assets – €5,704 million Millions of euro Equity investments in other companies measured at fair value Financial assets and securities included in net financial debt (see note 28.1) Service concession arrangements Non-current financial prepayments Total at Dec. 31, 2021 at Dec. 31, 2020 Change 72 2,692 2,890 50 5,704 70 2,745 2,300 44 2 (53) 590 6 2.9% -1.9% 25.7% 13.6% 5,159 545 10.6% “Other non-current financial assets” increased by €545 million, mainly reflecting the increase in financial assets in respect of service concession arrangements in Brazil and Costa Rica. This factor was partially offset by a decline in financial assets included in net financial debt, as detailed in note 28.1. The following is a breakdown of equity investments in oth- er companies measured at fair value. Millions of euro Empresa Propietaria de la Red SA European Energy Exchange Athonet Srl Korea Line Corporation Hubject GmbH Termoeléctrica José de San Martín SA Termoeléctrica Manuel Belgrano SA Other Total % held 11.1% 2.4% 16.0% 0.3% 12.5% 4.2% 4.7% at Dec. 31, 2021 5 13 7 1 10 11 12 13 72 at Dec. 31, 2020 % held Change 11.1% 2.4% 16.0% 0.3% 12.5% 3.3% 3.7% 5 13 7 1 10 10 11 13 70 - - - - - 1 1 - 2 28.1 Other non-current financial assets included in net financial debt – €2,692 million Millions of euro Securities Other financial assets Total at Dec. 31, 2021 at Dec. 31, 2020 Change 403 2,289 2,692 408 2,337 2,745 (5) (48) (53) -1.2% -2.1% -1.9% “Securities” are primarily represented by financial instru- ments measured at fair value through other comprehen- sive income in which the Dutch insurance companies in- vest a portion of their liquidity. The reduction in “Other financial assets” is mainly attrib- utable to: • a decline of €271 million in the financial assets of Enel SpA, essentially associated with the disposal of the in- vestment in Open Fiber; • the reclassification of €90 million of the current portion of the financial assets of e-distribuzione in respect of the Energy and Environmental Services Fund (€55 mil- lion) and the amount receivable in respect of the reim- bursement of the extraordinary costs incurred by dis- tributors for the early replacement of electromechani- cal meters with electronic devices (€35 million). These factors were partially offset by: • an increase of €198 million the financial assets of Enel Finance International, mainly regarding the Slovak Pow- er Holding BV loan; • an increase of €42 million in financial assets for depos- its; • an impairment loss of €25 million on the amount due to Enel Produzione from EP Slovakia BV associated with the sale of 50% of the investment in Slovak Power Hold- ing. Notes to the consolidated financial statements 347 347 29. Other current financial assets – €8,645 million Millions of euro Current financial assets included in net financial debt (see note 29.1) Other Total at Dec. 31, 2021 at Dec. 31, 2020 Change 8,467 178 8,645 4,971 3,496 142 36 70.3% 25.4% 5,113 3,532 69.1% “Other current financial assets” increased by €3,532 mil- lion, mainly reflecting the increase in current financial as- sets included in net financial debt, as detailed in note 29.1, as well as the increase in the current portion of financial assets in respect of service concession arrangements. 29.1 Other current financial assets included in net financial debt – €8,467 million Millions of euro Current portion of long-term financial assets Securities at FVTPL Securities at FVOCI Financial assets and cash collateral Other Total at Dec. 31, 2021 at Dec. 31, 2020 Change 1,538 1 87 6,485 356 8,467 1,428 - 67 110 1 20 3,223 3,262 7.7% - 29.9% - 253 103 40.7% 4,971 3,496 70.3% The increase in the item is mainly attributable to: • €3,262 million in respect of an increase in cash collat- eral paid to counterparties for derivatives transactions; • €110 million in respect of the increase in the current portion of long-term financial assets, which essentially reflects: – the increase in financial assets relating to the deficit of the Spanish electricity system (€47 million); – an increase in financial assets for security deposits (€61 million). 30. Other non-current assets – €3,268 million Millions of euro Amounts due from institutional market operators Other assets Total at Dec. 31, 2021 at Dec. 31, 2020 Change 242 3,026 3,268 186 2,308 2,494 56 718 774 30.1% 31.1% 31.0% “Amounts due from institutional market operators“ in- creased by €56 million, mainly in Spain as a result of the remuneration of distribution operations. “Other assets“ at December 31, 2021 included tax assets in the amount of €2,286 million (€1,539 million at December 31, 2020), security deposits in the amount of €340 million (€330 million at the end of 2020) and non-monetary grants to be received in respect of green certificates amounting to €56 million (€73 million at December 31, 2020). The change for the year mainly reflected the tax assets recognized by distribution companies connected with the PIS/COFINS dispute in Brazil in the amount of €596 million. 348 348 Integrated Annual Report 2021 31. Other current assets – €5,002 million Millions of euro Amounts due from institutional market operators Advances to suppliers Amounts due from employees Amounts due from others Sundry tax assets Current accrued income and prepayments Total at Dec. 31, 2021 at Dec. 31, 2020 Change 2,205 326 29 1,071 1,164 207 5,002 1,265 940 74.3% 309 30 956 848 170 17 (1) 115 316 37 5.5% -3.3% 12.0% 37.3% 21.8% 3,578 1,424 39.8% “Amounts due from institutional market operators“ include amounts due in respect of the Italian system in the amount of €1,519 million (€890 million at December 31, 2020) and the Spanish system in the amount of €667 million (€337 million at December 31, 2020). The increase was essentially attributable to the increase in amounts receivable in Italy in respect of the Energy and Environmental Services Fund, mainly held by e-distribuzione (€346 million) and Servizio Elettrico Nazionale (€1,046 million), primarily connected with equalization mechanisms. The increase of €316 million in sundry tax assets is mainly attributable to an increase in credits for indirect taxes and duties in Spain (€169 million) and Latin America (€194 mil- lion), partially offset by a decline in such items in Italy (€42 million). “Amounts due from others“ increased, mainly due to an in- crease in receivables for settled derivatives transactions in commodities (€303 million), primarily registered in Italy and Spain, partially offset by a decrease in assets in respect of security deposits and an increase in loss allowances. 32. Inventories – €3,109 million Millions of euro Raw and ancillary materials, and consumables: - fuels - materials, equipment and other inventories Total Environmental certificates: - CO2 emissions allowances - green certificates - white certificates Total Buildings held for sale Payments on account TOTAL at Dec. 31, 2021 at Dec. 31, 2020 Change 1,023 1,793 2,816 139 3 16 158 49 86 595 1,542 2,137 428 251 679 71.9% 16.3% 31.8% 159 (20) -12.6% 5 7 171 52 41 (2) 9 (13) (3) 45 -40.0% - -7.6% -5.8% - 3,109 2,401 708 29.5% “Raw and ancillary materials, and consumables“ consist of materials and equipment used to operate, maintain, and construct power plants and distribution networks, as well as fuel inventories to cover the Group’s requirements for generation and trading activities. The overall increase in inventories in 2021 (€708 million) is mainly attributable to an increase in inventories of fuel and materials, devices and other inventories recorded above all in Italy (€358 million), Spain (€195 million) and Latin Ameri- ca (€89 million), notably gas inventories to meet the needs of the Group, and an increase in stocks of low- and medi- um-voltage materials. Notes to the consolidated financial statements 349 349 33. Trade receivables – €16,076 million Millions of euro Customers: - electricity sales and transport - distribution and sale of gas - other assets Total trade receivables due from customers Trade receivables due from associates and joint ventures TOTAL at Dec. 31, 2021 at Dec. 31, 2020 Change 10,111 2,658 3,158 15,927 149 16,076 7,986 900 2,945 2,125 1,758 213 26.6% - 7.2% 11,831 4,096 34.6% 215 (66) -30.7% 12,046 4,030 33.5% Trade receivables due from customers are recognized net of loss allowances, which totaled €3,663 million at the end of the year, compared with a balance of €3,287 million at the end of the previous year. Specifically, the increase in 2021, totaling €4,030 million, mainly recognized in Italy (€1,495 million), Spain (€1,625 million) and Latin America (€728 million), was attributable to an increase in trade receivables for the sale and trans- port of electricity and gas, partially offset by an increase in net loss allowances. For more information on trade receivables, see note 46 “Financial instruments by category”. 34. Cash and cash equivalents – €8,858 million Cash and cash equivalents, detailed in the following table, increased by €2,952 million as a result of an increase in cash collateral paid by counterparties in derivatives trans- actions, partially offset by the decrease, especially for the Parent, attributable to cash outflows linked to the acqui- sition of additional equity interests in subsidiaries in Latin America. Millions of euro Bank and postal deposits Cash and cash equivalents on hand Other investments of liquidity Total at Dec. 31, 2021 at Dec. 31, 2020 Change 8,118 8 732 8,858 5,699 2,419 42.4% 42 165 (34) 567 -81.0% - 5,906 2,952 50.0% 350 350 Integrated Annual Report 2021 35. Assets classified as held for sale and liabilities included in disposal groups classified as held for sale – €1,242 million and €962 million Changes in assets classified as held for sale during 2021 break down as follows: Millions of euro Reclassification from/to current and non-current assets Disposals and changes in the consolidation scope at Dec. 31, 2020 Investments Other changes at Dec. 31, 2021 Property, plant and equipment Intangible assets Goodwill Deferred tax assets Equity-accounted investments Non-current financial assets Cash and cash equivalents Inventories, trade receivables and other current assets 781 58 - 18 489 11 29 30 3 88 1 3 4 30 13 45 (42) (2) - - (614) - (1) (4) 111 - - - - - - - Total 1,416 187 (663) 111 46 - - (5) 125 (1) 3 23 191 899 144 1 16 4 40 44 94 1,242 Changes in liabilities included in disposal groups held for sale in 2021 break down as follows: Millions of euro Long-term borrowings Provisions for risks and charges, non- current portion Deferred tax liabilities Non-current financial liabilities Other non-current liabilities Short-term borrowings Other current financial liabilities Trade payables and other current liabilities Total Reclassification from/to current and non-current liabilities Disposals and change in consolidation scope at Dec. 31, 2020 Other changes at Dec. 31, 2021 687 2 17 57 - - 12 33 808 - 6 28 - 5 2 - 54 95 - (1) (1) - - - - (1) (3) 95 3 2 (17) - - (6) (15) 62 782 10 46 40 5 2 6 71 962 Assets classified as held for sale and liabilities included in dis- posal groups classified as held for sale at December 31, 2021 amounted to €1,242 million and €962 million, respectively, and mainly refer to a number of renewables companies held for sale in Africa and certain Enel X companies in Italy, which, following decisions by management, meet the requirements of IFRS 5 for classification within this aggregate. A number of companies previously classified as available for sale were sold in 2021, in particular the investment held by Enel SpA in Open Fiber, the Enel Green Power companies in Bulgaria and the solar plant owned by the Panamanian com- pany Llano Sanchez Solar Power One SA. At December 31, 2020, the aggregate included the Enel Produzione business unit formed of the “Ettore Majorana” site at Termini Imerese (€4 million), which at December 31, 2021 was again classified under “Property, plant and equip- ment” as the preliminary sales contract was terminated. Notes to the consolidated financial statements 351 351 36. Equity – €42,342 million 36.1 Equity attributable to owners of the Parent – €29,653 million Millions of euro Share capital Treasury share reserve Other reserves Share premium reserve Reserve for equity instruments - perpetual hybrid bonds Legal reserve Other reserves Translation reserve Hedging reserve Hedging costs reserve Reserve from measurement of financial instruments at FVOCI Reserve from equity-accounted investments Actuarial reserve Reserve from disposal of equity interests without loss of control Reserve from acquisitions of non-controlling interests Retained earnings Equity attributable to owners of the Parent Share capital – €10,167 million At December 31, 2021, the fully subscribed and paid-up share capital of Enel SpA totaled €10,166,679,946, rep- resented by the same number of ordinary shares with a par value of €1.00 each. Enel SpA’s share capital was un- changed compared with the amount reported at Decem- ber 31, 2020. At December 31, 2021, based on the shareholders regis- ter and the notices submitted to CONSOB and received by the Parent pursuant to Article 120 of Legislative Decree 58 of February 24, 1998, as well as other available informa- tion, shareholders with interests of greater than 3% in the Parent’s share capital were the Ministry for the Economy and Finance (with a 23.585% stake), BlackRock Inc. (with a 5.000% stake held for asset management purposes) and Capital Research and Management Company (with a 5.000% stake held for asset management purposes). Treasury share reserve – €(36) million At December 31, 2021, treasury shares are represented by 4,889,152 ordinary shares of Enel SpA with a par value of €1.00 each (3,269,152 at December 31, 2020), purchased through an authorized intermediary for a total of €36 mil- lion. The difference between the amount paid and the par value is recognized as a reduction in equity in the share premium reserve. 352 352 Integrated Annual Report 2021 at Dec. 31, 2021 at Dec. 31, 2020 Change 10,167 (36) 1,721 7,496 5,567 2,034 2,313 (8,125) (2,268) (39) 10 (721) (1,325) (2,378) (843) 17,801 29,653 10,167 (3) (39) 7,476 2,386 2,034 2,268 (7,046) (1,917) (242) (1) (128) (1,196) (2,381) (1,292) 18,200 28,325 - (33) 1,760 20 3,181 - 45 (1,079) (351) 203 11 (593) (129) 3 449 (399) 1,328 Other reserves – €1,721 million Share premium reserve – €7,496 million Pursuant to Article 2431 of the Italian Civil Code, the share premium reserve contains, in the case of the issue of shares at a price above par, the difference between the is- sue price of the shares and their par value, including those resulting from conversion from bonds. The reserve, which is a capital reserve, may not be distributed until the legal reserve has reached the threshold established under Arti- cle 2430 of the Italian Civil Code. Reserve for equity instruments - perpetual hybrid bonds – €5,567 million This reserve reports the nominal value, net of transac- tion costs, of the non-convertible subordinated perpet- ual hybrid bonds denominated in euros for international investors. The change during the year reflected the subscription of new non-convertible subordinated perpetual hybrid bonds in an amount, net of transaction costs, of €2,214 million and the conversion of bonds already in issue and converted into perpetual hybrid bonds in the amount, net of transaction costs, of €967 million. In 2021, the Group paid €71 million in coupons to holders of perpetual hybrid bonds. Legal reserve – €2,034 million The legal reserve is formed of the part of profits that, pursuant to Article 2430 of the Italian Civil Code, cannot be distributed as dividends. Other reserves – €2,313 million These include €2,215 million related to the remaining portion of the adjustments carried out when Enel was transformed from a public entity to a joint-stock com- pany. Pursuant to Article 47 of the Consolidated Income Tax Code (Testo Unico Imposte sul Reddito, or “TUIR”), this amount does not constitute taxable income when dis- tributed. Translation reserve – €(8,125) million The decrease for the year, of €1,079 million, was mainly due to the change in the consolidation scope connected with the purchase of 17.3% of Enel Américas, partially off- set by the net depreciation of the functional currencies used by the foreign subsidiaries against the Group pres- entation currency (the euro). Hedging reserve – €(2,268) million This includes the net loss recognized in equity from the measurement of cash flow hedge derivatives. Hedging costs reserve – €(39) million In application of IFRS 9, this reserve includes the fair val- ue gains and losses on currency basis points and forward points. Reserve from measurement of financial instruments at FVOCI – €10 million This includes net unrealized fair value losses on financial assets. Reserve from equity-accounted investments – €(721) million The reserve reports the share of comprehensive income to be recognized directly in equity of equity-accounted investees. The change in 2021 is mainly attributable to the change in the hedging reserve of Slovak Power Hold- ing following the sharp rise in commodity prices. Actuarial reserve – €(1,325) million This reserve includes actuarial gains and losses in respect of employee benefit liabilities, net of tax effects. Reserve from disposal of equity interests without loss of control – €(2,378) million This item mainly reports: • the gain posted on the public offering of Enel Green Power shares, net of expenses associated with the dis- posal and the related taxation; • the sale of non-controlling interests recognized as a re- sult of the Enersis (now Enel Américas and Enel Chile) capital increase; • the capital loss, net of expenses associated with the disposal and the related taxation, from the public offer- ing of 21.92% of Endesa; • the disposal to third parties of the non-controlling in- terest in Enel Green Power North America Renewable Energy Partners; • the effects of the merger into Enel Américas of Endesa Américas and Chilectra Américas; • the disposal to third parties of a non-controlling inter- est without loss of control in a number of companies in South Africa. The change in the reserve in 2021 is associated with the sale of additional interests in a number of companies in South Africa. Reserve from acquisitions of non-controlling interests – €(843) million This reserve mainly includes the surplus of acquisition prices with respect to the carrying amount of the equi- ty acquired following the acquisition from third parties of further interests in companies already controlled in Latin America. The change for the year (€449 million) mainly reflects the effects of the increase of 17.3% in the interest held in Enel Américas following the completion of the voluntary par- tial tender offer and the completion of the merger of EGP Américas into Enel Américas. Following these transactions, Enel owns approximately 82.3% of the outstanding share capital of Enel Américas. Retained earnings – €17,801 million This reserve reports earnings from previous years that have not been distributed or allocated to other reserves. Notes to the consolidated financial statements 353 353 The table below shows the changes in gains and losses recognized directly in other comprehensive income, in- cluding non-controlling interests, with specific reporting of the related tax effects. Millions of euro at Dec. 31, 2020 Change at Dec. 31, 2021 Of which owners of the Parent Of which non- controlling interests Gains/ (Losses) recognized in equity during the year Total Translation reserve (11,700) (6,458) (5,242) Hedging reserve (2,236) (1,921) (315) Hedging costs reserve Reserve from measurement of financial instruments at FVOCI Share of OCI of equity-accounted associates Reserve from measurement of equity investments in other companies (244) (242) - 1 (175) (177) (32) (32) (2) (1) 2 - Actuarial reserve (1,828) (1,276) (552) (90) 506 208 11 (642) - 40 Released to profit or loss Taxes Total Of which owners of the Parent Of which non- controlling interests Of which owners of the Parent Of which non- controlling interests Total - - (90) 155 (245) (11,790) (6,303) (5,487) (1,805) 574 (725) (359) (366) (2,961) (2,280) (7) (6) 195 203 (8) (49) (39) (681) (10) - - - - - 11 11 - 11 12 (1) (3) (645) (648) 3 (820) (825) - - (10) 30 - 11 - (32) (32) 19 (1,798) (1,265) (533) 5 - Total gains/(losses) recognized in equity (16,215) (10,105) (6,110) 33 (1,812) 555 (1,224) (627) (597) (17,439) (10,732) (6,707) 36.2 Dividends Dividends distributed in 2020 Dividends for 2019 Interim dividends for 2020(1) Special dividends Total dividends distributed in 2020 Dividends distributed in 2021 Dividends for 2020 Interim dividends for 2021(2) Special dividends Total dividends distributed in 2021 Amount distributed (millions of euro) Dividend per share (euro) 3,334 - - 3,334 3,638 - - 3,638 0.328 - - 0.328 0.358 - - 0.358 (1) Approved by the Board of Directors on November 5, 2020, and paid as from January 20, 2021 (interim dividend of €0.175 per share for a total of €1,779 million). (2) Approved by the Board of Directors on November 4, 2021, and paid as from January 26, 2022 (interim dividend of €0.19 per share for a total of €1,932 million). The dividend for 2021 is equal to €0.38 per share, for a to- tal of €3,863 million (of which €0.19 per share, for a total of €1,932 million, already paid as an interim dividend as from January 26, 2022). It will be proposed to the Shareholders’ Meeting of May 19, 2022 at single call. These consolidated financial statements do not take ac- count of the effects of the distribution to shareholders of the dividend for 2021, except for the liability in respect of shareholders for the interim dividend for 2021, which was approved by the Board of Directors on November 4, 2021 for a potential maximum of €1,932 million, and paid as from January 26, 2022 net of the portion pertaining to the 4,889,152 treasury shares held as at the record date of January 25, 2021. In 2021, the Group also paid €71 million to holders of per- petual hybrid bonds. 354 354 Integrated Annual Report 2021 Capital management The Group’s objectives for managing capital comprise safeguarding the business as a going concern, creating value for stakeholders and supporting the development of the Group. In particular, the Group seeks to maintain an ad- equate capitalization that enables it to achieve a satisfac- tory return for shareholders and ensure access to external sources of financing, in part by maintaining an adequate rating. In this context, the Group manages its capital structure and adjusts that structure when changes in economic conditions so require. There were no substantive changes in objectives, policies or processes in 2021. To this end, the Group constantly monitors developments in the level of its debt in relation to equity. The situation at December 31, 2021 and 2020 is summarized in the follow- ing table. Millions of euro Non-current financial debt Net current financial position Non-current financial assets and long-term securities Net financial debt Equity attributable to owners of the Parent Non-controlling interests Equity Debt/equity ratio at Dec. 31, 2021 at Dec. 31, 2020 Change 54,620 24 (2,692) 51,952 29,653 12,689 42,342 1.23 49,519 (1,359) (2,745) 45,415 28,325 14,032 42,357 1.07 5,101 1,383 53 6,537 1,328 (1,343) (15) 0.16 The increase in the debt/equity ratio, which measures fi- nancial leverage, is essentially attributable to the increase in net financial debt, mainly reflecting the funding require- ments of investments in the year, the payment of dividends and extraordinary transactions in non-controlling interests connected with the acquisition of additional interests in Enel Américas. See note 45 for a breakdown of the individual items in the table. 36.3 Non-controlling interests – €12,689 million The following table presents the composition of non-con- trolling interests by geographical segment. Millions of euro Italy Iberia Latin America Europe North America Africa, Asia and Oceania Total Non-controlling interests at Dec. 31, 2021 at Dec. 31, 2020 1 5,238 6,511 635 151 153 2 5,869 7,206 638 160 157 12,689 14,032 Profit/(Loss) for the year attributable to non-controlling interests 2021 - 193 467 5 6 (3) 668 2020 - 468 477 55 6 6 1,012 The decrease in the portion attributable to non-controlling interests mainly reflects dividends and the increase in the percentage holding in Enel Américas. The financial disclosure requirements of IFRS 12 for sub- sidiaries with significant non-controlling interests are re- ported below. Notes to the consolidated financial statements 355 355 Millions of euro Non-current assets Current assets Total assets at Dec. 31, 2021 at Dec. 31, 2020 at Dec. 31, 2021 at Dec. 31, 2020 at Dec. 31, 2021 at Dec. 31, 2020 Subsidiaries Enel Américas Enel Chile Endesa 28,959 9,887 43,217 21,337 9,295 41,819 4,711 (642) 3,853 4,582 170 1,386 33,670 9,245 47,070 25,919 9,465 43,205 Millions of euro Non-current liabilities Current liabilities Total liabilities Equity Equity attributable to owners of the Parent Non-controlling interests at Dec. 31, 2021 at Dec. 31, 2020 at Dec. 31, 2021 at Dec. 31, 2020 at Dec. 31, 2021 at Dec. 31, 2020 at Dec. 31, 2021 at Dec. 31, 2020 at Dec. 31, 2021 at Dec. 31, 2020 at Dec. 31, 2021 at Dec. 31, 2020 Subsidiaries Enel Américas 11,320 8,827 6,073 5,495 17,393 14,322 16,277 11,597 11,556 6,643 4,721 4,954 Enel Chile Endesa 3,356 3,027 1,178 1,066 4,534 4,093 4,711 5,372 2,921 3,326 1,790 2,046 15,196 12,869 11,449 7,101 26,645 19,970 20,425 23,235 15,187 17,366 5,238 5,869 Millions of euro Total revenue(1) Pre-tax profit/(loss) Profit/(Loss) from continuing operations Profit/(Loss) attributable to owners of the Parent Profit/(Loss) attributable to non-controlling interests 2021 2020 2021 2020 2021 2020 2021 2020 2021 2020 Subsidiaries Enel Américas(2) 13,581 10,437 1,516 Enel Chile Endesa 3,114 2,816 20,217 16,614 128 769 1,187 (133) 1,965 757 104 589 738 (40) 1,551 337 57 396 274 (25) 1,082 420 47 193 464 (15) 469 (1) In order to ensure a uniform comparison of the data, revenue for 2020 was restated by excluding the part of income from commodity contracts, in line with the presentation of revenue in the notes to the financial statements. (2) For comparative purposes only, €87 million in 2020 in respect of the component recognized through profit or loss deriving from the remeasurement at fair value of the financial assets connected with service concession arrangements involving distribution operations in Brazil falling within the scope of IFRIC 12 have been reclassified from financial income to revenue. The latter classification had an impact of the same amount on operating profit. For more details, please see note 7 to the consolidated financial statements. 356 356 Integrated Annual Report 2021 37. Borrowings Millions of euro Long-term borrowings Short-term borrowings Total For more information on the nature of borrowings, see note 46.2 “Financial liabilities by category”. 38. Employee benefits – €2,724 million The Group provides its employees with a variety of bene- fits, including deferred compensation benefits, additional months’ pay for having reached age limits or eligibility for old-age pension, loyalty bonuses for achievement of sen- iority milestones, supplemental retirement and health- care plans, residential electricity discounts and similar benefits. More specifically: • for Italy, the item “Pension benefits” regards estimated accruals made to cover benefits due under the supple- mental retirement schemes of retired executives and the benefits due to personnel under law or contract at the time the employment relationship is terminated. For the foreign companies, the item refers to post-em- ployment benefits, of which the most material regard the pension benefit schemes of Endesa in Spain, which break down into three types that differ on the basis of employee seniority and company. In general, under the framework agreement of October 25, 2000, employees participate in a specific defined contribution pension plan and, in cases of disability or death of employees in service, a defined benefit plan which is covered by appropriate insurance policies. In addition, the group has two other limited-enrollment plans (i) for current and retired Endesa employees covered by the elec- tricity industry collective bargaining agreement prior to the changes introduced with the framework agree- ment noted earlier and (ii) for employees of the Catalan Non-current Current at Dec. 31, 2021 at Dec. 31, 2020 at Dec. 31, 2021 at Dec. 31, 2020 54,500 49,519 - - 54,500 49,519 4,031 13,306 17,337 3,168 6,345 9,513 companies merged in the past (Fecsa/Enher/HidroEm- pordà). Both are defined benefit plans and benefits are fully ensured, with the exception of the former plan for benefits in the event of the death of a retired employ- ee. Finally, the Brazilian companies have also established defined benefit plans; • the item “Electricity discount” comprises benefits re- garding electricity supply associated in particular with foreign companies; • the item “Health insurance” refers to benefits for cur- rent or retired employees covering medical expenses; • “Other benefits” mainly regard the loyalty bonus, which is adopted in various countries and for Italy is repre- sented by the estimated liability for the benefit entitling employees covered by the electricity workers national collective bargaining agreement to a bonus for achieve- ment of seniority milestones (25th and 35th year of ser- vice). It also includes other incentive plans, which pro- vide for the award to certain Company managers of a monetary bonus subject to specified conditions. The following table reports changes in the defined bene- fit obligation for post-employment and other long-term employee benefits at December 31, 2021, and December 31, 2020, respectively, as well as a reconciliation of that obligation with the actuarial liability. Notes to the consolidated financial statements 357 357 Millions of euro 2021 2020 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 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 assumptions Experience adjustments Past service cost (Gains)/Losses arising from settlements Exchange differences Employer contributions Employee contributions Benefits paid Other changes Liabilities included in disposal groups classified as held for sale Actuarial obligation at year- end (A) CHANGES IN PLAN ASSETS 4,408 403 217 222 5,250 5,691 904 263 242 7,100 17 214 192 2 3 - (664) (14) 452 (17) (4) 14 - - 31 - - (1) - - 4 7 (6) 6 (9) - - (1) - - (379) (15) (12) 7 - 1 - - - 28 3 - (1) - (3) - - - - (58) (1) - 51 227 186 18 249 45 (673) 105 474 (20) (4) 12 - - 466 (24) (584) (1,206) - 1 3 5 12 19 (21) (504) - (1) - - 4 7 6 (2) (7) (13) - (30) - - 38 4 1 2 (8) (1) - 63 265 64 124 430 (542) (584) (7) (1,244) - - - 1 (464) (358) (16) (11) (48) (433) 7 - 5 - 2 - - - (1) - 6 - 4,240 410 206 190 5,046 4,408 403 217 222 5,250 Fair value of plan assets at the start of the year 2,299 2,299 3,374 - - - - 15 - (15) - - - - - - - - - - - - - 12 - (12) - - - - - - - - - (28) (434) - - - - 28 - - - - - - - - - - 121 38 17 307 - - - 160 85 (782) 342 1 (358) (523) - 2,348 2,299 13 1 12 - - 26 45 3 (24) (11) - 13 - - - - 16 - (16) - - - - - - - - - - - - - 11 - (11) - - - - - - - - - - - - - 21 - (21) - - - - - - - - - 3,374 160 85 (782) 390 1 (406) (523) - 2,299 45 3 (24) (11) - 13 1,918 410 206 190 2,724 2,122 403 217 222 2,964 Interest income Expected return on plan assets excluding amounts included in interest income Exchange differences Employer contributions Employee contributions Benefits paid Other payments Changes in the consolidation scope 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 Changes in the consolidation scope Asset ceiling at year-end (C) Net liability in statement of financial position (A-B+C) 121 38 17 252 - (379) - - 2,348 13 1 12 - - 26 358 358 Integrated Annual Report 2021 Millions of euro (Gains)/Losses taken 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 Expected 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 2021 2020 9 107 (4) 22 1 135 (509) 108 (61) 31 (9) (440) 2021 2020 (38) (13) 12 (1) (40) (85) 626 (24) (1) 516 The change in the cost recognized in profit or loss was equal to €575 million. The impact on the income state- ment is, therefore, greater than in the previous year, due mainly to the signing in 2020 of the 5th Endesa Collective Bargaining Agreement, which modified the electricity dis- count benefit for current and former employees, with the consequent reversal of the associated provision. The liability recognized in the statement of financial posi- tion at the end of the year is reported net of the fair value of plan assets, amounting to €2,348 million at December 31, 2021. Those assets, which are entirely in Spain and Bra- zil, break down as follows. Investments quoted in active markets Equity instruments Fixed-income securities Investment property Other Unquoted investments Assets held by insurance undertakings Other Total at Dec. 31, 2021 at Dec. 31, 2020 8% 54% 3% - - 35% 100% 7% 63% 2% - - 28% 100% The main actuarial assumptions used to calculate the lia- bilities in respect of employee benefits and the plan assets, which are consistent with those used the previous year, are set out in the following table. Italy Iberia Latin America 2021 Other countries Italy Iberia Latin America 2020 Other countries Discount rate 0.00%-0.80% 0.00%-1.16% 5.60%-9.67% 0.80%-8.40% 0.00%-0.50% 0.00%-0.61% 2.55%-7.95% 0.75%-6.30% Inflation rate Rate of wage increases Rate of increase in healthcare costs Expected rate of return on plan assets 1.50% 2.20% 3.00% -8.00% 1.50%-4.01% 0.50% 1.00% 3.00%-4.85% 0.75%-3.83% 0.80%-1.80% 2.20% 3.80%-8.00% 2.50%-10.00% 0.50%-2.50% 1.00% 3.80%-5.04% 2.25%-3.83% 2.50% 4.40% 7.12%-8.00% - 0.57% 9.30%-9.46% - - 1.50% 3.20% 7.12%-8.00% - 0.57% 6.08%-7.33% - - Notes to the consolidated financial statements 359 359 The following table reports the outcome of a sensitivity analysis that demonstrates the effects on the defined ben- efit obligation of changes reasonably possible at the end of the year in the actuarial assumptions used in estimating the obligation. Pension benefits Electricity discount Health insurance Other benefits Pension benefits Electricity discount Health insurance Other benefits at Dec. 31, 2021 at Dec. 31, 2020 225 (184) 2 28 14 14 - 98 27 (30) (4) (2) (3) (3) - (3) 11 (14) (2) 9 (2) (2) 20 14 - (10) (6) (2) - (5) 1 (5) 239 (190) (1) 33 14 15 - 27 30 (30) (5) 2 (2) (2) - (11) 11 (15) (3) 7 (3) (3) (2) 2 (1) (11) (7) (4) (3) (6) - (34) 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 The sensitivity analysis used an approach that extrapolates the effect on the defined benefit obligation of reasonable changes in an individual actuarial assumption, leaving the other assumptions unchanged. The contributions expected to be paid into defined benefit plans in the subsequent year amount to €196 million. 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, 2021 at Dec. 31, 2020 392 364 1,077 1,714 366 337 971 1,534 Expected payments are increasing in general. This is main- ly due to Brazil, where forecasts have been impacted by rising life expectancy and a significant increase in expect- ed inflation. The amount of future payments shown in the table, not being subject to discounting, is significantly af- fected by this increase. Finally, it should be noted that the liability does not increase in the same manner, as the in- flationary effects are offset by the effects of discounting. 360 360 Integrated Annual Report 2021 39. Provisions for risks and charges – €8,323 million Millions of euro at Dec. 31, 2021 at Dec. 31, 2020 Non-current Current Total Non-current Current Total Provision for litigation, risks and other charges: - nuclear decommissioning - site retirement, removal and restoration - litigation - environmental certificates - taxes and duties - other Total Provision for early retirement incentives and other restructuring plans Provision for restructuring programs connected with the energy transition TOTAL 666 3,066 790 - 267 821 5,610 435 1,152 7,197 Millions of euro Accrual Reversal Utilization Discounting - 203 44 32 28 347 654 293 179 1,126 Provisions for site retirement and restoration 666 3,269 834 32 295 1,168 6,264 728 1,331 8,323 596 2,017 734 - 288 757 4,392 623 759 - 99 86 42 43 343 613 444 - 596 2,116 820 42 331 1,100 5,005 1,067 759 5,774 1,057 6,831 Change in the consolidation scope Exchange differences Other changes Reclassifications of liabilities included in disposal groups held for sale at Dec. 31, 2020 Provision for litigation, risks and other charges: - nuclear decommissioning - site retirement, removal and restoration 596 - - - 2,116 455 (13) (87) - litigation 820 213 (113) (124) - environmental certificates - taxes and duties - other Total Provision for early retirement incentives and other restructuring plans Provision for restructuring programs connected with the energy transition 42 331 15 64 1,100 338 (4) (41) (95) 5,005 1,085 (266) (21) (21) (162) (415) 1,067 16 (15) (361) 759 687 (18) (95) TOTAL 6,831 1,788 (299) (871) Nuclear decommissioning provision At December 31, 2021, the provision reflected solely the costs that would be incurred at the time of decommis- sioning of nuclear plants by Enresa, a Spanish public entity responsible for such activities in accordance with Royal Decree 1349/2003 and Law 24/2005. In general, the costs are quantified on the basis of a stand- ard contract between Enresa and the electricity compa- nies approved by the Ministry for the Economy in Septem- ber 2001, which regulates the retirement and closing of nuclear power plants. The time horizon envisaged, three years, corresponds to the period from the termination of power generation to the transfer of plant management to at Dec. 31, 2021 - - - - - (6) (6) - - 666 3,269 834 32 295 1,168 6,264 728 1,331 - (14) (3) - - (3) (20) - 2 (3) - (44) (11) (56) - 21 (1) (17) (21) (52) (6) 8,323 1 3 44 - 6 14 68 - 16 84 69 799 - - - (7) 861 - - 861 - 8 - - - - 8 - - 8 Enresa (so-called “post-operational costs“) and takes ac- count, among the various assumptions used to estimate the amount, of the quantity of unused nuclear fuel expect- ed at the date of closure of each of the Spanish nucle- ar plants on the basis of the provisions of the concession agreement. Site retirement, removal and restoration provision This provision represents the present value of the esti- mated cost for the retirement and removal of non-nuclear plants where there is a legal or constructive obligation to Notes to the consolidated financial statements 361 361 do so. The provision mainly regarded the Endesa Group and Enel Produzione. The change in the provision in 2021 was mainly linked to the redetermination of the future re- tirement costs of certain plants in Iberia and Italy and an increase in provisions for retirement costs resulting from the Group’s decision to promote the termination of gener- ation from coal-fired power plants and reconvert plans as part of the energy transition. The following table summarizes the temporal breakdown of payments connected with the site retirement, removal and restoration provision. Millions of euro Within 1 year In 1-5 years More than 5 years Total 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 year, as well as revised estimates of the potential costs associated with disputes initiated in prior years. The balance for litigation mainly regards the companies in Spain (€181 million), Italy (€133 million) and Latin America (€497 million). The increase compared with the previous year, equal to €14 million, mainly reflects the increase in the provision in Italy, Iberia and Brazil, reflecting provisions for new dis- putes, offset by an increase in uses in Peru following the resolution of a number of disputes. Provision for environmental certificates The provision for environmental certificates covers costs in respect of shortfalls in the environmental certificates needed for compliance with national or supranational en- vironmental protection requirements and mainly regards Enel Energía and Endesa Energía. Provision for taxes and duties The provision for taxes and duties covers the estimated liability deriving from tax disputes concerning direct and indirect taxes. The balance of the provision also includes the provision for current and potential disputes concerning local prop- erty tax (whether the Imposta Comunale sugli Immobili (ICI) or the Imposta Municipale Unica (IMU)) in Italy. In Ita- ly, the Group has taken due account of developments in land registry regulations (which with effect from January 1, 2016 excluded machinery, devices, equipment and oth- er plant specific to a production process from the calcu- lation of the imputed rent for buildings classified in land 362 362 Integrated Annual Report 2021 Payments by time bracket (nominal value) Discounted amount 652 929 2,671 4,252 651 896 1,722 3,269 registry group D, which includes generation plants) in es- timating the liability for such taxes, both for the purposes of quantifying the probable risk associated with pending litigation and generating a reasonable valuation of prob- able future charges on positions that have not yet been assessed by the Revenue Agency and municipalities. 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 oth- er charges. The increase of €68 million in other provisions is, in ad- dition to provisions for new insurance indemnities, mainly attributable to Enel Global Trading for provisions recog- nized by the company in view of a possible adjustment of the gas contract price to the market price by the supplier. Provision for early retirement incentives and other restructuring plans The provision for early retirement incentives and other restructuring plans includes the estimated charges relat- ed to binding agreements for the voluntary termination of employment contracts in response to organizational needs. The reduction of €339 million for the year main- ly reflects uses of provisions for incentives established in Spain (Acuerdo de Salida Voluntaria) and Italy in previous years to cover the early termination of employment for certain employees. Provision for restructuring programs connected with the energy transition Enel, in its role as a leader of the energy transition, has placed decarbonization and growth of renewables around the world at the center of its strategy. In this context, Enel has begun restructuring the activi- ties associated with the energy-transition process, which involves thermal generation plants in all the geographi- cal areas in which the Group operates. The consequent revision of processes and operating models will require changes in the roles and skills of employees, which the Group intends to implement with highly sustainable plans based on redeployment programs, with major upskilling and reskilling plans and voluntary individual early retire- ment agreements. The energy transition is also based on the progressive and expansive development of digital tools, as digitization is essential to responding to multiple external forces and making informed and well-consid- ered decisions at every level within the Group. A provision was therefore established in 2020 for restruc- turing programs, which at December 31, 2021 amounted to €1,331 million, which is mainly attributable to Spain and Italy, and represents the estimated costs that the Group will incur following the acceleration of the energy tran- sition, for all direct and indirect activities related to the review of processes and operating models and the roles and skills of employees. 40. Other non-current financial liabilities – €120 million Millions of euro Other non-current financial liabilities Total at Dec. 31, 2021 at Dec. 31, 2020 Change 120 120 - - 120 120 - - “Other non-current financial liabilities” report the non-cur- rent portion of liabilities in respect of the Spanish electri- cal system deficit in the amount of €120 million (€0 million at December 31, 2020), which are included in net financial debt. 41. Other non-current liabilities – €4,525 million Millions of euro Accrued operating expenses and deferred income Other items Total at Dec. 31, 2021 at Dec. 31, 2020 Change 498 4,027 4,525 500 (2) -0.4% 2,958 1,069 36.1% 3,458 1,067 30.9% The change in “Other items” reflected an increase of €42 million in amounts due to institutional market operators, an increase of €156 million in liabilities for tax partnerships beyond 12 months in the United States and an increase in liabilities relating to the outcome of the PIS/COFINS dis- pute in Brazil (already discussed under “Other non-current assets”) in the amount of €766 million. Notes to the consolidated financial statements 363 363 42. Other current liabilities – €12,959 million Millions of euro Amounts due to customers Amounts due to institutional market operators Amounts due to employees Other tax liabilities Amounts due to social security institutions Contingent consideration Put options granted to non-controlling shareholders Current accrued expenses and deferred income Dividends Other Total at Dec. 31, 2021 at Dec. 31, 2020 Change 1,950 2,961 471 1,274 205 45 4 395 2,191 3,463 12,959 1,481 4,012 438 886 207 53 1 346 2,135 2,092 469 31.7% (1,051) -26.2% 33 388 (2) (8) 3 49 56 7.5% 43.8% -1.0% -15.1% - 14.2% 2.6% 1,371 65.5% 11,651 1,308 11.2% “Amounts due to customers“ include €1,169 million (€822 million at December 31, 2020) in security deposits related primarily to amounts received from customers in Spain as part of electricity and gas supply contracts. Following the finalization of the contract, deposits for electricity sales, the use of which is not restricted in any way, are classified as current liabilities given that the Parent does not have an unconditional right to defer repayment beyond 12 months. Amounts due to institutional market operators include liabilities arising from the application of equalization mechanisms to electricity purchases on the Italian market amounting to €1,976 million (€2,444 million at December 31, 2020), on the Spanish market amounting to €938 mil- lion (€1,538 million at December 31, 2020) and on the Latin American market amounting to €47 million (€30 million at December 31, 2020). The increase in “Other” liabilities is mainly attributable to Italy in respect of expired derivatives on energy commod- ities. The increase in “Other tax liabilities” is mainly attributable to Italy following the start in 2021 of the Group settlement mechanism for VAT obligations by the Parent, Enel SpA. 43. Trade payables – €16,959 million The item amounted to €16,959 million (€12,859 million at December 31, 2020) and includes payables in respect of electricity supplies, fuel, materials, equipment associated with tenders, and other services. More specifically, trade payables falling due in less than 12 months amounted to €16,865 million (€12,282 million at December 31, 2020), while those falling due in more than 12 months amounted to €94 million (€577 million at De- cember 31, 2020). 364 364 Integrated Annual Report 2021 44. Other current financial liabilities – €625 million Millions of euro Accrued financial expense and deferred financial income Other items Total at Dec. 31, 2021 at Dec. 31, 2020 Change 539 86 625 535 87 622 4 (1) 3 0.7% -1.1% 0.5% Other current financial liabilities are virtually unchanged on December 31, 2020. Other items mainly regard liabilities for accrued interest. 45. Net financial position and long-term financial assets and securities – €51,952 million The following table shows the net financial position and long-term financial assets and securities on the basis of the items on the statement of consolidated financial po- sition. Millions of euro Long-term borrowings Other non-current financial borrowings(1) Short-term borrowings Other current financial borrowings(2) Current portion of long-term borrowings Other non-current financial assets included in net financial debt Other current financial assets included in net financial debt Cash and cash equivalents Total Notes at Dec. 31, 2021 at Dec. 31, 2020 Change 37 40 37 37 28.1 29.1 34 54,500 120 13,306 12 4,031 (2,692) (8,467) (8,858) 51,952 49,519 4,981 10.1% - 120 6,345 6,961 5 3,168 (2,745) 7 863 53 - - - 27.2% 1.9% (4,971) (3,496) -70.3% (5,906) (2,952) -50.0% 45,415 6,537 14.4% (1) The item “Other non-current financial borrowings” is represented by “Other non-current financial liabilities” in the statement of financial position. (2) The item “Other current financial borrowings” is included under “Other current financial liabilities” in the statement of financial position. The net financial debt of the Enel Group at December 31, 2021 and December 31, 2020 is reported below in accord- ance with Guideline 39, issued on March 4, 2021, by ESMA, applicable as from May 5, 2021, and with warning notice no. 5/2021 issued by CONSOB on April 29, 2021, recon- ciled with net financial debt as provided for in the pres- entation methods of the Enel Group. The references to the CESR Recommendations contained in previous CONSOB communications shall be considered to have been replaced by references to the ESMA Guide- line cited above, including the references in Communica- tion no. DEM/6064293 of July 28, 2006 regarding the net financial position. Notes to the consolidated financial statements 365 365 Millions of euro Liquidity Cash and cash equivalents on hand Bank and post office deposits Liquid assets Cash equivalents Securities Short-term loan assets Current portion of long-term loan assets Other current financial assets Liquidity Current financial debt Bank debt Commercial paper Other short-term borrowings(1) Current financial debt (including debt instruments) Current portion of long-term bank borrowings Bonds issued (current portion) Other borrowings (current portion) Non-current financial debt (current portion) Current financial debt Net current financial debt Non-current financial debt Bank borrowings Other borrowings(2) Non-current financial debt (excluding current portion and debt instruments) Bonds Trade payables and other non-interest-bearing non-current liabilities with a significant financing component Non-current financial debt Net financial debt as per CONSOB instructions Long-term financial assets and securities NET FINANCIAL DEBT at Dec. 31, 2021 at Dec. 31, 2020 Change 8 8,118 8,126 732 88 6,841 1,538 8,467 17,325 (1,329) (10,708) (1,281) (13,318) (989) (2,700) (342) (4,031) (17,349) (24) (12,579) (2,942) (15,521) (39,099) - (54,620) (54,644) 2,692 (51,952) 42 (34) -81.0% 5,699 5,741 165 67 3,476 1,428 2,419 42.4% 2,385 41.5% 567 21 - 31.3% 3,365 96.8% 110 7.7% 4,971 3,496 70.3% 10,877 6,448 59.3% (711) (618) -86.9% (4,854) (5,854) - (785) (496) -63.2% (6,350) (6,968) - (1,369) 380 27.8% (1,412) (1,288) -91.2% (387) 45 11.6% (3,168) (863) -27.2% (9,518) (7,831) -82.3% 1,359 (1,383) - (8,663) (3,916) -45.2% (2,499) (443) -17.7% (11,162) (4,359) -39.1% (38,357) (742) -1.9% - - - (49,519) (5,101) -10.3% (48,160) (6,484) -13.5% 2,745 (53) -1.9% (45,415) (6,537) -14.4% (1) (2) Includes current financial borrowings included in “Other current financial liabilities” in the statement of financial position. Includes other non-current financial borrowings presented under “Other non-current financial liabilities” in the statement of financial position. This statement of the net financial position does not in- clude financial assets and liabilities in respect of deriva- tives, since derivative contracts, even if not designated as hedges for hedge accounting purposes, are in any case entered into by the Group for hedging purposes. At December 31, 2021, those financial assets and liabili- ties are reported separately in the statement of financial position under the following items: “Non-current financial derivative assets” in the amount of €2,772 million (€1,236 million at December 31, 2020), “Current financial derivative assets” in the amount of €22,791 million (€3,471 million at December 31, 2020), “Non-current financial derivative lia- bilities” in the amount of €3,339 million (€3,606 million at 31 December, 2020) and “Current financial derivative lia- bilities” in the amount of €24,607 million (€3,531 million at December 31, 2020). 366 366 Integrated Annual Report 2021 Financial instruments 46. Financial instruments by category This note provides disclosures necessary for users to assess the significance of financial instruments for the Group’s financial position and performance. 46.1 Financial assets by category The following table reports the carrying amount for each category of financial asset provided for under IFRS 9, bro- ken down into current and non-current financial assets, showing hedging derivatives and derivatives measured at fair value through profit or loss separately. Millions of euro Financial assets at amortized cost Financial assets at FVOCI Financial assets at fair value through profit or loss Derivative financial assets at FVTPL Other 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 Notes 46.1.1 46.1.2 46.1.3 46.1.3 46.1.4 46.1.4 Non-current Current at Dec. 31, 2021 at Dec. 31, 2020 at Dec. 31, 2021 at Dec. 31, 2020 4,092 443 277 2,662 2,939 61 2,434 2,495 9,969 3,966 34,671 22,967 448 87 67 52 19,664 2,087 2,139 50 1,134 1,184 7,737 141 19,805 - 3,127 3,127 57,690 2,765 301 3,066 28 678 706 26,806 For more information on the recognition and classification of current and non-current derivative assets, please see note 49 “Derivatives and hedge accounting”. For more information on fair value measurement, see note 50 “Assets and liabilities measured at fair value”. 46.1.1 Financial assets measured at amortized cost The following table reports financial assets measured at amortized cost by nature, broken down into current and non-current financial assets. Millions of euro Non-current Current Cash and cash equivalents Trade receivables Current portion of long-term loan assets Cash collateral Other financial assets Financial assets from service concession arrangements at amortized cost Other financial assets at amortized cost Total Notes at Dec. 31, 2021 at Dec. 31, 2020 Notes at Dec. 31, 2021 at Dec. 31, 2020 33 28.1 28 34 33 29.1 29.1 29.1 29 - 1,301 - - - 1,200 - - 2,289 2,337 260 242 243 186 4,092 3,966 8,759 14,775 1,538 6,485 315 64 2,735 34,671 5,702 10,846 1,331 3,223 253 9 1,603 22,967 Notes to the consolidated financial statements 367 367 Impairment of financial assets at amortized cost Financial assets measured at amortized cost amounted to €38,763 million at December 31, 2021 (€26,933 million at December 31, 2020) and are recognized net of loss allow- ances for expected credit losses totaling €4,051 million at December 31, 2021 (€3,624 million at the end of the pre- vious year). The Group mainly has the following types of financial as- sets measured at amortized cost subject to impairment testing: • cash and cash equivalents; • trade receivables and contract assets; • loan assets; • other financial assets. While cash and cash equivalents are also subject to the impairment requirements of IFRS 9, the identified impair- ment loss was immaterial. The expected credit loss (ECL) – determined using proba- bility of default (PD), loss given default (LGD) and exposure at default (EAD) – is the difference between all contractual cash flows that are due in accordance with the contract and all cash flows that are expected to be received (i.e., all short- falls) discounted at the original effective interest rate (EIR). For calculating ECL, the Group applies two different ap- proaches: • the general approach, for financial assets other than trade receivables, contract assets and lease receivables. This approach, based on an assessment of any signif- icant increase in credit risk since initial recognition, is performed comparing PD at origination with PD at the reporting date, at each reporting date. Then, based on the results of the assessment, a loss al- lowance is recognized based on 12-month ECL or life- time ECL (i.e., staging): – 12-month ECL, for financial assets for which there has not been a significant increase in credit risk since initial recognition; – lifetime ECL, for financial assets for which there has been a significant increase in credit risk or which are credit impaired (i.e., defaulted based on past due in- formation); • the simplified approach, for trade receivables, contract assets and lease receivables with or without a signifi- cant financing component, based on lifetime ECL with- out tracking changes in credit risk. A forward-looking adjustment can be applied considering qualitative and quantitative information in order to reflect future events and macroeconomic developments that could impact the risk associated with the portfolio or fi- nancial instrument. Depending on the nature of the financial assets and the credit risk information available, the assessment of the in- crease in credit risk can be performed on: • an individual basis, if the receivables are individually sig- nificant and for all receivables which have been individ- ually identified for impairment based on reasonable and supportable information; • a collective basis, if no reasonable and supportable infor- mation is available without undue cost or effort to meas- ure expected credit losses on an individual instrument basis. When there is no reasonable expectation of recovering a financial asset in its entirety or a portion thereof, the gross carrying amount of the financial asset shall be reduced. A write-off represents a derecognition event (e.g., the right to cash flows is legally or contractually extinguished, trans- ferred or expired). The following table reports expected credit losses on fi- nancial assets measured at amortized cost on the basis of the general simplified approach. Millions of euro at Dec. 31, 2021 at Dec. 31, 2020 Cash and cash equivalents Trade receivables Loan assets Other financial assets at amortized cost Total Loss allowance for expected credit losses Loss allowance for expected credit losses Total Gross amount Total - 8,759 5,702 - 5,702 3,663 16,076 15,333 3,287 12,046 234 10,627 154 3,301 7,352 2,170 208 129 7,144 2,041 Gross amount 8,759 19,739 10,861 3,455 42,814 4,051 38,763 30,557 3,624 26,933 To measure expected losses, the Group assesses trade receivables and contract assets with the simplified ap- proach, both on an individual basis (e.g., government enti- ties, authorities, financial counterparties, wholesale sellers, traders and large companies, etc.) and a collective basis (e.g., retail customers). 368 368 Integrated Annual Report 2021 In the case of individual assessments, PD is generally ob- tained from external providers. Otherwise, in the case of collective assessments, trade re- ceivables are grouped on the basis of their shared credit risk characteristics and information on past due positions, con- sidering a specific definition of default. Based on each business and local regulatory framework, as well as differences between customer portfolios, including their default and recovery rates (comprising expectations for recovery beyond 90 days): • the Group mainly defines a defaulted position as one that is 180 days past due. Accordingly, beyond this time lim- it, trade receivables are presumed to be credit impaired; and • specific clusters are defined on the basis of specific mar- kets, business and risk characteristics. Contract assets substantially have the same risk character- Millions of euro Opening balance at Jan. 1, 2020 Accruals Uses Reversals to profit or loss Other changes Closing balance at Dec. 31, 2020 Opening balance at Jan. 1, 2021 Accruals Uses Reversals to profit or loss Other changes Closing balance at Dec. 31, 2021 The following table reports changes in the loss allowance for expected credit losses on trade receivables in accord- ance with the simplified approach. Millions of euro Opening balance at Jan. 1, 2020 Accruals Uses Reversals to profit or loss Other changes Closing balance at Dec. 31, 2020 Opening balance at Jan. 1, 2021 Accruals Uses Reversals to profit or loss Other changes Closing balance at Dec. 31, 2021 istics as trade receivables for the same types of contracts. In order to measure ECL for trade receivables on a collective basis, as well as for contract assets, the Group uses the fol- lowing assumptions regarding the ECL parameters: • PD, assumed equal to the average default rate, is calcu- lated by cluster and considering historical data from at least 24 months; • LGD is a function of the recovery rates for each cluster, discounted using the effective interest rate; and • EAD is estimated as equal to the carrying amount at the reporting date net of cash deposits, including invoices is- sued but not past due and invoices to be issued. The following table reports changes in the loss allowance for expected credit losses on loan assets in accordance with the general approach. ECL 12-month allowance ECL lifetime allowance 78 354 - (4) (363) 65 65 - - (25) 25 65 153 8 - (4) (14) 143 143 9 - (9) 26 169 2,980 1,505 (819) (194) (185) 3,287 3,287 1,361 (709) (258) (18) 3,663 Notes to the consolidated financial statements 369 369 The following table reports changes in the loss allowance for expected credit losses on other financial assets at am- ortized cost in accordance with the simplified approach. Millions of euro Opening balance at Jan. 1, 2020 Accruals Uses Reversals to profit or loss Other changes Closing balance at Dec. 31, 2020 Opening balance at Jan. 1, 2021 Accruals Uses Reversals to profit or loss Other changes Closing balance at Dec. 31, 2021 ECL lifetime allowance 159 22 - (23) (29) 129 129 87 - (21) (41) 154 Note 47 “Risk management” provides additional informa- tion on the exposure to credit risk and expected losses. 46.1.2 Financial assets at fair value through other comprehensive income through other comprehensive income by nature, broken down into current and non-current financial assets. The following table shows financial assets at fair value Millions of euro Non-current Current Notes 28 28.1 at Dec. 31, 2021 at Dec. 31, 2020 Notes at Dec. 31, 2021 at Dec. 31, 2020 40 403 443 40 408 448 29.1 - 87 87 - 67 67 Non-current Current 64 6 - (21) (9) 40 40 2 - - (2) 40 - - - - - - - - - - - - Investments in other companies at FVOCI Securities Total Changes in financial assets at FVOCI Investments in other companies Millions of euro Opening balance at Jan. 1, 2020 Purchases Sales Changes in fair value through OCI Other changes Closing balance at Dec. 31, 2020 Opening balance at Jan. 1, 2021 Purchases Sales Changes in fair value through OCI Other changes Closing balance at Dec. 31, 2021 370 370 Integrated Annual Report 2021 Securities at FVOCI Millions of euro Opening balance at Jan. 1, 2020 Purchases Sales Changes in fair value through OCI Reclassifications Other changes Closing balance at Dec. 31, 2020 Opening balance at Jan. 1, 2021 Purchases Sales Changes in fair value through OCI Reclassifications Other changes Closing balance at Dec. 31, 2021 Non-current Current 416 124 (54) (3) (75) - 408 408 165 (87) 2 (85) - 403 61 - - - 75 (69) 67 67 - - - 85 (65) 87 46.1.3 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 Derivatives at FVTPL Investments in liquid assets Financial assets at FVTPL Securities Equity investments in other companies at FVTPL Financial assets from service concession arrangements at FVTPL Total Notes 49 28 28 46.1.4 Derivative financial assets designated as hedging instruments For more information on derivative financial assets, please see note 49 “Derivatives and hedge accounting”. at Dec. 31, 2021 at Dec. 31, 2020 Notes 49 34 52 - - 29, 29.1 29.1 - 30 2,057 2,139 at Dec. 31, 2021 at Dec. 31, 2020 19,664 99 41 1 - - 2,765 204 97 - - - 19,805 3,066 277 - - - 32 2,630 2,939 Notes to the consolidated financial statements 371 371 46.2 Financial liabilities by category The following table shows the carrying amount for each category of financial liability provided for under IFRS 9, broken down into current and non-current financial liabil- ities, showing hedging derivatives and derivatives meas- ured at fair value through profit or loss separately. Millions of euro Non-current Current Financial liabilities measured at amortized cost Financial liabilities at fair value through profit or loss Derivative financial liabilities at FVTPL 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 Total derivative financial liabilities designated as hedging instruments Notes 46.2.1 46.4 46.4 46.4 at Dec. 31, 2021 at Dec. 31, 2020 at Dec. 31, 2021 at Dec. 31, 2020 54,914 50,254 42,330 29,598 169 169 5 3,165 3,170 29 29 - 3,577 3,577 19,696 19,696 - 4,911 4,911 2,887 2,887 - 644 644 TOTAL 58,253 53,860 66,937 33,129 For more information on fair value measurement, please see note 50 “Assets and liabilities measured at fair value”. 46.2.1 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 liabilities. Millions of euro Non-current Current Long-term borrowings Short-term borrowings Trade payables Other financial liabilities Total Notes 46.3 43 at Dec. 31, 2021 at Dec. 31, 2020 Notes at Dec. 31, 2021 at Dec. 31, 2020 54,500 49,519 46.3 - 94 320 - 46.3 43 577 158 4,031 13,306 16,865 8,128 3,168 6,345 12,282 7,803 54,914 50,254 42,330 29,598 372 372 Integrated Annual Report 2021 46.3 Borrowings 46.3.1 Long-term borrowings (including the portion falling due within 12 months) – €58,531 million The following table reports the nominal value, carrying Long-term borrowings by category and type of interest rate(1) amount and fair value of long-term borrowings including the portion falling 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 Changes in carrying amount 2021- 2020 Bonds: at Dec. 31, 2021 at Dec. 31, 2020 - listed, fixed rate 27,857 27,413 2,119 25,294 30,279 23,629 23,052 1,041 22,011 27,470 4,361 - listed, floating rate - unlisted, fixed rate - unlisted, floating rate 2,574 2,557 434 2,123 2,545 2,817 2,800 260 2,540 2,937 (243) 11,293 11,207 622 622 50 97 11,157 12,670 13,262 13,184 - 13,184 15,753 (1,977) 525 728 733 733 111 622 828 (111) Total bonds 42,346 41,799 2,700 39,099 46,222 40,441 39,769 1,412 38,357 46,988 2,030 Bank borrowings: - fixed rate 2,414 2,405 - floating rate 10,139 10,109 238 751 2,167 2,298 790 782 9,358 10,037 9,278 9,250 254 1,115 528 833 8,135 9,259 1,623 859 - use of revolving credit lines Total bank borrowings Leases: 1,054 1,054 - 1,054 1,054 - - - - - 1,054 13,607 13,568 989 12,579 13,389 10,068 10,032 1,369 8,663 10,092 3,536 - fixed rate 2,477 2,477 - floating rate 70 70 Total leases 2,547 2,547 242 17 259 69 14 83 2,235 2,477 1,979 1,979 53 70 89 89 2,288 2,547 2,068 2,068 526 8 569 25 534 594 607 191 798 639 179 818 225 22 247 74 66 1,754 1,979 67 89 1,821 2,068 565 113 630 160 498 (19) 479 (44) (157) 140 678 790 (201) 571 34 605 595 22 617 44,612 44,097 2,718 41,379 48,293 40,267 39,636 1,594 38,042 46,665 4,461 14,493 14,434 1,313 13,121 14,459 13,108 13,051 1,574 11,477 13,273 1,383 TOTAL 59,105 58,531 4,031 54,500 62,752 53,375 52,687 3,168 49,519 59,938 5,844 (1) Does not include other non-current financial borrowings reported under “Other non-current financial liabilities” in the statement of financial position that are included in long-term financial debt. Notes to the consolidated financial statements 373 373 Other non-bank borrowings: - fixed rate - floating rate Total other non- bank borrowings Total fixed-rate borrowings Total floating-rate borrowings The table below reports long-term financial debt by cur- rency and interest rate. Long-term financial debt by currency and interest rate(1) Millions of euro Euro US dollar Pound sterling Colombian peso Brazilian real Swiss franc Chilean peso/UF Peruvian sol Russian ruble Other currencies Carrying amount Nominal value Carrying amount Nominal value Current average nominal interest rate Current effective interest rate Current average nominal interest rate Current effective interest rate at Dec. 31, 2021 at Dec. 31, 2020 at Dec. 31, 2021 at Dec. 31, 2020 32,041 32,387 25,581 26,089 17,518 17,629 18,500 18,589 3,901 1,341 1,720 343 423 415 427 402 3,976 1,341 1,753 344 428 415 427 405 3,955 1,283 1,832 328 368 388 281 171 3,998 1,283 1,864 329 374 388 286 175 1.6% 4.2% 5.0% 6.5% 8.8% 1.8% 5.2% 5.2% 6.8% 1.9% 4.3% 5.2% 6.5% 8.9% 1.8% 5.2% 5.2% 7.3% 2.2% 4.5% 5.1% 6.8% 5.3% 1.8% 4.9% 5.8% 7.1% 2.6% 4.7% 5.3% 6.8% 5.3% 1.8% 5.0% 5.8% 7.1% Total non-euro currencies 26,490 26,718 27,106 27,286 TOTAL 58,531 59,105 52,687 53,375 (1) Does not include other non-current financial borrowings reported under “Other non-current financial liabilities” in the statement of financial position. Long-term financial debt denominated in currencies other than the euro decreased by €616 million, largely attributa- ble to the changes in debt denominated in US dollars. Change in the nominal value of long-term debt(1) Millions of euro Nominal value Repayments Change in the consolidation scope New Exchange borrowings Other changes differences Nominal value Bonds Borrowings - of which leases Total financial debt at Dec. 31, 2020 40,441 12,934 2,068 (9,049) (2,272) (165) 53,375 (11,321) - 183 2 183 10,368 5,527 526 15,895 (900) (131) - 1,486 518 116 (1,031) 2,004 at Dec. 31, 2021 42,346 16,759 2,547 59,105 (1) Does not include changes in the nominal value of other non-current financial borrowings reported under “Other non-current financial liabilities” in the statement of financial position. 374 374 Integrated Annual Report 2021 The nominal value of long-term debt amounted to €59,105 million at December 31, 2021, an increase of €5,730 mil- lion compared with December 31, 2020. The increase in debt reflected new borrowings of €15,895 million, ex- change losses of €2,004 million and the consolidation of the debt of a number of Australian companies amounting to €183 million. These factors were only partially offset by repayments of €11,321 million and other changes in the debt equal to €1,031 million, of which €900 million were attributable to the change in the accounting treatment of non-convertible subordinated hybrid bonds in euros issued by Enel SpA and converted into perpetual hybrid bonds in 2021. Repayments in 2021 involved bonds in the amount of €9,049 million and loans in the amount of €2,272 million. Specifically, repayments in 2021 included: • €1,069 million in respect of the repurchase and subse- quent cancellation of part of four series of convention- al bonds in euros by Enel Finance International in June 2021 through a non-binding voluntary tender offer; • $6,000 million (equivalent to €5,101 million at the repay- ment date) in respect of the cash repurchase of four conventional bonds denominated in US dollars by Enel Finance International in July 2021 following the exercise of a repurchase option; • $1,472 million (equivalent to €1,275 million at the repay- ment date) in respect of the repurchase and subsequent cancellation of part of two series of conventional bonds denominated in US dollars by Enel Finance International in October 2021 through a voluntary non-binding tender offer; • €533 million in respect of fixed-rate bonds issued by Enel Finance International, maturing in July 2021; • the equivalent of €292 million in respect of hybrid bonds denominated in British pounds issued by Enel SpA, matur- ing in September 2021; • the equivalent of €171 million in respect of the repayment of bonds in local currency by Emgesa, maturing in January 2021; • the equivalent of €114 million in respect of the repayment of bonds in local currency by Enel Distribuição São Paulo, maturing in September 2021. The main repayments of loans made during the year included: • €200 million in respect of a floating-rate loan of Enel SpA; • the equivalent of €196 million in respect of a floating-rate loan in US dollars of Enel SpA; • €178 million in respect of Endesa loans, of the which €166 million in sustainable loans; • €294 million in respect of sustainable loans of the Group’s Italian companies; • the equivalent of €1,019 million relating to South American companies. New borrowings in 2021 involved €10,368 million in bonds and €5,527 million in loans. The table below shows the main characteristics of financial transactions carried out in 2021 and translated into euros at the exchange rate prevailing at December 31, 2021. Notes to the consolidated financial statements 375 375 Issuer/Borrower Issue/ Grant date Amount in millions of euro Currency Interest rate Interest rate type Maturity Enel Finance International 17.06.2021 Enel Finance International 17.06.2021 Enel Finance International 17.06.2021 Enel Finance International 12.07.2021 Enel Finance International 12.07.2021 Enel Finance International 12.07.2021 Enel Finance International 12.07.2021 Enel Finance International 28.09.2021 Enel Finance International 28.09.2021 Enel Finance International 28.09.2021 Enel Distribuição São Paulo 30.04.2021 Enel Distribuição São Paulo 04.10.2021 Enel SpA 05.05.2021 Enel SpA 12.10.2021 1,000 1,250 1,000 1,104 883 883 662 1,250 1,000 1,250 114 91 10,487 200 308 EUR EUR EUR USD USD USD USD EUR EUR EUR BRL BRL 0.00% 0.50% 0.875% 1.375% 1.875% 2.250% 2.875% Fixed rate 17.06.2027 Fixed rate 17.06.2030 Fixed rate 17.06.2036 Fixed rate 12.07.2026 Fixed rate 12.07.2028 Fixed rate 12.07.2031 Fixed rate 12.07.2041 - Fixed rate 28.05.2026 0.375% 0.875% Fixed rate 28.05.2029 Fixed rate 28.09.2034 IPCA + 4.26% Floating rate 15.04.2031 CDI + 1.64% a.a Floating rate 04.10.2028 EUR Euribor 6M + 0.3% Floating rate 03.05.2024 USD USD SOFR 3M CMP 5LB + 0.7% Floating rate 12.10.2025 Enel SpA 30.12.2021 1,000 EUR Euribor 6M + 0.4% Floating rate 05.03.2026 e-distribuzione 30.07.2021 150 EUR e-distribuzione 22.12.2021 150 EUR Endesa 15.04.2021 150 Endesa 28.06.2021 Endesa 30.07.2021 Endesa 30.07.2021 Endesa 15.10.2021 Endesa 15.10.2021 Endesa 27.10.2021 Endesa 22.11.2021 Endesa 09.12.2021 Endesa 17.12.2021 Enel Distribuição Ceará 06.01.2021 Enel Distribuição São Paulo 19.04.2021 Enel Distribuição São Paulo 09.09.2021 Codensa 14.05.2021 Codensa 15.07.2021 Codensa 30.11.2021 Enel Chile 03.12.2021 Enel Brasil 15.09.2021 75 75 50 125 75 100 250 275 225 69 74 68 87 65 56 132 61 3,820 EUR EUR EUR EUR EUR EUR EUR EUR EUR EUR USD USD USD COP COP COP USD USD Euribor 6M + 0.257% Euribor 6M + 0.275% Euribor 3M + 0.82% Floating rate 30.07.2036 Floating rate 22.12.2036 Floating rate 18.04.2028 0.27% 0.26% 0.26% 0.09% 0.11% 0.25% Fixed rate 28.06.2028 Fixed rate 30.07.2028 Fixed rate 30.07.2028 Fixed rate 15.10.2026 Fixed rate 15.10.2026 Fixed rate 27.10.2028 Euribor 6M + 0.313% Floating rate 22.11.2036 0.00% 0.156% 1.225% 1.974% Fixed rate 09.12.2024 Fixed rate 17.12.2024 Fixed rate 06.01.2023 Fixed rate 19.04.2024 2.365% Fixed rate 09.09.2025 COP IBR 3M + 0.75% COP IBR 6M + 0.5% COP IBR 3M + 0.085% USD LIBOR + 1.10% Floating rate 14.05.2026 Floating rate 15.07.2026 Floating rate 30.11.2026 Floating rate 03.12.2026 1.91% Fixed rate 16.09.2024 Bonds Total bonds Bank borrowings Total bank borrowings 376 376 Integrated Annual Report 2021 Swiss franc Chilean peso/ UF Peruvian sol Russian ruble Other currencies Total non-euro currencies The following table reports the impact on gross long-term debt of hedges to mitigate currency risk. Structure of long-term financial debt by currency after hedging(1) Millions of euro at Dec. 31, 2021 at Dec. 31, 2020 Initial debt structure Carrying amount Nominal value % Impact of hedge Debt structure after hedging Initial debt structure Impact of hedge Debt structure after hedging Carrying amount Nominal value % Euro 32,041 32,387 54.8% 16,657 49,044 83.0% 25,581 26,089 48.9% 18,423 44,512 83.4% US dollar 17,518 17,629 29.8% (13,423) 4,206 7.1% 18,500 18,589 34.8% (14,955) 3,634 6.8% Pound sterling 3,901 3,976 6.7% (3,976) - - 3,955 3,998 7.5% (3,998) - - Colombian peso 1,341 1,341 2.3% - 1,341 2.3% 1,283 1,283 2.4% - 1,283 2.4% Brazilian real 1,720 1,753 2,781 4.7% 1,832 1,864 3.0% 0.6% 0.7% 0.7% 0.7% 1,028 (344) - - - 344 428 415 427 - 428 415 427 - 0.7% 0.7% 0.7% 405 0.7% 58 463 0.8% 343 423 415 427 402 328 368 388 281 171 329 374 388 286 175 3.5% 0.6% 0.7% 0.7% 0.5% 0.4% 794 (329) 2,658 5.0% - - - - - 374 0.7% 388 286 0.7% 0.5% 65 240 0.5% 26,490 26,718 45.2% (16,657) 10,061 17.0% 27,106 27,286 51.1% (18,423) 8,863 16.6% TOTAL 58,531 59,105 100.0% - 59,105 100.0% 52,687 53,375 100.0% - 53,375 100.0% (1) Does not include other non-current financial borrowings reported under “Other non-current financial liabilities” in the statement of financial position. The amount of floating-rate debt that is not hedged against interest rate risk is the main risk factor that could adversely impact profit or loss (raising borrowing costs) in the event of an increase in market interest rates. Millions of euro 2021 2020 Floating rate Fixed rate Total Pre-hedge % Post-hedge % Pre-hedge % Post-hedge 27,811 44,612 72,423 38.4% 61.6% 22,478 49,945 72,423 31.0% 69.0% 19,458 40,267 59,725 32.6% 67.4% 13,672 46,053 59,725 % 22.9% 77.1% At December 31, 2021, 38.4% of financial debt was float- ing rate (32.6% at December 31, 2020). Taking account of hedges of interest rates considered effective pursuant to the IFRS-EU, 31.0% of net financial debt at December 31, 2021 (22.9% at December 31, 2020) was exposed to inter- est rate risk. These figures are in line with the limits estab- lished in the risk management policy. The following table shows the impact of the IBOR reform on long-term financial debt for the main indices (for more details, please see the section “Reform of benchmarks for the determination of interest rates - IBOR reform” in note 49.1). Millions of euro Long-term financial debt USD LIBOR/SOFR GBP LIBOR/SONIA Total Notional amount at Dec. 31, 2021 Phase 1 Phase 2 888 - 888 - - - Notes to the consolidated financial statements 377 377 Long-term debt - Main covenants The Group’s main long-term financial liabilities are gov- erned by covenants that are commonly adopted in inter- national business practice. These liabilities primarily re- gard bond issues carried out within the framework of the Global/Euro Medium Term Notes program, issues of sub- ordinated unconvertible hybrid bonds (so-called “hybrid bonds”) and loans granted by banks and other financial institutions (including the European Investment Bank and Cassa Depositi e Prestiti SpA). The main covenants regarding bond issues carried out within the framework of the Global/Euro Medium Term Notes program of Enel and Enel Finance International NV (including the green bonds of Enel Finance International NV guaranteed by Enel SpA, which are used to finance the Group’s so-called “eligible green projects“) and those re- garding bonds issued by Enel Finance International NV on the US market guaranteed by Enel SpA can be summarized as follows: • negative pledge clauses under which the issuer and the guarantor may not establish or maintain mortgages, liens or other encumbrances on all or part of its assets or revenue to secure certain financial liabilities, unless the same encumbrances are extended equally or pro rata to the bonds in question; • pari passu clauses, under which the bonds and the as- sociated security constitute a direct, unconditional and unsecured obligation of the issuer and the guarantor and are issued without preferential rights among them and have at least the same seniority as other present and future unsubordinated and unsecured bonds of the issuer and the guarantor; • cross-default clauses, under which the occurrence of a default event in respect of a specified financial liability (above a threshold level) of the issuer, the guarantor or, in some cases, “significant” subsidiaries, constitutes a default in respect of the liabilities in question, which be- come immediately repayable. Since 2019, Enel Finance International NV has issued a number of “sustainable” bonds on the European market (as part of the Euro Medium Term Notes - EMTN bond issue program) and on the American market, both guaranteed by Enel SpA, linked to the achievement of a number of the Sustainable Development Goals (SDGs) of the United Na- tions that contain the same covenants as other bonds of the same type. The main covenants covering Enel’s hybrid bonds, includ- ing the perpetual hybrid bond issues, which will only be repaid in the event of the dissolution or liquidation of the Company, can be summarized as follows: 378 378 Integrated Annual Report 2021 • subordination clauses, under which each hybrid bond is subordinate to all other bonds issued by the company and has the same seniority with all other hybrid financial instruments issued, being senior only to equity instru- ments; • prohibition on mergers with other companies, the sale or leasing of all or a substantial part of the company’s assets to another company, unless the latter succeeds in all obligations of the issuer. The main covenants envisaged in the loan contracts of Enel and Enel Finance International NV and the other Group companies, including the sustainability-linked loan facility agreements obtained by Enel SpA, can be summa- rized as follows: • negative pledge clauses, under which the borrower and, in some cases, the guarantor are subject to limitations on the establishment of mortgages, liens or other encum- brances on all or part of their respective assets, with the exception of expressly permitted encumbrances; • disposals clauses, under which the borrower and, in some cases, the guarantor may not dispose of their as- sets or operations, with the exception of expressly per- mitted disposals; • pari passu clauses, under which the payment undertak- ings of the borrower have the same seniority as its other unsecured and unsubordinated payment obligations; • change of control clauses, under which the borrower and, in some cases, the guarantor could be required to renegotiate the terms and conditions of the financing or make compulsory early repayment of the loans granted; • rating clauses, which provide for the borrower or the guarantor to maintain their rating above a certain spec- ified level; • cross-default clauses, under which the occurrence of a default event in respect of a specified financial liability (above a threshold level) of the issuer or, in some cases, the guarantor constitutes a default in respect of the lia- bilities in question, which become immediately repayable. In some cases, the covenants are also binding for the sig- nificant companies or subsidiaries of the obligated parties. All the borrowings considered specify “events of default” typical of international business practice, such as, for ex- ample, insolvency, bankruptcy proceedings or the entity ceasing trading. In addition, the guarantees issued by Enel in the interest of e-distribuzione SpA for certain loans to e-distribuzi- one SpA from Cassa Depositi e Prestiti SpA require that at the end of each six-month measurement period Enel’s net consolidated financial debt shall not exceed 4.5 times annual consolidated gross operating profit. Finally, the debt of Endesa SA, Enel Américas SA, Enel Chile SA and the other Spanish and Latin American subsidiaries (notably Enel Generación Chile SA) contain covenants and events of default typical of international business practice. 46.3.2 Short-term borrowings – €13,306 million At December 31, 2021 short-term borrowings totaled €13,306 million, an increase of €6,961 million compared with December 31, 2020, and break down as follows: Millions of euro Short-term bank borrowings Commercial paper Cash collateral and other financing on derivatives Other short-term borrowings(1) Short-term borrowings at Dec. 31, 2021 at Dec. 31, 2020 Change 1,329 10,708 918 351 13,306 711 4,854 370 410 6,345 618 5,854 548 (59) 6,961 (1) Does not include other current borrowings included in “Other current financial liabilities” of the statement of financial position included in financial debt. Commercial paper liabilities totaling €10,708 million con- cerned issues by Enel Finance International, Enel Finance America and Endesa. The main commercial paper programs include: • €6,000 million of Enel Finance International linked to sustainability objectives; • €4,000 million of Endesa linked to sustainability objec- tives; • $5,000 million (equivalent to €4,414 million at Decem- ber 31, 2021) of Enel Finance America linked to sustain- ability objectives. During 2021, Enel Finance America expanded its commercial paper program from $3,000 million to $5,000 million. At December 31, 2021 commercial paper issues linked to sustainability objectives amounted to €10,343 million. 46.4 Derivative financial liabilities For more information on derivative financial liabilities, please see note 49 “Derivatives and hedge accounting”. 46.5 Net gains and losses The following table shows net gains and losses by category of financial instruments, excluding derivatives. Millions of euro 2021 2020 Financial assets at amortized cost (915) (1,194) (1,326) (1,334) Of which impairment Net gain/(loss) loss/gain Net gain/(loss) Of which impairment loss/gain Financial assets at FVOCI Equity investments at FVOCI Other financial assets at FVOCI Total financial assets at FVOCI Financial assets at FVTPL Financial assets at FVTPL Financial assets designated upon initial recognition (fair value option) Total financial assets at FVTPL - 15 15 28 - 28 Financial liabilities measured at amortized cost (4,325) Financial liabilities at FVTPL Financial liabilities held for trading Financial liabilities designated upon initial recognition (fair value option) Total financial liabilities at FVTPL - - - For more details on net gains and losses on derivatives, please see note 13 “Net financial income/(expense) from derivatives”. - - - 25 - 25 - - - - 1 6 7 (125) - (125) (1,385) - - - - - - (346) - (346) - - - - Notes to the consolidated financial statements 379 379 47. Risk management Financial risk management governance and objectives As part of its operations, the Enel Group is exposed to a va- riety of financial risks, notably interest rate risk, commodity risk, currency risk, credit and counterparty risk and liquidity risk. The Group’s governance arrangements for financial risks include internal committees and the establishment of spe- cific policies and operational limits. Enel’s primary objec- tive is to mitigate financial risks appropriately so that they do not give rise to unexpected changes in results. The Group’s policies for managing financial risks provide for the mitigation of the effects on performance of chang- es in interest rates and exchange rates with the exclusion of translation risk (connected with consolidation of the accounts). This objective is achieved at the source of the risk, through the diversification of both the nature of the financial instruments and the sources of revenue, and by modifying the risk profile of specific exposures with deriv- atives entered into on over-the-counter markets or with specific commercial agreements. As part of its governance of compliance risks, the Enel Group monitors non-risk-reducing positions in OTC de- rivatives contracts in relation to the threshold values es- tablished under the EMIR (Regulation (EU) no. 648/2012) for the various asset classes. In 2021, the Group was posi- tioned below those clearing thresholds for all asset class- es, maintaining its classification as a non-financial coun- terparty. There were no changes in the sources of exposure to such risks compared with the previous year. Finally, the impact of COVID-19 on risk management is- sues was limited and in any case not such as to directly and materially influence the valuation of derivative instruments and the outcome of the assessment of the effectiveness of hedges of exchange rates, interest rates and commodities. The financial underlyings were not affected by the adverse impact of COVID-19 either, and no changes were recorded in the exposures. Interest rate risk Interest rate risk derives primarily from the use of financial instruments and manifests itself as unexpected changes in charges on financial liabilities, if indexed to floating rates and/or exposed to the uncertainty of financial terms and conditions in negotiating new debt instruments, or as an unexpected change in the value of financial instruments measured at fair value (such as fixed-rate debt). The main financial liabilities held by the Group include bonds, bank borrowings, borrowings from other lenders, commercial paper, derivatives, cash deposits received to secure commercial or derivative contracts (guarantees, cash collateral). 380 380 Integrated Annual Report 2021 The Enel Group mainly manages interest rate risk through the definition of an optimal financial structure, with the dual goal of stabilizing borrowing costs and containing the cost of funds. This goal is pursued through the diversification of the port- folio of financial liabilities by contract type, maturity and interest rate, and modifying the risk profile of specific ex- posures using OTC derivatives, mainly interest rate swaps and interest rate options. The term of such derivatives does not exceed the maturity of the underlying financial li- ability, so that any change in the fair value and/or expected cash flows of such contracts is offset by a corresponding change in the fair value and/or cash flows of the hedged position. Proxy hedging techniques can be used in a number of re- sidual circumstances, when the hedging instruments for the risk factors are not available on the market or are not sufficiently liquid. For the purpose of EMIR compliance, in order to test the actual effectiveness of the hedging techniques adopted, the Group subjects its hedge portfolios to periodic statis- tical assessment. Using interest rate swaps, the Enel Group agrees with the counterparty to periodically exchange floating-rate in- terest flows with fixed-rate flows, both calculated on the same notional principal amount. Floating-to-fixed interest rate swaps transform float- ing-rate financial liabilities into fixed rate liabilities, there- by neutralizing the exposure of cash flows to changes in interest rates. Fixed-to-floating interest rate swaps transform fixed rate financial liabilities into floating-rate liabilities, thereby neu- tralizing the exposure of their fair value to changes in in- terest rates. Floating-to-floating interest rate swaps transform the in- dexing criteria for floating-rate financial liabilities. Some structured borrowings have multi-stage cash flows hedged by interest rate swaps that at the reporting date, and for a limited time, provide for the exchange of fixed- rate interest flows. Interest rate options involve the exchange of interest dif- ferences calculated on a notional principal amount once certain thresholds (strike prices) are reached. These thresholds specify the effective maximum rate (cap) or the minimum rate (floor) to which the synthetic financial instrument will be indexed as a result of the hedge. Certain hedging strategies provide for the use of combinations of options (collars) that establish the minimum and maximum rates at the same time. In this case, the strike prices are normally set so that no premium is paid on the contract (zero cost collars). Such contracts are normally used when the fixed interest rate that can be obtained in an interest rate swap is con- sidered too high with respect to market expectations for future interest rate developments. In addition, interest rate options are also considered most appropriate in periods of greater uncertainty about future interest rate develop- ments because they make it possible to benefit from any decrease in interest rates. The following table reports the notional amount of interest rate derivatives at December 31, 2021 and December 31, 2020 broken down by type of contract. Millions of euro 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 Notional amount at Dec. 31, 2021 at Dec. 31, 2020 7,700 7,323 722 - 391 50 173 - 276 50 8,863 7,822 For more details on interest rate derivatives, please see note 49 “Derivatives and hedge accounting”. Interest rate risk sensitivity analysis Enel analyzes the sensitivity of its exposure by estimating the effects of a change in interest rates on the portfolio of financial instruments. More specifically, sensitivity analysis measures the po- tential impact on profit or loss and on equity of market scenarios that would cause a change in the fair value of derivatives or in the financial expense associated with un- 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 hedged gross debt. These market scenarios are obtained by simulating parallel increases and decreases in the yield curve as at the re- porting date. There were no changes introduced in the methods and as- sumptions used in the sensitivity analysis compared with the previous year. With all other variables held constant, the Group’s pre-tax profit would be affected by a change in the level of interest rates as follows. 2021 Pre-tax impact on profit or loss Pre-tax impact on equity Basis points Increase Decrease Increase Decrease 25 25 25 25 23 38 - - (23) (38) - - - - 67 - - - (67) - At December 31, 2021, 24.5% (24.6% at December 31, 2020) of gross long-term financial debt was floating rate. Taking account of effective cash flow hedges of interest rate risk (in accordance with the provisions of the IFRS-EU), 84.5% of gross long-term financial debt was hedged at December 31, 2021 (86.3% at December 31, 2020). Currency risk Currency risk mainly manifests itself as unexpected changes in the financial statement items associated with transactions denominated in a currency other than the presentation currency. The Group’s consolidated financial statements are also exposed to translation risk as a result of the conversion of the financial statements of foreign subsidiaries, which are denominated in local currencies, into euros as the Group’s presentation currency. The Group’s exposure to currency risk is connected with the purchase or sale of fuels and power, investments (cash flows for capitalized costs), dividends and the purchase or sale of equity investments, commercial transactions and financial assets and liabilities. The Group policies for managing currency risk provide for the mitigation of the effects on profit or loss of changes in the level of exchange rates, with the exception of the translation effects connected with consolidation. In order to minimize the exposure to currency risk, Enel im- plements diversified revenue and cost sources geograph- ically, and uses indexing mechanisms in commercial con- Notes to the consolidated financial statements 381 381 tracts. Enel also uses various types of derivatives, typically on the OTC market. The derivatives in the Group’s portfolio of financial instru- ments include cross currency interest rate swaps, currency forwards and currency swaps. The term of such contracts does not exceed the maturity of the underlying instru- ment, so that any change in the fair value and/or expected cash flows of such instruments offsets the corresponding change in the fair value and/or cash flows of the hedged position. Cross currency interest rate swaps are used to transform a long-term financial liability denominated in a currency other than the presentation currency into an equivalent liability in the presentation currency. Currency forwards are contracts in which the counter- parties agree to exchange principal amounts denominat- ed in different currencies at a specified future date and exchange rate (the strike). Such contracts may call for the actual exchange of the two principal amounts (deliverable forwards) or payment of the difference generated by dif- ferences between the strike exchange rate and the prevail- ing exchange rate at maturity (non-deliverable forwards). In the latter case, the strike rate and/or the spot rate can be determined as averages of the rates observed in a given period. Currency swaps are contracts in which the counterparties enter into two transactions of the opposite sign at differ- ent future dates (normally one spot, the other forward) that provide for the exchange of principal denominated in dif- ferent currencies. The following table reports the notional amount of trans- actions outstanding at December 31, 2021 and December 31, 2020, broken down by type of hedged item. Millions of euro Cross currency interest rate swaps (CCIRSs) hedging debt denominated in currencies other than the euro Currency forwards hedging currency risk on commodities Currency forwards/CCIRSs hedging future cash flows in currencies other than the euro Other currency forwards Total Notional amount at Dec. 31, 2021 at Dec. 31, 2020 21,123 6,183 5,034 926 20,636 5,469 3,971 990 33,266 31,066 More specifically, these include: • CCIRSs with a notional amount of €21,123 million to hedge the currency risk on debt denominated in cur- rencies other than the euro (€20,636 million at Decem- ber 31, 2020); • currency forwards and cross currency swaps with a total notional amount of €11,217 million used to hedge the currency risk associated with purchases of natural gas and fuel and expected cash flows in currencies other than the euro (€9,440 million at December 31, 2020); • other currency forwards, which include OTC derivatives transactions carried out to mitigate currency risk on expected cash flows in currencies other than the pres- entation currency connected with the purchase of in- vestment goods in the renewables and infrastructure and networks sectors (new generation digital meters), on operating costs for the supply of cloud services and on revenue from the sale of renewable energy. At December 31, 2021, 45% (51% at December 31, 2020) of Group long-term debt was denominated in currencies other than the euro. Taking account of hedges of currency risk, the percentage of debt not hedged against that risk amounted to 17% at December 31, 2021 (17% at December 31, 2020). Currency risk sensitivity analysis The Group analyzes the sensitivity of its exposure by es- timating the effects of a change in exchange rates on the portfolio of financial instruments. More specifically, sensitivity analysis measures the poten- tial impact on profit or loss and equity of market scenarios that would cause a change in the fair value of derivatives or in the financial expense associated with unhedged gross medium/long-term debt. These scenarios are obtained by simulating the apprecia- tion/depreciation of the euro against all of the currencies compared with the value observed as at the reporting date. There were no changes in the methods or assumptions used in the sensitivity analysis compared with the previous year. With all other variables held constant, the pre-tax profit would be affected by changes in exchange rates as follows. 382 382 Integrated Annual Report 2021 Millions of euro 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 Commodity price risk The risk of fluctuations in the price of energy commodities such as electricity, gas, oil, CO2, etc. is generated by the vol- atility of prices and structural correlations between them, which create uncertainty in the margin on purchases and sales of electricity and fuels at variable prices (e.g., indexed bilateral contracts, transactions on the spot market, etc.). The exposures on indexed contracts are quantified by breaking down the contracts that generate exposure into the underlying risk factors. To contain the effects of fluctuations and stabilize margins, in accordance with the policies and operating limits deter- mined by the Group’s governance and leaving an appropri- ate margin of flexibility to seize any short-term opportuni- ties that may present themselves, Enel develops and plans strategies that impact the various phases of the industrial process linked to the production and sale of electricity and gas (such as forward procurement and long-term com- mercial agreements), as well as risk mitigation plans and techniques using derivative contracts (hedging). As regards electricity sold by the Group, Enel mainly uses fixed-price contracts in the form of bilateral physical con- tracts (PPAs) and financial contracts (e.g., contracts for dif- ferences, VPP contracts, etc.) in which differences are paid to the counterparty if the market electricity price exceeds the strike price and to Enel in the opposite case. The resid- ual exposure in respect of the sale of energy on the spot 2021 Pre-tax impact on profit or loss Pre-tax impact on equity Exchange rate Increase Decrease Increase Decrease 10% 485 (592) - - 10% 10% - (50) - 61 (2,458) 3,003 - - market not hedged with such contracts is aggregated by uniform risk factors that can be managed with hedging transactions on the market. Proxy hedging techniques can be used for the industrial portfolios when the hedg- ing instruments for the specific risk factors generating the exposure are not available on the market or are not sufficiently liquid. In addition, Enel uses portfolio hedging techniques to assess opportunities for netting intercom- pany exposures. The Group mainly uses plain vanilla derivatives for hedging (more specifically, forwards, swaps, options on commodi- ties, futures, contracts for differences). Some of these products can be indexed to a variety of un- derlyings (coal, gas, oil, CO2, different geographical areas, etc.) and the approaches can be assessed and adapted to specific needs. Enel also engages in proprietary trading in order to main- tain a presence in the Group’s reference energy com- modity markets. These operations consist in taking on exposures in energy commodities (oil products, gas, coal, CO2 certificates and electricity) using financial derivatives and physical contracts traded on regulated and over-the- counter markets, optimizing profits through transactions carried out on the basis of expected market developments. The following table reports the notional amount of out- standing transactions at December 31, 2021 and Decem- ber 31, 2020, broken down by type of instrument. Millions of euro Forward and futures contracts Swaps Options Embedded Total Notional amount at Dec. 31, 2021 at Dec. 31, 2020 90,273 12,122 1,076 - 48,064 1,862 576 7 103,471 50,509 For more details, please see note 49 “Derivatives and hedge accounting”. Sensitivity analysis of commodity price risk The following table presents the results of the analysis of sensitivity to a reasonably possible change in the com- modity prices underlying the valuation model used in the scenario at the same date, with all other variables held constant. The impact on pre-tax profit of shifts of +15% and -15% in the price curve for the main commodities that make up the fuel scenario and the basket of formulas used in the Notes to the consolidated financial statements 383 383 contracts is mainly attributable to the change in the price of electricity, gas and petroleum products and, to a lesser extent, of CO2. The impact on equity of the same shifts in the price curve is primarily due to changes in the price of electricity, petroleum products and, to a lesser extent, CO2. The Group’s exposure to changes in the prices of other commodities is not material. Millions of euro Change in the fair value of trading derivatives on commodities Change in the fair value of derivatives on commodities designated as hedging instruments Credit and counterparty risk The Group’s commercial, commodity and financial trans- actions expose it to credit and counterparty risk, i.e., the possibility of a deterioration in the creditworthiness of a counterparty that has an adverse impact on the expected value of the creditor position or, for trade payables only, increases average collection times. Accordingly, the exposure to credit risk is attributable to the following types of transactions: • the sale and distribution of electricity and gas in free and regulated markets and the supply of goods and services (trade receivables); • trading activities that involve the physical exchange of assets or transactions in financial instruments (the commodity portfolio); • trading in derivatives, bank deposits and, more general- ly, financial instruments (the financial portfolio). In order to minimize credit risk, credit exposures are man- aged at the region/country/Global Business Line level by different units, thereby ensuring the necessary segregation of risk management and control activities. Monitoring the consolidated exposure is carried out by Enel SpA. In addition, at the Group level the policy provides for the use of uniform criteria – in all the main regions/countries/Global Business Lines and at the consolidated level – in measuring commercial credit exposures in order to promptly identify any deterioration in the quality of outstanding receivables and any mitigation actions to be taken. 2021 Pre-tax impact on profit or loss Pre-tax impact on equity Commodity price Increase Decrease Increase Decrease 15% 15% (621) - 632 - - 72 - (88) The policy for managing credit risk associated with com- mercial activities provides for a preliminary assessment of the creditworthiness of counterparties and the adoption of mitigation instruments, such as obtaining collateral or unsecured guarantees. In addition, the Group undertakes transactions to factor receivables without recourse, which results in the com- plete derecognition of the corresponding assets involved in the factoring, as the risks and rewards associated with them have been transferred. Finally, with regard to financial and commodity transac- tions, risk mitigation is pursued with a uniform system for assessing counterparties at the Group level, including im- plementation at the level of regions/countries/Global Busi- ness Lines, as well as with the adoption of specific stand- ardized contractual frameworks that contain risk mitiga- tion clauses (e.g., netting arrangements) and possibly the exchange of cash collateral. Despite the deterioration in the collection status of some customer segments, which was taken into account in the assessment of the impairment of trade receivables, to date the Group portfolio has displayed resilience to the global pandemic. This reflects the strengthening of digital collec- tion channels and a sound diversification of commercial customers with a low exposure to the impacts of COVID (e.g., utilities and distribution companies). Loan assets Millions of euro Staging Performing Underperforming Non-performing Total Basis for recognition of expected credit loss allowance 12 m ECL Lifetime ECL Lifetime ECL Average loss rate (PD*LGD) Gross carrying amount Expected credit loss allowance 0.6% 27.8% 73.0% 10,585 72 204 10,861 65 20 149 234 at Dec. 31, 2021 Carrying amount 10,520 52 55 10,627 384 384 Integrated Annual Report 2021 Contract assets, trade receivables and other financial assets: individual measurement Millions of euro Contract assets Trade receivables Trade receivables not past due Trade receivables past due: - 1-30 days - 31-60 days - 61-90 days - 91-120 days - 121-150 days - 151-180 days - more than 180 days (credit impaired) Total trade receivables Other financial assets Other financial assets not past due Other financial assets past due: - 1-30 days - 31-60 days - 61-90 days - 91-120 days - 121-150 days - 151-180 days - more than 180 days (credit impaired) Total other financial assets TOTAL Millions of euro Contract assets Trade receivables Trade receivables not past due Trade receivables past due: - 1-30 days - 31-60 days - 61-90 days - 91-120 days - 121-150 days - 151-180 days - more than 180 days (credit impaired) Total trade receivables Other financial assets Other financial assets not past due Other financial assets past due: - 1-30 days - 31-60 days - 61-90 days - 91-120 days - 121-150 days - 151-180 days - more than 180 days (credit impaired) Total other financial assets TOTAL at Dec. 31, 2021 Average loss rate (PD*LGD) Gross carrying amount Expected credit loss allowance - 110 0.7% 5,339 1.2% 3.4% 10.2% 50.0% 31.6% 26.9% 77.1% 489 89 59 34 19 26 1,813 7,868 - 39 6 3 6 17 6 7 1,397 1,481 Carrying amount 110 5,300 483 86 53 17 13 19 416 6,387 1.9% 1,712 32 1,680 - - - - - - 13.9% 352 244 - 2 - - 332 2,642 10,620 - - - - - - 46 78 1,559 at Dec. 31, 2020 Average loss rate (PD*LGD) Gross carrying amount Expected credit loss allowance 4.3% 23 1.3% 4,953 1.5% 2.8% 12.8% 28.0% 12.9% 100.0% 83.8% 453 106 39 25 31 53 1,692 7,352 3.1% 1,243 15.6% - - - - 40.0% 6.3% 499 11 - - - 5 79 1,837 9,212 1 66 7 3 5 7 4 53 1,418 1,563 38 78 - - - - 2 5 123 1,687 352 244 - 2 - - 286 2,564 9,061 Carrying amount 22 4,887 446 103 34 18 27 - 274 5,789 1,205 421 11 - - - 3 74 1,714 7,525 Notes to the consolidated financial statements 385 385 Contract assets, trade receivables and other financial assets: collective measurement Millions of euro at Dec. 31, 2021 Average loss rate (PD*LGD) Gross carrying amount Expected credit loss allowance Contract assets Trade receivables Trade receivables not past due Trade receivables past due: - 1-30 days - 31-60 days - 61-90 days - 91-120 days - 121-150 days - 151-180 days - more than 180 days (credit impaired) Total trade receivables Other financial assets Other financial assets not past due Other financial assets past due: - 1-30 days - 31-60 days - 61-90 days - 91-120 days - 121-150 days - 151-180 days - more than 180 days (credit impaired) Total other financial assets TOTAL Millions of euro Contract assets Trade receivables Trade receivables not past due Trade receivables past due: - 1-30 days - 31-60 days - 61-90 days - 91-120 days - 121-150 days - 151-180 days - more than 180 days (credit impaired) Total trade receivables Other financial assets Other financial assets not past due Other financial assets past due: - 1-30 days - 31-60 days - 61-90 days - 91-120 days - 121-150 days - 151-180 days - more than 180 days (credit impaired) Total other financial assets TOTAL 386 386 Integrated Annual Report 2021 11.5% 26 1.7% 4,603 3,321 272 183 111 111 90 3,180 11,871 2.8% 9.9% 15.3% 26.1% 32.4% 33.3% 58.5% - - - - - - - - Carrying amount 24 4,526 3,227 245 155 82 75 60 1,319 9,689 2 77 94 27 28 29 36 30 1,861 2,182 804 76 728 7 - - - - 1 1 - - - - - - - 7 - - - - 1 1 813 12,710 76 2,260 737 10,450 at Dec. 31, 2020 Average loss rate (PD*LGD) Gross carrying amount Expected credit loss allowance 1.2% 0.6% 7.2% 16.2% 26.4% 36.6% 43.1% 100.0% 100.0% 163 5,487 554 154 110 71 58 79 1,468 7,981 2.2% 274 - - - - - - - 3 1 - - - - 55 333 8,477 2 32 40 25 29 26 25 79 1,468 1,724 6 - - - - - - - 6 1,732 Carrying amount 161 5,455 514 129 81 45 33 - - 6,257 268 3 1 - - - - 55 327 6,745 Liquidity risk Liquidity risk manifests itself as uncertainty about the Group’s ability to discharge its obligations associated with financial liabilities that are settled by delivering cash or an- other financial asset. Enel manages liquidity risk by implementing measures to ensure an appropriate level of liquid financial resources, minimizing the associated opportunity cost and maintain- ing a balanced debt structure in terms of its maturity pro- file and funding sources. In the short term, liquidity risk is mitigated by maintaining an appropriate level of unconditionally available resources, including liquidity on hand and short-term deposits, avail- able committed credit lines and a portfolio of highly liquid assets. In the long term, liquidity risk is mitigated by maintaining a balanced maturity profile for our debt, access to a range of sources of funding on different markets, in different cur- rencies and with diverse counterparties. The mitigation of liquidity risk enables the Group to main- tain a credit rating that ensures access to the capital mar- ket and limits the cost of funds, with a positive impact on its financial position and performance. The Group holds the following undrawn lines of credit and commercial paper programs. Millions of euro at Dec. 31, 2021 at Dec. 31, 2020 Committed credit lines Uncommitted credit lines Commercial paper Total Maturity analysis The table below summarizes the maturity profile of the Group’s long-term debt. Millions of euro At Dec. 31, 2021 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 Leases: - fixed rate - floating rate Total leases Other non-bank borrowings(1): - fixed rate - floating rate Total other non-bank borrowings TOTAL Expiring within one year Expiring beyond one year Expiring within one year Expiring beyond one year 438 888 3,709 5,035 14,822 - - 4,028 802 7,591 14,531 - - 14,822 12,421 14,531 Maturing in Less than 3 months From 3 months to 1 year 2023 2024 2025 2026 Beyond 59 128 50 - 2,060 2,078 4,691 2,150 3,782 12,593 306 466 357 298 191 811 - 97 - 97 1,320 97 - 97 1,094 8,743 97 137 237 2,463 2,641 6,465 2,545 5,164 22,284 65 96 - 173 655 - 206 756 50 945 197 334 485 1,261 1,072 2,313 3,956 - 4 1,000 - 161 828 1,012 2,206 1,273 3,647 4,441 67 4 71 11 3 14 175 13 188 58 11 69 213 15 228 73 - 73 166 13 179 80 120 200 151 13 164 66 5 71 147 1,558 9 3 156 1,561 74 1 75 233 2 235 483 3,548 3,954 9,050 4,053 9,042 28,521 (1) Includes other non-current financial borrowings reported under “Other non-current financial liabilities” in the statement of financial position. Notes to the consolidated financial statements 387 387 Commitments to purchase commodities In conducting its business, the Enel Group has entered into contracts to purchase specified quantities of commodities at a certain future date for its own use, which qualify for the own use exemption provided for under IFRS 9. The following table reports the undiscounted cash flows associated with outstanding commitments at December 31, 2021. Millions of euro Commitments to purchase commodities: - electricity - fuels Total at Dec. 31, 2021 2022-2025 2026-2030 2031-2035 Beyond 71,244 58,042 22,916 11,542 16,201 34,027 13,932 18,195 8,038 4,435 129,286 34,458 50,228 21,970 22,630 48. Offsetting financial assets and financial liabilities At December 31, 2021, the Group did not hold offset posi- tions in assets and liabilities, as it is not the Enel Group’s poli- cy to settle financial assets and liabilities on a net basis. 49. Derivatives and hedge accounting The following tables show the notional amount and the fair value of derivative financial assets and derivative financial liabilities eligible for hedge accounting or measured at FVTPL, classified on the basis of the type of hedge rela- tionship and the hedged risk, broken down into current and non-current instruments. The notional amount of a derivative contract is the amount on the basis of which cash flows are exchanged. This amount can be expressed as a value or a quantity (for ex- ample tons, converted into euros by multiplying the no- tional amount by the agreed price). Amounts denominated in currencies other than the euro are translated at the offi- cial closing exchange rates provided by the World Markets Refinitiv (WMR) Company. Millions of euro Non-current Current Notional Fair value Notional Fair value at Dec. 31, 2021 at Dec. 31, 2020 at Dec. 31, 2021 at Dec. 31, 2020 at Dec. 31, 2021 at Dec. 31, 2020 at Dec. 31, 2021 at Dec. 31, 2020 DERIVATIVE ASSETS Fair value hedge derivatives: - on interest rates - on exchange 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 139 672 811 404 14,980 2,693 18,077 - 26 1,147 1,173 138 639 777 161 5,061 2,541 7,763 50 71 379 500 19 42 61 19 1,356 1,059 2,434 - - 277 277 22 28 50 21 685 428 1,134 2 4 46 52 TOTAL DERIVATIVE ASSETS 20,061 9,040 2,772 1,236 - - - - 2,690 3,469 6,159 50 2,154 48,304 50,508 56,667 - 79 79 - 698 2,165 2,863 - 3,430 21,424 24,854 27,796 - - - - 104 3,023 3,127 1 23 19,640 19,664 22,791 - 28 28 - 51 627 678 - 79 2,686 2,765 3,471 388 388 Integrated Annual Report 2021 Millions of euro Non-current Current Notional Fair value Notional Fair value at Dec. 31, 2021 at Dec. 31, 2020 at Dec. 31, 2021 at Dec. 31, 2020 at Dec. 31, 2021 at Dec. 31, 2020 at Dec. 31, 2021 at Dec. 31, 2020 DERIVATIVE LIABILITIES Fair value hedge derivatives: - on interest rates - on exchange 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 LIABILITIES 660 - 660 6,807 7,224 3,312 - - - 7,201 16,310 1,535 17,343 25,046 - 73 884 957 50 28 89 167 5 - 5 620 1,244 1,301 3,165 - 2 167 169 - - - 938 2,491 148 3,577 4 3 22 29 - - - 653 1,892 2,067 4,612 150 3,555 41,595 45,300 - - - 122 3,766 1,466 5,354 100 984 20,910 21,994 - - - 9 49 4,853 4,911 73 60 19,563 19,696 18,960 25,213 3,339 3,606 49,912 27,348 24,607 - - - 2 263 379 644 88 41 2,758 2,887 3,531 49.1 Derivatives designated as hedging instruments Derivatives are initially recognized at fair value, on the trade date of the contract and are subsequently re-measured at their fair value. The method of recognizing the result- ing gain or loss depends on whether the derivative is des- ignated as a hedging instrument, and if so, the nature of the item being hedged. Hedge accounting is applied to derivatives entered into in order to reduce risks such as interest rate risk, currency risk, commodity price risk and net investments in foreign operations when all the criteria provided by IFRS 9 are met. At the inception of the transaction, the Group docu- ments the relationship between hedging instruments and hedged items, as well as its risk management objec- tives and strategy. The Group also documents its assess- ment, both at hedge inception and on an ongoing basis, of whether hedging instruments are highly effective in offsetting changes in fair values or cash flows of hedged items. For cash flow hedges of forecast transactions designat- ed as hedged items, the Group assesses and documents that they are highly probable and present an exposure to changes in cash flows that affect profit or loss. Depending on the nature of the risk exposure, the Group designates derivatives as either: • fair value hedges; • cash flow hedges. For more details about the nature and the extent of risks arising from financial instruments to which the Group is exposed, please see note 47 “Risk management”. To be effective a hedge relationship shall meet all of the following criteria: • existence of an economic relationship between hedg- ing instrument and hedged item; • the effect of credit risk does not dominate the value changes resulting from the economic relationship; • the hedge ratio defined at initial designation shall be equal to the one used for risk management purpos- es (i.e., same quantity of the hedged item that the en- tity actually hedges and the quantity of the hedging instrument that the entity actually uses to hedge the quantity of the hedged item). Based on the IFRS 9 requirements, the existence of an economic relationship is evaluated by the Group through a qualitative assessment or a quantitative computation, depending on the following circumstances: • if the underlying risk of the hedging instrument and the hedged item is the same, the existence of an eco- nomic relationship will be provided through a qualita- tive analysis; • on the other hand, if the underlying risk of the hedging instrument and the hedged item is not the same, the existence of the economic relationship will be demon- strated through a quantitative method in addition to a qualitative analysis of the nature of the economic rela- tionship (i.e., linear regression). In order to demonstrate that the behavior of the hedging instrument is in line with those of the hedged item, differ- ent scenarios will be analyzed. Notes to the consolidated financial statements 389 389 For hedging of commodity price risk, the existence of an economic relationship is deduced from a ranking matrix that defines, for each possible risk component, a set of all standard derivatives available in the market whose rank- ing is based on their effectiveness in hedging the consid- ered risk. In order to evaluate the credit risk effects, the Group con- siders the existence of risk mitigating measures (collat- eral, mutual break-up clauses, netting agreements, etc.). The Group has established a hedge ratio of 1:1 for all the hedge relationships (including commodity price risk hedging) as the underlying risk of the hedging derivative is identical to the hedged risk, in order to minimize hedg- ing ineffectiveness. The hedge ineffectiveness will be evaluated through a qualitative assessment or a quantitative computation, depending on the following circumstances: • if the critical terms of the hedged item and hedging instrument match and there are no other sources of ineffectiveness included the credit risk adjustment on the hedging derivative, the hedge relationship will be considered fully effective on the basis of a qualitative assessment; • if the critical terms of the hedged item and hedging in- strument do not match or there is at least one source of ineffectiveness, the hedge ineffectiveness will be quantified applying the dollar offset cumulative meth- od with hypothetical derivative. This method compares changes in fair value of the hedging instrument and the hypothetical derivative between the reporting date and the inception date. The main causes of hedge ineffectiveness can be the fol- lowing: • basis differences (i.e., the fair value or cash flows of the hedged item depend on a variable that is differ- ent from the variable that causes the fair value or cash flows of the hedging instrument to change); • timing differences (i.e., the hedged item and hedging instrument occur or are settled at different dates); • quantity or notional amount differences (i.e., the hedged item and hedging instrument are based on different quantities or notional amounts); • other risks (i.e., changes in the fair value or cash flows of a derivative hedging instrument or hedged item re- late to risks other than the specific risk being hedged); • credit risk (i.e., the counterparty credit risk differently impacts the changes in the fair value of the hedging instruments and hedged items). Fair value hedges Fair value hedges are used to protect the Group against exposures to changes in the fair value of assets, liabilities 390 390 Integrated Annual Report 2021 or firm commitment attributable to a particular risk that could affect profit or loss. Changes in the fair value of derivatives that qualify and are designated as hedging instruments are recognized in the income statement, together with changes in the fair value of the hedged item that are attributable to the hedged risk. If the hedge no longer meets the criteria for hedge ac- counting, the adjustment to the carrying amount of a hedged item for which the effective interest rate method is used is amortized to profit or loss over the period to maturity. Cash flow hedges Cash flow hedges are applied in order to hedge the Group exposure to changes in future cash flows that are attribut- able to a particular risk associated with a recognized asset or liability or a highly probable transaction that could affect profit or loss. The effective portion of changes in the fair value of deriv- atives that are designated and qualify as cash flow hedges is recognized in other comprehensive income. The gain or loss relating to the ineffective portion is recognized imme- diately in the income statement. Amounts accumulated in equity are reclassified to profit or loss in the periods when the hedged item affects profit or loss (for example, when the hedged forecast sale takes place). If the hedged item results in the recognition of a non-fi- nancial asset (i.e., property, plant and equipment or inven- tories, etc.) or a non-financial liability, or a hedged forecast transaction for a non-financial asset or a non-financial liability becomes a firm commitment for which fair value hedge accounting is applied, the amount accumulated in equity (i.e., hedging reserve) shall be removed and included in the initial amount (cost or other carrying amount) of the asset or the liability hedged (i.e., “basis adjustment”). When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss existing in equity at that time remains in equity and is recognized when the forecast transaction is ultimately recognized in the income state- ment. When a forecast transaction is no longer expected to occur, the cumulative gain or loss that was reported in equity is immediately transferred to the income statement. For hedge relationships using forwards as a hedging in- strument, where only the change in the value of the spot element is designated as the hedging instrument, ac- counting for the forward element (profit or loss vs. OCI) is defined case by case. This approach is actually applied by the Group for hedging of currency risk on renewables assets. Conversely, for hedge relationships using cross currency interest rate swaps as hedging instruments, the Group separates foreign currency basis spread, in designating the hedging derivative, and presents them in other com- prehensive income (OCI) as hedging costs. With specific regard to cash flow hedges of commodity risk, in order to improve their consistency with the risk management strategy, the Enel Group applies a dynamic hedge accounting approach based on specific liquidity requirements (the so-called “liquidity-based approach“). This approach requires the designation of hedges through the use of the most liquid derivatives available on the market and replacing them with others that are more effective in covering the risk in question. Consistent with the risk management strategy, the liquid- ity-based approach allows the roll-over of a derivative by replacing it with a new derivative, not only in the event of expiry but also during the hedge relationship, if and only if the new derivative meets both of the following require- ments: • it represents a best proxy of the old derivative in terms of ranking; • it meets specific liquidity requirements. Satisfaction of these requirements is verified quarterly. At the roll-over date, the hedge relationship is not dis- continued. Accordingly, starting from that date, changes in the effective fair value of the new derivative will be rec- ognized in equity (the hedging reserve), while changes in the fair value of the old derivative are recognized through profit or loss. Reform of benchmarks for the determination of interest rates – IBOR reform Overview Interbank Offered Rates (“IBORs”) are benchmark rates at which banks can borrow funds on the interbank market on an unsecured basis for a given period ranging from overnight to 12 months, in a specific currency. In recent years there have been a number of cases of manipulation of these rates by the banks contributing to their calculation. For this reason, regulators around the world have begun a sweeping reform of interest rate benchmarks that includes the replacement of some benchmarks with alternative risk-free rates (the IBOR re- form). The Group’s main exposure is based on Euribor, USD LI- BOR and GBP LIBOR. Euribor is still considered compliant with the European Benchmarks Regulation (BMR) and this permits market participants to continue to use it for both existing and new contracts. In line with the most recent guidance issued by the major regulatory bodies: • the 1-month, 3-month and 6-month USD LIBOR benchmarks will become unrepresentative after June 30, 2023 and the alternative reference rate will be the Secured Overnight Financing Rate (SOFR); • the 1-month, 3-month and 6-month GBP LIBOR benchmarks will become unrepresentative after De- cember 31, 2021 and the alternative reference rate will be the Sterling Overnight Index Average (SONIA). As a result of the IBOR reform, a number of temporary exceptions to the rules on hedge relationships have been allowed in implementation of the amendments to IFRS 9 issued in September 2019 (Phase 1) and August 2020 (Phase 2) to address, respectively: • pre-replacement issues that impact financial reporting in the period preceding the replacement of an existing interest rate benchmark with an alternative risk-free rate (Phase 1); and • post-replacement issues that could impact financial reporting when an existing interest rate benchmark is reformed or replaced and there is there no longer any initial uncertainty, but hedge contracts and rela- tionships still need to be updated to reflect the new benchmark rates (Phase 2). Impact of the IBOR reform on the Group In a context of uncertainty regarding the IBOR transition in the various countries, the Group has determined the overall number and nominal value of the contracts im- pacted by the reform. In addition, a number of contractu- al amendments have already been implemented in con- tracts previously indexed to GBP LIBOR and others will be amended in 2022-2023 on the basis of the evolution of the IBOR reform and best market practice. Debt and derivatives The Group’s floating rate debt is mainly benchmarked against Euribor and USD LIBOR and is almost entirely hedged using financial derivatives. At the reporting date, the Group is planning to take no action with regard to Euribor since, as stated above, this benchmark has been comprehensively reformed to com- ply with the European Benchmarks Regulation. Despite the continuity with Euribor, replacement clauses may be required and could therefore be implemented by the Group in the new contracts in accordance with the evolu- tion of accepted market practice. During 2021, the Group obtained new US dollar loans indexed to SOFR and proactively changed its existing exposure in derivatives by switching from GPB LIBOR to SONIA. The main focus over the coming months will be how to change existing USD LIBOR to USD SOFR expo- sures and how to use the new, alternative risk-free rates for new financial transactions. The Group’s derivative instruments are managed through contracts that are mainly based on framework agree- ments defined by the International Swaps and Derivatives Association (ISDA). Notes to the consolidated financial statements 391 391 The ISDA has revised its standardized contracts in light of the IBOR reform and amended the choices for floating rates within the 2006 ISDA definitions to include replace- ment clauses that would apply upon the permanent dis- continuation of specific key benchmarks. These changes took effect on January 25, 2021. Transactions represent- ed in the 2006 ISDA definitions carried out on January 25, 2021 or later include adjusted floating-rate options (e.g., the choice of floating rate with replacement clause), while transactions completed before that date (previous deriv- ative contracts) continue to be based on the 2006 ISDA definitions. For this reason, the ISDA published an IBOR Fallback Pro- tocol to facilitate multilateral amendments to include the amended definitions. The Group is assessing whether to: (i) adopt that protocol in the light of its exposure and developments in the IBOR reform or (ii) adjust in advance any contracts impacted bi- laterally by the reform. Hedge relationships At the reporting date, hedged items and hedging instru- ments are primarily indexed to Euribor, USD LIBOR and GBP SONIA. The Group has assessed the impact of uncertainty engen- dered by the IBOR reform on hedge relationships at De- cember 31, 2021 with reference to both hedging instru- ments and hedged items. Both the hedged items and the hedging instruments will change their parameterization from interbank market-based benchmarks (IBORs) to al- ternative risk-free rates (RFRs) as a result of the contrac- tual amendments that will take effect in the coming years. In particular, uncertainty remains as to how the replacement will take place with regard to both hedging instruments and hedged items indexed to USD LIBOR. The Group manages the uncertainty associated with these hedge relationships by continuing to apply the temporary exceptions provided for in the amendments to IFRS 9 issued in September 2019 (Phase 1). It was therefore felt that the benchmark indices for determining the interest rates on which the cash flows of the hedged items or the hedging instruments are based would not change as a consequence of the IBOR reform. The exception was applied for the following hedge rela- tionship requirements: • determine if a forecast transaction is highly probable; • establish whether the future hedged cash flows will arise in a discontinued cash flow hedge relationship; • assess the economic relationship between the hedged item and the hedging instrument. The hedge relationships impacted may become ineffective attributable to different replacements of existing bench- marks with alternative risk-free benchmarks. In any case, the Group will seek to implement the replacements at the same time. In addition, the Group changed the reference to GBP LIBOR in its interest rate hedging instruments used in cash flow hedge relationships with the new, economically equivalent, SONIA benchmark at the end of 2021. There is therefore no longer any uncertainty as to how and when the replace- ment can take place both with reference to the hedged items and the hedging instruments. Consequently, the Group no longer applies the amendments to IFRS 9 issued in September 2019 (Phase 1) to these hedge relationships and, consequently, has begun to apply the amendments to IFRS 9 issued in August 2020 (Phase 2), modifying the formal designation of the hedge relationship as required by the IBOR reform and without considering this event as a termination of the hedge relationship. Furthermore, for cash flow hedge relationships, in modify- ing the description of the hedged item in the hedge rela- tionship, the amounts accumulated in the hedging reserve were considered on the basis of the alternative benchmark index in relation to which the future hedged cash flows are determined. The following table provides details of the notional amounts of the hedging instruments for which the amendments to IFRS 9 (both Phase 1 and Phase 2) were applied as at De- cember 31, 2021, broken down by the alternative bench- mark index used for determining the interest rate. Millions of euro Hedging instruments(1) USD LIBOR/SOFR GBP LIBOR/SONIA Total Notional amount at Dec. 31, 2021 Phase 1 Phase 2 1,315 - 1,315 - 1,309 1,309 (1) Since the hedge relationships mentioned are considered highly effective, the amounts specified in the table as de facto “hedging instruments” represent the equivalent amounts of the associated hedged items. 392 392 Integrated Annual Report 2021 Unamended contracts including those with specific replacement clauses The Group is monitoring the evolution of the transition from the old interest rate benchmarks to the new rates, review- ing the overall amounts of contracts that have not yet been indexed to the new benchmark rates and, among these, the amounts of contracts which already include specific re- placement clauses. The Group considers a contract to have not yet incorporated an alternative benchmark rate when the interest rate of the contract is indexed to an interest rate benchmark still involved in the IBOR reform and, therefore, when uncertainties still exist as to how and when replace- ment with the new benchmark will take place. 49.1.1 Hedge relationships by type of risk hedged Interest rate risk The following table shows the notional amount and the average interest rate of instruments hedging the interest rate risk on transactions outstanding at December 31, 2021 and December 31, 2020, broken down by maturity. Millions of euro At Dec. 31, 2021 Interest rate swaps Total notional amount Notional amount related to IRS in euro Average IRS rate in euro Maturity 2022 2023 2024 2025 2026 Beyond Total 653 128 169 169 729 639 582 582 942 729 5,588 8,663 4,582 6,829 5.0651 4.2791 0.8596 1.9099 2.2703 1.6826 Notional amount related to IRS in US dollars 353 - 44 - - 674 1,071 Average IRS rate in US dollars 3.5227 0.6950 2.4672 Millions of euro At Dec. 31, 2020 Interest rate swaps Total notional amount Notional amount related to IRS in euro Average IRS rate in euro Maturity 2021 2022 2023 2024 2025 Beyond Total 122 - 461 135 178 178 155 155 591 591 6,115 7,622 5,295 6,354 5.0139 4.1593 4.4380 1.9058 1.8321 Notional amount related to IRS in US dollars 122 326 - - - 639 1,087 Average IRS rate in US dollars 2.0350 3.5227 2.4648 The following table shows the notional amount and the fair value of the hedging instruments on the interest rate risk of transactions outstanding as at December 31, 2021 and December 31, 2020, broken down by type of hedged item. Millions of euro Fair value Notional amount Fair value Notional amount Assets Liabilities Assets Liabilities Hedging instrument Hedged item at Dec. 31, 2021 at Dec. 31, 2020 Fair value hedges Interest rate swaps Interest rate swaps Cash flow hedges Interest rate swaps Interest rate swaps Interest rate swaps Total Floating-rate borrowings/bonds Fixed-rate borrowings/bonds Floating-rate bonds Floating-rate loan assets Floating-rate borrowings 13 6 - 13 6 38 (1) (4) (167) (1) (461) (634) 241 558 1,190 164 6,510 8,663 15 7 - 21 - 43 - - (232) - (708) (940) 126 12 1,190 161 6,133 7,622 Notes to the consolidated financial statements 393 393 The following table shows the notional amount and the fair value of hedging derivatives on interest rate risk as at December 31, 2021 and December 31, 2020, broken down by type of hedge. Millions of euro Notional amount Fair value assets Notional amount Fair value liabilities Derivatives Fair value hedges Interest rate swaps Total Cash flow hedges Interest rate swaps Total TOTAL INTEREST RATE DERIVATIVES at Dec. 31, 2021 at Dec. 31, 2020 at Dec. 31, 2021 at Dec. 31, 2020 at Dec. 31, 2021 at Dec. 31, 2020 at Dec. 31, 2021 at Dec. 31, 2020 139 139 404 404 543 138 138 161 161 299 19 19 19 19 38 22 22 21 21 43 660 660 7,460 7,460 8,120 - - 7,323 7,323 7,323 (5) (5) (629) (629) (634) - - (940) (940) (940) The notional amount of derivatives classified as hedg- ing instruments at December 31, 2021 came to €8,663 million, with a corresponding negative fair value of €596 million. Compared with December 31, 2020, the notional amount increased by €1,041 million, mainly reflecting: • the expiry of interest rate swaps amounting to €122 million; • the consolidation of Australian companies holding in- terest rate swaps amounting to €340 million; • new interest rate swaps amounting to €952 million. The amount also reflects the reduction of €129 million in the notional amount of amortizing interest rate swaps. The improvement in the fair value of €301 million mainly reflects developments in the yield curve. Fair value hedge derivatives The following table reports net gains and losses recog- nized through profit or loss in respect of fair value hedge derivatives and the hedged item that are attributable to interest rate risk both in 2021 and the previous year. Millions of euro Interest rate hedging instruments Hedged item Ineffective portion The following table shows the impact of fair value hedges of interest rate risk in the statement of financial position at December 31, 2021 and December 31, 2020. 2021 2020 Net gain/(loss) Net gain/(loss) (11) (8) (19) 15 (14) 1 Millions of euro at Dec. 31, 2021 at Dec. 31, 2020 Interest rate swaps Notional amount 799 Carrying amount 14 Fair value used to measure ineffectiveness in the year Notional amount Carrying amount Fair value used to measure ineffectiveness in the year 14 138 22 22 394 394 Integrated Annual Report 2021 The following table shows the impact of the hedged item of fair value hedges in the statement of financial position at December 31, 2021 and December 31, 2020. Millions of euro at Dec. 31, 2021 at Dec. 31, 2020 Fixed-rate borrowings Floating-rate borrowings Total Cumulative adjustment of fair value of hedged item Fair value used to measure ineffectiveness in the year Carrying amount Cumulative adjustment of fair value of hedged item Fair value used to measure ineffectiveness in the year Carrying amount 518 306 824 6 (11) (5) (5) 9 4 20 146 166 7 15 22 (7) (15) (22) Cash flow hedge derivatives The following table shows the cash flows expected in coming years from cash flow hedge derivatives on inter- est rate risk. Millions of euro Fair value Distribution of expected cash flows at Dec. 31, 2021 2022 2023 2024 2025 2026 Beyond Cash flow hedge derivatives on interest rates Positive fair value Negative fair value 19 3 2 1 3 3 5 (629) (139) (121) (96) (78) (66) (163) The following table shows the impact of cash flow hedges of interest rate risk in the statement of financial position at December 31, 2021 and December 31, 2020. Millions of euro at Dec. 31, 2021 at Dec. 31, 2020 Interest rate swaps Notional amount 7,864 Carrying amount (610) Fair value used to measure ineffectiveness in the year (610) Notional amount 7,484 Carrying amount (919) Fair value used to measure ineffectiveness in the year (919) The following table shows the impact of the hedged item of cash flow hedges in the statement of financial position at December 31, 2021 and December 31, 2020. Millions of euro at Dec. 31, 2021 at Dec. 31, 2020 Fair value at the designation date of CFH derivatives through profit or loss Fair value used to measure ineffectiveness in the year Ineffective portion of carrying amount of CFH derivatives Fair value used to measure ineffectiveness in the year Fair value at the designation date of CFH derivatives through profit or loss Hedging reserve Hedging costs reserve Hedging reserve Hedging costs reserve Floating-rate bonds Floating-rate loan assets Floating-rate borrowings Total 167 (12) 417 572 - - (32) (32) (167) 12 (417) (572) - - - - - - (6) (6) 232 (21) 653 864 - - (232) 21 (44) (653) (44) (864) - - - - Ineffective portion of carrying amount of CFH derivatives - - (11) (11) Notes to the consolidated financial statements 395 395 Currency risk The following table reports the maturity profile of the notional amount and associated average contractual ex- change rate for the instruments hedging currency risk on transactions outstanding at December 31, 2021 and De- cember 31, 2020. Millions of euro At Dec. 31, 2021 Cross currency interest rate swaps (CCIRS) 2022 2023 2024 2025 2026 Beyond Total Maturity Total notional amount of CCIRS 258 1,574 4,638 1,002 1,153 12,814 21,439 Notional amount for CCIRS EUR/USD Average exchange rate EUR/USD Notional amount for CCIRS EUR/GBP Average exchange rate EUR/GBP Notional amount for CCIRS EUR/CHF Average exchange rate EUR/CHF Notional amount for CCIRS USD/BRL Average exchange rate USD/BRL Notional value for CCIRS EUR/BRL Average exchange rate EUR/BRL Currency forwards - 1,104 2,158 661 1,104 8,632 13,659 1.3350 1.1345 1.1742 1.1790 1.2094 - - - - 1,012 0.8765 218 1.0642 - - - - 3,678 4,690 0.8241 126 344 1.2100 98 132 295 155 49 244 973 4.8123 5.2217 5.5483 5.2921 5.3875 3.5655 160 339 402 79 6.4122 6.4379 6.2482 6.7126 Total notional amount of forwards 4,324 1,320 371 Notional amount - currency forwards EUR/USD 3,064 1,268 371 4 4 Average currency forward rate - EUR/USD 1.1600 1.1900 1.1800 1.1800 Notional amount - currency forwards USD/BRL Average currency forward rate - USD/BRL Notional amount - currency forwards USD/COP Average currency forward rate - USD/COP Notional amount - currency forwards EUR/CLP Average currency forward rate - EUR/CLP Notional amount - currency forwards EUR/CAD Average currency forward rate - EUR/CAD 311 5.6500 284 3,964 145 818.9400 107 1.2400 - - - - - - - - - - - - 396 396 Integrated Annual Report 2021 - - - - - - - 77 1,057 3.9197 - - - - - - 6,019 4,707 311 284 145 107 Millions of euro At Dec. 31, 2020 Cross currency interest rate swaps (CCIRS) 2021 2022 2023 2024 2025 Beyond Total Maturity Total notional amount of CCIRS 859 1,702 3,120 3,088 1,336 10,882 20,987 185 1,630 2,038 1,223 1,223 6,928 13,227 1.1348 1.1213 1.2493 1.1039 1.1593 1.2397 Notional amount for CCIRS EUR/USD Average exchange rate EUR/USD Notional amount for CCIRS EUR/GBP Average exchange rate EUR/GBP Notional amount for CCIRS EUR/CHF Average exchange rate EUR/CHF Notional amount for CCIRS USD/BRL Average exchange rate USD/BRL Currency forwards 278 0.8248 - - - - - 946 0.8765 208 1.0642 395 71 64 4.3935 4.1779 5.1967 Total notional amount of forwards 3,684 1,871 Notional amount - currency forwards EUR/USD 2,671 1,786 12 12 Average currency forward rate - EUR/USD 1.1473 1.1535 1.1976 Notional amount - currency forwards USD/BRL Average currency forward rate - USD/BRL 379 37 5.2226 5.4405 Notional amount - currency forwards USD/COP Average currency forward rate - USD/COP Notional amount - currency forwards EUR/CLP Average currency forward rate - EUR/CLP Notional amount - currency forwards EUR/RUB Average currency forward rate - EUR/RUB 187 3,782 121 716.8847 100 91.8464 - - - - - - - - - - - - - - - - 3,443 4,667 0.7876 120 328 0.9040 244 774 3.4489 - - - - - - 5,567 4,469 416 187 121 100 - - - - - - - Notes to the consolidated financial statements 397 397 The following table shows the notional amount and the fair value of the hedging instruments on the currency risk of transactions outstanding as at December 31, 2021 and December 31, 2020, broken down by type of hedged item. Millions of euro Fair value Notional amount Fair value Notional amount Hedging instrument Hedged item Assets Liabilities Assets Liabilities at Dec. 31, 2021 at Dec. 31, 2020 Fair value hedges Cross currency interest rate swaps (CCIRS) Fixed-rate borrowings/bonds in foreign currencies Cross currency interest rate swaps (CCIRS) Floating-rate borrowings in foreign currencies Cash flow hedges Cross currency interest rate swaps (CCIRS) Floating-rate borrowings/ financial assets in foreign currencies Cross currency interest rate swaps (CCIRS) Fixed-rate borrowings in foreign currencies Cross currency interest rate swaps (CCIRS) Floating-rate bonds in foreign currencies Cross currency interest rate swaps (CCIRS) Fixed-rate bonds in foreign currencies Cross currency interest rate swaps (CCIRS) Future cash flows denominated in foreign currencies Currency forwards Currency forwards Currency forwards Total Future cash flows denominated in foreign currencies Future commodity purchases denominated in foreign currencies Purchases of investment goods and other in foreign currency 12 30 88 43 37 - - 595 77 (19) 953 (58) 2,553 - 344 28 28 67 50 12 - - 639 79 (15) 579 - - 484 356 1,159 (1,095) 16,601 588 (2,374) 18,499 - 7 (75) (3) 316 378 106 (36) 4,802 20 (7) 839 7 3 5 4 (4) (12) 351 574 (309) 4,167 (40) 825 1,502 (1,293) 27,458 792 (2,754) 26,553 Cash flow hedges and fair value hedges include: • CCIRSs with a notional amount of €19,749 million used to hedge the currency risk on fixed-rate debt denomi- nated in currencies other than the euro, with a positive fair value of €61 million; • CCIRSs with a notional amount of €1,690 million used to hedge the currency risk on floating-rate debt denomi- nated in currencies other than the euro, with a positive fair value of €61 million; • currency forwards with a notional amount of €5,180 million used to hedge the currency risk associated with purchases of natural gas, purchases of fuel and expect- ed cash flows in currencies other than the euro, with a positive fair value of €74 million; • currency forwards with a notional amount of €839 mil- lion and a positive fair value of €13 million in respect of OTC transactions to mitigate the currency risk on ex- pected cash flows in currencies other than the pres- entation currency connected with the purchase of in- vestment goods in the renewables and infrastructure and networks sectors (new generation digital meters), on operating costs for the supply of cloud services and on revenue from the sale of renewable energy. 398 398 Integrated Annual Report 2021 The following table reports the notional amount and fair value of foreign exchange derivatives at December 31, 2021 and December 31, 2020, broken down by type of hedge. Millions of euro Notional amount Fair value assets Notional amount Fair value liabilities at Dec. 31, 2021 at Dec. 31, 2020 at Dec. 31, 2021 at Dec. 31, 2020 at Dec. 31, 2021 at Dec. 31, 2020 at Dec. 31, 2021 at Dec. 31, 2020 Derivatives Fair value hedges CCIRS Total Cash flow hedges Currency forwards CCIRS Total 672 672 4,117 13,553 17,670 718 718 476 5,582 6,058 42 42 133 1,327 1,460 56 56 12 724 736 792 - - 1,902 7,214 9,116 - - - - - - 5,090 14,687 19,777 (46) (1,247) (1,293) (361) (2,393) (2,754) 9,116 19,777 (1,293) (2,754) TOTAL EXCHANGE RATE DERIVATIVES 18,342 6,776 1,502 The notional amount of CCIRSs at December 31, 2021 amounted to €21,439 million (€20,987 million at Decem- ber 31, 2020), an increase of €452 million. Cross currency interest rate swaps with a total amount of €859 million ex- pired, while new derivatives amounted to €6,470 million, of which €3,532 million in respect of bond issues denom- inated in US dollars in July 2021. In addition, following the early redemption of conventional bonds in US dollars by Enel Finance International during the year, cross currency interest rate swaps of €5,909 million were terminated ear- ly. The amount also reflects developments in the exchange rate of the euro against the main other currencies and the effect of amortization, which caused their notional amount to increase by €750 million. The notional amount of currency forwards at December 31, 2021 amounted to €6,019 million (€5,566 million at De- cember 31, 2020), an increase of €453 million. The expo- sure to currency risk, especially that associated with the US dollar, is mainly due to purchases of natural gas, pur- chases of fuel and cash flows in respect of investments. Changes in the notional amount are connected with nor- mal developments in operations. Fair value hedge derivatives The following table reports net gains and losses recog- nized through profit or loss, reflecting changes in the fair value of fair value hedge derivatives and the hedged item that are attributable to currency risk for 2021 and the pre- vious year. Millions of euro Interest rate hedging instruments Hedged item Ineffective portion The following table shows the impact of fair value hedges of currency risk in the statement of financial position at December 31, 2021 and December 31, 2020. 2021 2020 Net gain/(loss) Net gain/(loss) 1 (2) (1) 44 (51) (7) Millions of euro at Dec. 31, 2021 at Dec. 31, 2020 Cross currency interest rate swaps (CCIRS) Notional amount Carrying amount Fair value used to measure ineffectiveness in the year Notional amount Carrying amount Fair value used to measure ineffectiveness in the year 672 42 37 718 56 56 Notes to the consolidated financial statements 399 399 The following table shows the impact of the hedged item of fair value hedges in the statement of financial position at December 31, 2021 and December 31, 2020. Millions of euro at Dec. 31, 2021 at Dec. 31, 2020 Cumulative adjustment of fair value of hedged item Fair value used to measure ineffectiveness in the year Carrying amount Cumulative adjustment of fair value of hedged item Fair value used to measure ineffectiveness in the year Carrying amount Fixed-rate borrowings in foreign currency Floating-rate borrowings in foreign currency Total 639 - 639 (35) - (35) (44) - (44) 637 79 716 34 28 62 (34) (28) (62) Cash flow hedge derivatives The following table shows the cash flows expected in com- ing years from cash flow hedge derivatives on currency risk. Millions of euro Fair value Distribution of expected cash flows Cash flow hedge derivatives on exchange rates Positive fair value Negative fair value The following table shows the impact of cash flow hedges of currency risk in the statement of financial position at December 31, 2021 and December 31, 2020. at Dec. 31, 2021 2022 2023 2024 2025 2026 Beyond 1,460 305 407 (1,293) (9) 13 247 (66) 180 (49) 205 1,780 (27) (256) Millions of euro at Dec. 31, 2021 at Dec. 31, 2020 Cross currency interest rate swaps (CCIRS) Currency forwards Total Notional amount Carrying amount Fair value used to measure ineffectiveness in the year Notional amount Carrying amount Fair value used to measure ineffectiveness in the year 20,767 6,019 26,786 80 87 167 82 89 171 20,269 (1,669) (1,463) 5,566 25,835 (349) (2,018) (342) (1,805) 400 400 Integrated Annual Report 2021 The following table shows the impact of the hedged item of cash flow hedges in the statement of financial position at December 31, 2021 and December 31, 2020. Millions of euro at Dec. 31, 2021 at Dec. 31, 2020 Fair value used to measure ineffectiveness in the year Hedging reserve Hedging costs reserve Ineffective portion of carrying amount of CFH derivatives Fair value used to measure ineffectiveness in the year Hedging reserve Hedging costs reserve Ineffective portion of carrying amount of CFH derivatives Floating-rate borrowings in foreign currencies Fixed-rate borrowings in foreign currencies Floating-rate bonds in foreign currencies Fixed-rate bonds in foreign currencies Future cash flows denominated in foreign currencies (hedged with CCIRSs) Future cash flows denominated in foreign currencies (hedged with forwards) Future commodity purchases denominated in foreign currencies Purchases of investment goods and other in foreign currency (69) 69 15 (15) (37) (66) 37 66 75 (75) (2) (72) (15) 2 72 15 Total (171) 171 - - - (2) - 1 - (3) (4) - - - - - - - - - (52) (50) (12) 52 50 12 - - - 1,580 (1,580) (205) (3) 7 3 (7) 305 (305) 30 (30) - (3) - (5) 1,805 (1,805) (213) - - - - - - 1 (1) - Notes to the consolidated financial statements 401 401 Notional value on gas 3,315 1,048 Commodity price risk Millions of euro At Dec. 31, 2021 Commodity swaps Notional value on power Average commodity swap price on power (€/MWh) Notional value on gas Average commodity swap price on gas (€/MWh) Notional amount on oil Average commodity swap price on oil ($/bbl) Commodity forwards/futures Notional value on power Average commodity forward/future price on power (€/MWh) Notional value on coal/shipping Average commodity forward/future price on coal/shipping ($/ton) Average commodity forward/future price on gas (€/MWh) Notional value on CO2 Average commodity forward/future price on CO2 (€/ton) Notional value on oil Average commodity forward/future price on oil ($/bbl) Commodity options Notional value on power Average commodity option price on power (€/MWh) Notional value on gas Average commodity option price on gas (€/MWh) Millions of euro At Dec. 31, 2020 Commodity swaps Notional value on power Average commodity swap price on power (€/MWh) Notional value on coal/shipping Average commodity swap price on coal/shipping ($/ton) Notional value on gas Average commodity swap price on gas (€/MWh) Commodity forwards/futures Notional value on power Average commodity forward/future price on power (€/MWh) Notional value on gas Average commodity forward/future price on gas (€/MWh) Notional value on CO2 Average commodity forward/future price on CO2 (€/ton) Notional value on oil Average commodity forward/future price on oil ($/bbl) Commodity options Notional value on power Maturity 2022 2023 2024 2025 2026 Beyond Total 164 53.7 372 13.7 244 168 47.5 129 12.1 99 149 46.6 11 9.4 - 146 46.0 17 12.0 - 472 33.2 93 9.6 - 92.9 79.4 302 20.0 - 5 18.0 - - 21 29.9 - 288 19.7 248 18.7 856 16.6 - - - - - - - - - - - - 21 29.8 - 21 29.8 - 134 32.6 - 124 51.8 131 63.8 669 86.4 319 29.7 14 90.8 637 43.3 - 18.9 61 38.4 57 51.6 21 29.3 - 15.1 476 46.1 600 37.7 10 26.3 99 50.5 1,223 753 1,012 2,650 14 4,368 537 657 228 99 Maturity 2021 2022 2023 2024 2025 Beyond Total 78 40.3 32 51.2 - 1,065 43.2 1,521 14.3 317 24.2 744 45.0 65 37.9 2 57.9 - 244 25.0 973 14.9 134 26.6 413 44.3 64 37.7 - - 246 19.1 17 15.2 37 27.9 - - 8 9 65 37.7 - - 197 17.9 20 4.9 - - 9 53 37.6 - - 191 17.4 20 4.9 - - 9 606 34 - 2,684 2,659 488 1,157 80 281 37.7 - - 741 15.2 108 2.5 - - 45 31.7 Average commodity option price on power (€/MWh) 29.7 26.4 26.4 26.4 402 402 Integrated Annual Report 2021 The following table reports the notional amount and fair value of instruments hedging commodity price risk on transactions outstanding at December 31, 2021 and De- cember 31, 2020, broken down by type of commodity. Millions of euro Notional amount Fair value assets Notional amount Fair value liabilities at Dec. 31, 2021 at Dec. 31, 2020 at Dec. 31, 2021 at Dec. 31, 2020 at Dec. 31, 2021 at Dec. 31, 2020 at Dec. 31, 2021 at Dec. 31, 2020 Derivatives Cash flow hedges Derivatives on power: - swaps - forwards/futures - options 820 769 229 369 2,066 70 640 351 49 Total derivatives on power 1,818 2,505 1,040 Derivatives on coal/shipping: - swaps - forwards/futures - options Total derivatives on coal/shipping Derivatives on gas and oil: - swaps - forwards/futures - options Total derivatives on gas and oil Derivatives on CO2: - swaps - forwards/futures - options Total derivatives on CO2 - 14 - 14 669 3,094 30 3,793 - 537 - 537 34 - - 34 - 1,674 11 1,685 - 482 - 482 - 3 - 3 69 2,557 3 2,629 - 410 - 410 70 361 - 431 11 - - 11 - 456 18 474 - 139 - 139 401 1,881 - 2,282 - - - - 1,095 1,932 70 236 571 - 807 - - - - - (263) (598) (18) (879) - - - - (99) (56) (16) - (72) - - - - - 2,189 (5,150) - (26) (455) - 3,097 2,189 (5,275) (455) - - - - - 5 - 5 - - - - - - - - TOTAL COMMODITY DERIVATIVES 6,162 4,706 4,082 1,055 5,379 3,001 (6,154) (527) The table reports the notional amount and fair value of de- rivatives hedging commodity price risk at December 31, 2021 and at December 31, 2020, broken down by type of hedge. The positive fair value of cash flow hedge derivatives on commodities regards derivatives on gas and oil commod- ities in the amount of €2,629 million, derivatives on CO2 (€410 million), derivatives on power (€1,040 million) and, to a lesser extent, hedges of coal purchases requested by the generation companies in the amount of €3 million. The first category primarily regards hedges of fluctuations in the price of natural gas, for both purchases and sales, carried out for oil commodities and gas products. The CO2 category mainly includes hedging transactions undertaken for Enel Group compliance purposes. The power category mainly includes medium/long-term hedging transactions, especially in Spain and North Amer- ica. Cash flow hedge derivatives on commodities included in liabilities regard derivatives on gas and oil commodities in the amount of €5,275 million (mainly for derivatives hedg- ing sales) and derivatives on power in the amount of €879 million. Notes to the consolidated financial statements 403 403 Cash flow hedge derivatives The following table shows the cash flows expected in com- ing years from cash flow hedge derivatives on commodity price risk. Millions of euro Cash flow hedge derivatives on commodities Positive fair value Negative fair value Fair value at Dec. 31, 2021 Distribution of expected cash flows 2022 2023 2024 2025 2026 Beyond 4,082 2,960 (6,154) (4,892) 720 (858) 122 (126) 72 (84) 45 (58) 163 (136) The following table shows the impact of cash flow hedges of commodity price risk in the statement of financial posi- tion at December 31, 2021 and December 31, 2020. Millions of euro at Dec. 31, 2021 at Dec. 31, 2020 Power swaps Coal/shipping swaps Gas and oil swaps Power forwards/futures Coal/shipping forwards/futures Gas and oil forwards/futures CO2 forwards/futures Power options Gas and oil options Total Notional amount Carrying amount Fair value used to measure ineffectiveness in the year Notional amount Carrying amount Fair value used to measure ineffectiveness in the year 1,221 - 1,764 2,675 14 377 - (30) (223) 3 377 - (30) (223) 3 5,027 (2,592) (2,592) 537 204 99 410 7 (24) 410 7 (24) 605 34 - 2,717 - 3,794 487 70 - 23 11 - 375 - (20) 139 - - 11,541 (2,072) (2,072) 7,707 528 23 11 - 356 - (20) 139 - - 509 The following table shows the impact of the hedged item of cash flow hedges in the statement of financial position at December 31, 2021 and December 31, 2020. Millions of euro at Dec. 31, 2021 at Dec. 31, 2020 Fair value used to measure ineffectiveness in the year Hedging reserve Hedging costs reserve Ineffective portion of carrying amount of CFH derivatives Fair value used to measure ineffectiveness in the year Hedging reserve Hedging costs reserve Ineffective portion of carrying amount of CFH derivatives Future transactions in power Future transactions in coal/ shipping Future transactions in gas and oil Future transactions in CO2 Total (297) (3) 297 3 2,751 (2,751) (410) 410 2,041 (2,041) - - - - - (29) (316) - (2) - (31) (11) 20 (139) (446) 374 11 (20) 139 504 - - - - - 24 - - - 24 Finally, with regard to cash flow hedge derivatives on com- modity prices, in 2021 the entire commodities market experienced major price swings. The greatest impact in terms of changes in the hedging reserve is attributable to future transactions in gas, which of all commodities was the one most affected by the high volatility. 404 404 Integrated Annual Report 2021 49.2 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, 2021 and December 31, 2020. Millions of euro Notional amount Fair value assets Notional amount Fair value liabilities at Dec. 31, 2021 at Dec. 31, 2020 at Dec. 31, 2021 at Dec. 31, 2020 at Dec. 31, 2021 at Dec. 31, 2020 at Dec. 31, 2021 at Dec. 31, 2020 Derivatives at FVTPL on interest rates: - interest rate swaps - interest rate options on exchange rates: 50 - 50 - - currency forwards 2,180 3,501 1 - 23 - (78) 3,368 78 3,368 4 63 - 67 (1,049) 16,706 268 2 - 83 - 14 75 24 100 50 3,628 - 1,088 17,970 113 100 50 1,012 - 109 5,626 9 (71) (2) (62) - (198) (2,927) (16) (88) (4) (44) - (18) (428) (12) 113 19,171 5,744 (3,141) (458) 4 40 - 44 81 2,108 165 133 455 - 588 4,199 16,755 399 16 144 - 160 259 14,121 170 23 (148) - (125) 1,843 (17,374) (402) (1) (27) - (28) (34) (1,999) (173) - - 777 23,207 3 23,987 35 213 - 248 2,904 19,001 232 144 5,493 137 5,774 47 200 - 247 635 13,993 185 22,137 14,813 15,925 2,354 21,353 14,550 (15,933) (2,206) - 3,079 - 3,079 - - - - - - 770 - 770 - 195 - 195 4 - 557 - 557 - - - - - - 209 - 209 - 9 - 9 3 - 1,366 - 1,366 1 - - 1 - - 290 5 295 13 234 - 247 3 - (530) - (530) (1) - - (1) - - (72) (5) (77) (7) (1) - (8) (3) - CCIRSs on commodities 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: - swaps - forwards/futures - options Total derivatives on CO2 Derivatives on other: - swaps - forwards/futures - options Total derivatives on other Embedded derivatives TOTAL 51,681 25,354 19,941 2,817 46,257 22,161 (19,865) (2,916) At December 31, 2021 the notional amount of trading deriv- atives on interest rates came to €200 million. The negative fair value of €72 million improved by €18 million on the pre- vious year, mainly due to developments in the yield curve. At December 31, 2021, the notional amount of derivatives on exchange rates was €5,808 million. The overall increase in their notional value of €1,295 million and the decrease in the associated net fair value of €78 million mainly reflected normal operations and developments in exchange rates. Notes to the consolidated financial statements 405 405 At December 31, 2021, the notional amount of derivatives on commodities came to €91,930 million. The fair value of trading derivatives on commodities classified as assets mainly reflects the market valuation of hedges of gas and oil amounting to €15,925 million, derivatives on power amounting to €3,368 million, derivatives on CO2 amount- ing to €557 million and, to a lesser extent, derivatives on coal totaling €67 million. The fair value of trading derivatives on commodities classified as liabilities mainly regards hedges of gas and oil amounting to €15,933 million, derivatives on power amounting to €3,141 million and derivatives on CO2 and Fair value measurement 50. Assets and liabilities measured at fair value The Group determines fair value in accordance with IFRS 13 whenever such measurement is required by the IFRSs as a recognition or measurement criterion. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability, in an orderly trans- action, between market participants, at the measurement date (i.e., an exit price). The best proxy of fair value is market price, i.e., the current publicly available price actually used on a liquid and active market. The fair value of assets and liabilities is classified in ac- cordance with the three-level hierarchy described below, depending on the inputs and valuation techniques used in determining their fair value: • Level 1, where the fair value is determined on the basis of quoted prices (unadjusted) in active markets for iden- tical assets or liabilities that the entity can access at the measurement date; • Level 2, where the fair value is determined on the basis of inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (such as prices) or indirectly (derived from prices); coal in the amount of €530 million and €125 million, re- spectively. These amounts include transactions managed within the trading portfolios and transactions that, although estab- lished for hedging purposes, did not meet the require- ments for hedge accounting. The “other” category includes hedges using weather deriv- atives. In addition to commodity risk, the Group companies are also exposed to changes in volumes associated with weather conditions (for example, temperature impacts the consumption of gas and power). • Level 3, where the fair value is determined on the basis of unobservable inputs. This note also provides detailed disclosures concerning the valuation techniques and inputs used to perform these measurements. To that end: • recurring fair value measurements of assets or liabilities are those required or permitted by the IFRSs in the state- ment of financial position at the close of each period; • non-recurring fair value measurements are those re- quired or permitted by the IFRSs in the statement of fi- nancial position in particular circumstances. For general information or specific disclosures on the ac- counting treatment of these circumstances, please see note 2 “Accounting policies”. 50.1 Assets measured at fair value in the statement of financial position The following table shows, for each class of assets meas- ured at fair value on a recurring or non-recurring basis in the statement of financial position, the fair value measure- ment at the end of the reporting period and the level in the fair value hierarchy into which the fair value measurements of those assets are classified. 406 406 Integrated Annual Report 2021 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 at Dec. 31, 2021 at Dec. 31, 2021 Equity investments in other companies at FVOCI 28 41 4 15 22 Securities at FVOCI Securities at FVTPL 28.1, 29.1 29.1 Equity investments in other companies at FVTPL Financial assets from service concession arrangements at FVTPL Loan assets and other financial assets measured at fair value Fair value hedge derivatives: - on interest rates - on exchange rates Cash flow hedge derivatives: - on interest rates - on exchange rates - on commodities Trading derivatives: - on interest rates - on exchange rates - on commodities Inventories measured at fair value 28 28 28 49 49 49 49 49 49 49 49 49 Contingent consideration 30, 31 The fair value of “Equity investments in other companies at FVOCI” is determined for listed companies on the basis of the quoted price at the close of the year, while that for unlisted companies is based on a reliable valuation of the relevant assets and liabilities. “Financial assets from service concession arrangements at FVTPL” concern electricity distribution operations in Brazil, mainly by Enel Distribuição Rio de Janeiro, Enel Distribuição Ceará, and Enel Distribuição São Paulo, as well as the gener- ation plant of PH Chucas in Costa Rica, and are accounted for in accordance with IFRIC 12. Fair value was estimated as the net replacement cost based on the most recent rate information available and on the general price index for the Brazilian market. The current portion of “Loan assets and other financial as- sets measured at fair value” essentially regards investments of liquidity. Their fair value is determined using Level 1 mar- ket inputs. Level 3 of the non-current portion of “Loan assets and other financial assets measured at fair value” reports the receiv- able in respect of the sale of Slovak Power Holding, which amounted to €25 million at December 31, 2021. Its fair value was determined using the contractual price formula. The fair value of derivative contracts is determined using the official prices for instruments traded on regulated markets. 404 404 - 32 - 23 2,630 25 19 42 19 1,356 - - - - - - - - - 2,630 - - 9 - - 87 1 - - - 87 1 - - - 25 140 140 19 42 19 1,356 - - - - - - - 104 - - - - - - - - - - - - - 104 - - - - - - - - - - 1,059 332 387 340 3,023 1,066 1,681 276 - - - - - - 277 114 162 - - - - - - - - 1 - - 1 23 - - 1 23 19,640 8,236 11,404 55 15 53 - 2 2 - - - - 13 The fair value of instruments not listed on a regulated mar- ket is determined using valuation methods appropriate for each type of financial instrument and market data as of the end of the reporting period (such as interest rates, exchange rates, volatility), discounting expected future cash flows on the basis of the market yield curve and translating amounts in currencies other than the euro using exchange rates pro- vided by the World Markets Refinitiv (WMR) Company. Derivatives on interest rates and exchange rates are all measured using Level 2 inputs. The fair value of derivatives on commodities is almost al- ways measured using Level 1 or Level 2 inputs, as the deter- mination is based on market inputs as these contracts are entered into with exchange counterparties, leading sector operators or financial institutions. Marginal exceptions for both cash flow hedges and trading transactions include certain derivatives relating to weather derivatives, which are measured on the basis of certified historical data for the underlying variables as well as cer- tain long-term financial contracts (virtual power purchase agreements, or VPPAs), for which internal measurement models were also used in part in order to measure these in- struments over longer time horizons, given the illiquidity of the underlying variables. In accordance with the IFRSs, the Group assesses credit risk, both of the counterparty (Credit Valuation Adjustment or CVA) and its own (Debit Valuation Adjustment or DVA), in order to adjust the fair value of financial instruments for the Notes to the consolidated financial statements 407 407 corresponding amount of counterparty risk where neces- sary. More specifically, the Group measures CVA/DVA us- ing a Potential Future Exposure valuation technique for the net exposure of the position and subsequently allocating the adjustment to the individual financial instruments that make up the overall portfolio. All of the inputs used in this technique are observable on the market. 50.2 Assets not measured at fair value in the statement of financial position For each class of assets not measured at fair value on a recurring basis but whose fair value must be reported, the following table reports the fair value at the end of the year and the level in the fair value hierarchy into which the fair value measurements of those assets 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 at Dec. 31, 2021 at Dec. 31, 2021 Investment property Inventories 21 32 150 - 15 - - - 135 - - 50 - - - 1 - 49 The table reports the fair value of investment property and inventories of real estate not used in the business in the amount of €150 million and €50 million respectively. The amounts were calculated with the assistance of apprais- als conducted by independent experts, who used different methods depending on the specific assets involved. 50.3 Liabilities measured at fair value in the statement of financial position The following table reports for each class of liabilities measured at fair value on a recurring or non-recurring basis in the statement of financial position the fair value measurement at the end of the reporting period and the level in the fair value hierarchy into which the fair value measurements are classified. 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 at Dec. 31, 2021 at Dec. 31, 2021 Fair value hedge derivatives: - on interest rates - on exchange rates - on commodities Cash flow hedge derivatives: - on interest rates - on exchange rates - on commodities Trading derivatives: - on interest rates - on exchange rates - on commodities 49 49 49 49 49 49 49 49 49 Contingent consideration 40, 41 5 - - 620 1,244 1,301 - 2 167 84 - - - - - 5 - - 620 1,244 - - - - - - - - 9 49 - - - - - - - - 9 49 416 742 143 4,853 2,366 2,480 - - 72 - - 2 95 - - - - 84 73 60 - - 73 60 19,563 7,628 11,934 45 - 43 - - - - - 7 - - 1 2 Contingent consideration mainly regards a number of eq- uity investments held by the Group in North America and Greece, whose fair value was determined on the basis of the contractual terms and conditions. 408 408 Integrated Annual Report 2021 50.4 Liabilities not measured at fair value in the statement of financial position For each class of liabilities not measured at fair value in the statement of financial position but whose fair value must be reported, the following table reports the fair value at the end of the period and the level in the fair value hierarchy into which the fair value measurements of those liabilities are classified. Millions of euro Bonds: - fixed rate - floating rate Bank borrowings: - fixed rate - floating rate Non-bank borrowings: - fixed rate - floating rate Total Notes Fair value Level 1 Level 2 Level 3 at Dec. 31, 2021 46.3.1 46.3.1 46.3.1 46.3.1 46.3.1 46.3.1 42,949 39,709 3,273 147 2,298 11,091 3,046 95 - - - - 3,240 3,126 2,298 11,091 3,046 95 62,752 39,856 22,896 - - - - - - - For listed debt instruments, the fair value is given by official prices. For unlisted instruments the fair value is determined using appropriate valuation techniques for each category of financial instrument and market data at the close of the year, including the credit spreads of Enel. Other information 51. Share-based payments Starting in 2019, the Shareholders’ Meeting of Enel SpA (“Enel” or the “Company”) has each year approved the adoption of long-term share-based incentive plans for the management of Enel and/or its subsidiaries pursuant to Article 2359 of the Italian Civil Code. Each of the incentive plans approved (the 2019 Long-Term Incentive Plan, the 2020 Long-Term Incentive Plan and the 2021 Long-Term Incentive Plan; referred to hereinafter, respectively, the “2019 LTI Plan”, the “2020 LTI Plan” and the “2021 LTI Plan” and, jointly, the “Plans”) provides for the grant of ordinary Company shares (“Shares”) to the respective beneficiaries subject to the achievement of specific performance tar- gets. Plan beneficiaries are the Chief Executive Officer/General Manager of Enel and Enel Group managers in the positions most directly responsible for company performance or considered to be of strategic interest. The Plans provide for the award to the beneficiaries of an incentive consist- ing of a monetary component and an equity component. This incentive – determined, at the time of the award, as a base value calculated in relation to the fixed remuner- ation of the individual beneficiary – may vary depending on the degree of achievement of each of the three-year performance targets of the Plans, ranging from zero up to a maximum of 280% or 180% of the base value in the case, respectively, of the Chief Executive Officer/General Man- ager or the other beneficiaries. The Plans establish that, of the total incentive effectively vested, the bonus will be fully paid in shares in the amount of (i) up to 100% of the base value for the Chief Executive Officer/General Manager and (ii) up to 50% of the base val- ue for the other beneficiaries. The actual award of the bonus under the Plans is subject to the achievement of specific performance targets dur- ing the three year performance period. If these targets are achieved, 30% of both the equity and cash components of the incentive will be paid in the first year following the end of the performance period and the remaining 70% will be paid in the second year following the end of the per- formance period. The payment of a substantial portion of long-term variable remuneration (70% of the total) is therefore deferred to the second year following the end of the performance period of the individual Plans. The following table provides information on the 2019 LTI Plan, the 2020 LTI Plan and the 2021 LTI Plan. For more information on the characteristics of the Plans, please see the information documents prepared pursuant Notes to the consolidated financial statements 409 409 to Article 84-bis of the CONSOB Regulation issued with Resolution no. 11971 of May 14, 1999 (the Issuers Regu- lation), which are available to the public in the section of Enel’s website (www.enel.com) dedicated to the Sharehold- ers’ Meetings held respectively on May 16, 2019, May 14, 2020 and May 20, 2021. 2019 LTI Plan 2020 LTI Plan 2021 LTI Plan Grant date Performance period Verification of achievement of targets 12.11.2019(28) 17.09.2020(30) 16.09.2021(32) 2019-2021 2020-2022 2021-2023 2022(29) 2023(31) 2024(33) Payout 2022-2023 2023-2024 2024-2025 In implementation of the authorizations granted by the Shareholders’ Meetings held on May 16, 2019, May 14, 2020 and May 20, 2021 and in compliance with the associated terms and conditions, the Board of Directors approved — at its meetings of September 19, 2019, July 29, 2020 and June 17, 2021 — the launch of share buyback programs to serve the 2019 LTI Plan, the 2020 LTI Plan and the 2021 LTI Plan respectively. The number of Shares whose purchase was authorized by the Board of Directors for each Plan, the actual number of Shares purchased, the associated weighted average price and total value are shown below. Purchases authorized by the Board of Directors Number of shares Number of shares Actual purchases Weighted average price (euros per share) Total value (euros) 2019 LTI Plan 2020 LTI Plan 2021 LTI Plan No more than 2,500,000 for a maximum amount of €10,500,000 million 1,720,000 1,620,000 1,549,152(34) 1,720,000(35) 1,620,000(36) 6.7779 7.4366 7.8737 10,499,999 12,790,870 12,755,459 As a result of the purchases made to support the 2019 LTI Plan, the 2020 LTI Plan and the 2021 LTI Plan, at December 31, 2021 Enel holds a total of 4,889,152 treasury shares, equal to about 0.048% of share capital. The following information concerns the equity instruments granted in 2019, 2020 and 2021. 2021 2020 2019 Number of shares granted at the grant date Fair value per share at the grant date Number of shares potentially available for award 1,529,182 Number of shares granted at the grant date Fair value per share at the grant date Number of shares potentially available for award Number of shares granted at the grant date Fair value per share at the grant date Number of shares potentially available for award 1,529,182 1,538,547 6.983 1,538,547 1,638,775 1,638,775(37) 7.38 1,638,775(38) 1,577,773 7.001 1,577,773 2019 LTI Plan 2020 LTI Plan 2021 LTI Plan (28) The date on which the Board of Directors approved the procedures and timing for granting the 2019 LTI Plan to the beneficiaries (taking account of the proposal issued by the Nomination and Compensation Committee at its meeting of November 11, 2019). (29) On the occasion of the approval of the consolidated financial statements of the Enel Group at December 31, 2021, the Board of Directors will verify the level of achievement of the performance targets of the 2019 LTI Plan. (30) The date on which the Board of Directors approved the procedures and timing for granting the 2020 LTI Plan to the beneficiaries (taking account of the proposal issued by the Nomination and Compensation Committee at its meeting of September 16, 2020). (31) On the occasion of the approval of the consolidated financial statements of the Enel Group at December 31, 2022, the Board of Directors will verify the level of achievement of the performance targets of the 2020 LTI Plan. (32) The date on which the Board of Directors approved the procedures and timing for granting the 2021 LTI Plan to the beneficiaries (taking account of the proposal issued by the Nomination and Compensation Committee at its meeting of June 9, 2021). (33) On the occasion of the approval of the consolidated financial statements of the Enel Group at December 31, 2023, the Board of Directors will verify the level of achievement of the performance targets of the 2021 LTI Plan. (34) Shares purchased in the period between September 23 and December 2, 2019, equal to about 0.015% of share capital. (35) Shares purchased in the period between September 3 and October 28, 2020, equal to about 0.017% of share capital. (36) Shares purchased in the period between June 18 and July 21, 2021, equal to about 0.016% of share capital. (37) The figure has been restated from that published in the financial statements for 2020. (38) The figure has been restated from that published in the financial statements for 2020. 410 410 Integrated Annual Report 2021 The fair value of those equity instruments is measured on the basis of the market price of Enel Shares at the grant date.(39) The cost of the equity component is determined on the basis of the fair value of the equity instruments granted and is recognized over the duration of the vesting period through an equity reserve. The total costs recognized by the Group through profit or loss amounted to €9 million in 2021 (€5 million in 2020). There have been no terminations or amendments involving the 2019 LTI Plan, the 2020 LTI Plan or the 2021 LTI Plan. 52. Related parties As an operator in the field of generation, distribution, transport and sale of electricity and the sale of natural gas, Enel carries out transactions with a number of companies directly or indirectly controlled by the Italian State, the Group’s controlling shareholder. The table below summarizes the main types of transac- tions carried out with such counterparties. Related party Relationship Nature of main transactions Single Buyer Fully controlled (indirectly) by the Ministry for the Economy and Finance Purchase of electricity for the enhanced protection market Cassa Depositi e Prestiti Group Directly controlled by the Ministry for the Economy and Finance Sale of electricity on the Ancillary Services Market (Terna) Sale of electricity transport services (Eni Group) Purchase of transport, dispatching and metering services (Terna) Purchase of postal services (Poste Italiane) Purchase of fuels for generation plants and natural gas storage and distribution services (Eni Group) ESO - 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 EMO - Energy Markets Operator Fully controlled (indirectly) by the Ministry for the Economy and Finance Sale of electricity on the Power Exchange (EMO) Purchase of electricity on the Power Exchange for pumping and plant planning (EMO) Leonardo Group Directly controlled by the Ministry for the Economy and Finance Purchase of IT services and supply of goods In addition, the Group conducts essentially commercial transactions with associates or companies in which it holds non-controlling interests. Finally, Enel also maintains relationships with the pension funds FOPEN and FONDENEL, as well as Fondazione Enel and Enel Cuore, an Enel non-profit company devoted to providing social and healthcare assistance. All transactions with related parties were carried out on normal market terms and conditions, which in some cas- es are determined by the Regulatory Authority for Energy, Networks and the Environment. The following tables summarize transactions with related parties, associates and joint ventures outstanding at De- cember 31, 2021 and December 31, 2020 and carried out during the period. (39) For the 2019 LTI Plan, the grant date is November 12, 2019, i.e., the date of the meeting of the Board of Directors that approved the procedures and timing of the grant under the 2019 LTI Plan to the beneficiaries. For the 2020 LTI Plan, the grant date is September 17, 2020, i.e., the date of the meeting of the Board of Directors that approved the procedures and timing of the grant under the 2020 LTI Plan to the beneficiaries. For the 2021 LTI Plan, the grant date is September 16, 2021, i.e., the date of the meeting of the Board of Directors that approved the procedures and timing of the grant under the 2021 LTI Plan to the beneficiaries. Notes to the consolidated financial statements 411 411 Single Buyer EMO ESO Cassa Depositi e Prestiti Group(1) Other Total 2021 ventures Overall total 2021 % of total Total in financial statements Associates and joint Single Buyer EMO ESO Cassa Depositi e Prestiti Group(1) Other Total at Dec. 31, 2021 ventures Associates and joint Overall total at Dec. 31, Total in financial statements % of total - - - - - - - - - - - - - - - Millions of euro Income statement Revenue from sales and services Other income Other financial income Electricity, gas and fuel purchases 4,613 6,363 Costs for services and other materials Other operating costs Net results from commodity contracts Other financial expense - 6 - - 75 198 - - (1) The figure includes Open Fiber SpA, which was considered an associate last year. 3,018 275 3,165 210 - - - - - 3 - - - 5 15 2,572 2,874 13 13 10 - - - 57 1 - - Millions of euro Statement of financial position Other non-current financial assets Non-current financial derivative assets Other non-current assets Trade receivables Current financial derivative assets Other current financial assets Other current assets Long-term borrowings Non-current contract liabilities Non-current financial derivative liabilities Short-term borrowings Current portion of long-term borrowings Trade payables 1,903 Current contract liabilities Other current liabilities Other information Guarantees issued Guarantees received Commitments - - - - - (1) The figure includes Open Fiber SpA, which was considered an associate last year. 412 412 Integrated Annual Report 2021 - - - 469 - - - - - - - - 641 - - 40 - - - - - 9 - - 76 - - - - - 1 - - - - - - - 119 659 - - 21 536 187 - - 89 1,466 12 38 11 138 401 - - - 36 - 1 2 - 7 - - - 12 - 38 59 36 - 6,668 5 15 13,548 3,009 218 13 10 119 1,173 - - - 1 99 536 194 - - 89 12 76 110 174 401 4,023 342 1 123 278 143 - 11 22 1,120 14 - 148 32 156 24 344 20 59 - 1 6 - 4 - - - 7,010 6 138 13,826 3,152 218 24 32 2021 1,120 14 119 1,321 32 157 123 880 194 1 6 109 4,082 12 80 110 174 401 84,104 3,902 1,882 49,093 19,609 2,095 2,522 6,114 5,704 2,772 3,268 16,076 22,791 8,645 5,002 54,500 6,214 3,339 13,306 4,031 16,959 1,433 12,959 8.3% 0.2% 7.3% 28.2% 16.1% 10.4% 1.0% 0.5% 19.6% 0.5% 3.6% 8.2% 0.1% 1.8% 2.5% 1.6% 3.1% - - 2.7% 24.1% 0.8% 0.6% Revenue from sales and services 3,018 275 3,165 210 Millions of euro Income statement Other income Other financial income Electricity, gas and fuel purchases 4,613 Costs for services and other materials Other operating costs Net results from commodity contracts Other financial expense (1) The figure includes Open Fiber SpA, which was considered an associate last year. - - - - 6 - - - - - - - - - - - - - - - - - - - 6,363 75 198 - - - - - - - - - - - - - - - - - - - 40 469 1,903 641 - - - 3 - - - - - - 9 - - - - - - - 1 - - - - - 76 2,572 2,874 5 15 13 13 10 119 659 21 536 187 - - - - - - 1,466 89 12 38 11 138 401 57 - - - 1 - - 36 - - - - 1 2 - 7 - - - 12 - 38 59 36 - Millions of euro Statement of financial position Other non-current financial assets Non-current financial derivative assets Other non-current assets Trade receivables Current financial derivative assets Other current financial assets Other current assets Long-term borrowings Non-current contract liabilities Non-current financial derivative liabilities Short-term borrowings Current portion of long-term borrowings Trade payables Current contract liabilities Other current liabilities Other information Guarantees issued Guarantees received Commitments (1) The figure includes Open Fiber SpA, which was considered an associate last year. Single Buyer EMO ESO Cassa Depositi e Prestiti Group(1) Other Total 2021 Associates and joint ventures Overall total 2021 Total in financial statements % of total 6,668 5 15 13,548 3,009 218 13 10 342 1 123 278 143 - 11 22 7,010 6 138 13,826 3,152 218 24 32 84,104 3,902 1,882 49,093 19,609 2,095 2,522 6,114 8.3% 0.2% 7.3% 28.2% 16.1% 10.4% 1.0% 0.5% Single Buyer EMO ESO Cassa Depositi e Prestiti Group(1) Other Total at Dec. 31, 2021 Associates and joint ventures Overall total at Dec. 31, 2021 Total in financial statements % of total - - 119 1,173 - 1 99 536 194 - - 89 4,023 12 76 110 174 401 1,120 14 - 148 32 156 24 344 - 1 6 20 59 - 4 - - - 1,120 14 119 1,321 32 157 123 880 194 1 6 109 4,082 12 80 110 174 401 5,704 2,772 3,268 16,076 22,791 8,645 5,002 54,500 6,214 3,339 13,306 4,031 16,959 1,433 12,959 19.6% 0.5% 3.6% 8.2% 0.1% 1.8% 2.5% 1.6% 3.1% - - 2.7% 24.1% 0.8% 0.6% Notes to the consolidated financial statements 413 413 Millions of euro Income statement Revenue from sales and services Other income Financial income Single Buyer EMO - - - 808 - - Electricity, gas and fuel purchases 2,038 2,059 Costs for services and other materials Other operating costs Results from commodity contracts Other financial expense - 6 - - 38 183 - - ESO 295 - - - 3 - - - Cassa Depositi e Prestiti Group Other Total 2020 ventures Overall total 2020 % of total Total in financial statements Associates and joint 2,542 - - 1,122 2,728 9 1 13 187 1 - - 44 1 - - (1) The figures for 2020 have been adjusted, for comparative purposes only, to take account of the effects associated with the change in classification connect- ed with the fair value measurement of outstanding contracts at the end of the period for the purchase and sale of commodities with physical settlement. The change in classification had no impact on operating profit. For more details, please see note 7 to these consolidated financial statements. (2) For comparative purposes only, €87 million in 2020 in respect of the component recognized through profit or loss deriving from the remeasurement at fair value of the financial assets connected with service concession arrangements involving distribution operations in Brazil falling within the scope of IFRIC 12 have been reclassified from financial income to revenue. The latter classification had an impact of the same amount on operating profit. For more details, please see note 7 to these consolidated financial statements. Millions of euro Statement of financial position Other non-current financial assets Non-current financial derivative assets Trade receivables Other current financial assets Other current assets Long-term borrowings Non-current contract liabilities Short-term borrowings Current portion of long-term borrowings Trade payables Current contract liabilities Other current liabilities Other information Guarantees issued Guarantees received Commitments Single Buyer EMO ESO Cassa Depositi e Prestiti Group Other Total Associates and joint at Dec. 31, 2020 ventures Overall total at Dec. 31, 2020 Total in financial statements % of total - - - - - - - - - 554 - - - - - - - 35 - 9 - - - - 83 - - 250 - - - - 15 - 84 - - - - 746 - - - - - - - 569 - 63 625 4 - 89 748 - 15 13 157 102 - - 29 1 2 - 6 - - 5 1 13 83 36 2 3,832 1 - 5,219 2,813 199 1 13 - - 1 648 158 625 10 - 89 1 28 346 193 104 2,136 206 9 62 166 145 3 - 58 21 215 189 6 359 151 21 19 69 15 9 - - - 4,038 10 62 5,385 2,958 202 1 71 21 863 190 164 984 161 21 108 2,205 16 37 346 193 104 1,144 1,144 63,642(1) (2) 2,362 2,676(2) 26,026(1) 18,366(1) 2,202 (99)(1) 4,485 5,159 1,236 12,046 5,113 3,578 49,519 6,191 6,345 3,168 12,859 1,275 11,651 6.3% 0.4% 2.3% 20.7% 16.1% 9.2% -1.0% 1.6% 22.2% 1.7% 7.2% 3.7% 4.6% 2.0% 2.6% 0.3% 3.4% 17.1% 1.3% 0.3% 414 414 Integrated Annual Report 2021 (1) The figures for 2020 have been adjusted, for comparative purposes only, to take account of the effects associated with the change in classification connect- ed with the fair value measurement of outstanding contracts at the end of the period for the purchase and sale of commodities with physical settlement. The change in classification had no impact on operating profit. For more details, please see note 7 to these consolidated financial statements. (2) For comparative purposes only, €87 million in 2020 in respect of the component recognized through profit or loss deriving from the remeasurement at fair value of the financial assets connected with service concession arrangements involving distribution operations in Brazil falling within the scope of IFRIC 12 have been reclassified from financial income to revenue. The latter classification had an impact of the same amount on operating profit. For more details, please see note 7 to these consolidated financial statements. Millions of euro Income statement Revenue from sales and services Other income Financial income Costs for services and other materials Other operating costs Results from commodity contracts Other financial expense Electricity, gas and fuel purchases 2,038 Millions of euro Statement of financial position Other non-current financial assets Non-current financial derivative assets Trade receivables Other current financial assets Other current assets Long-term borrowings Non-current contract liabilities Short-term borrowings Current portion of long-term borrowings Trade payables Current contract liabilities Other current liabilities Other information Guarantees issued Guarantees received Commitments - - - - 6 - - - - - - - - - - - - - - - - 808 2,059 38 183 - - - - - - - - - - - - 35 - - - 9 250 ESO 295 - - - 3 - - - - - - - - - - - - - - - 15 84 1,122 2,728 - - 9 1 13 569 63 625 - - - 4 - 89 748 - 15 13 157 102 554 83 746 44 1 - - 1 - - 29 - - 1 2 - 6 - - 5 1 13 83 36 2 Single Buyer EMO Cassa Depositi e Prestiti Group Other Total 2020 Associates and joint ventures Overall total 2020 Total in financial statements % of total 2,542 187 3,832 1 - 5,219 2,813 199 1 13 206 9 62 166 145 3 - 58 4,038 10 62 5,385 2,958 202 1 71 63,642(1) (2) 2,362 2,676(2) 26,026(1) 18,366(1) 2,202 (99)(1) 4,485 6.3% 0.4% 2.3% 20.7% 16.1% 9.2% -1.0% 1.6% Single Buyer EMO ESO Cassa Depositi e Prestiti Group Other Total at Dec. 31, 2020 Associates and joint ventures Overall total at Dec. 31, 2020 Total in financial statements % of total - - 648 1 158 625 10 - 89 2,136 1 28 346 193 104 1,144 1,144 21 215 189 6 359 151 21 19 69 15 9 - - - 21 863 190 164 984 161 21 108 2,205 16 37 346 193 104 5,159 1,236 12,046 5,113 3,578 49,519 6,191 6,345 3,168 12,859 1,275 11,651 22.2% 1.7% 7.2% 3.7% 4.6% 2.0% 2.6% 0.3% 3.4% 17.1% 1.3% 0.3% Notes to the consolidated financial statements 415 415 With regard to disclosures on the remuneration of di- rectors, members of the Board of Statutory Auditors, the General Manager and key management personnel, provid- ed for under IAS 24, please see the following tables. Millions of euro Remuneration of members of the Board of Directors and Board of Statutory Auditors and the General Manager Short-term employee benefits Other long-term benefits Total Millions of euro Remuneration of key management personnel Short-term employee benefits Other long-term benefits Total 2021 2020 Change 5 1 6 6 4 10 (1) (3) (4) -16.7% -75.0% -40.0% 2021 2020 Change 13 4 17 13 8 21 - (4) (4) - -50.0% -19.0% In November 2010, the Board of Directors of Enel SpA ap- proved a procedure governing the approval and execution of transactions with related parties carried out by Enel SpA directly or through subsidiaries. The procedure (both the version in effect until June 30, 2021 and the version amended in June 2021 and in effect from July 1, 2021 are available at https://www.enel.com/investors/governance/ bylaws-rules-policies/) sets out rules designed to ensure the transparency and procedural and substantive propri- ety of transactions with related parties. It was adopted in implementation of the provisions of Article 2391-bis of the Italian Civil Code and the implementing regulations issued by CONSOB. In 2021, no transactions were carried out for which it was necessary to make the disclosures required In the rules on transactions with related parties adopted with CONSOB Resolution no. 17221 of March 12, 2010, as amended. 416 416 Integrated Annual Report 2021 53. Government grants - Disclosure pursuant to Article 1, paragraphs 125-129, of Law 124/2017 Pursuant to Article 1, paragraphs 125-129, of Law 124/2017 as amended, the following provides information on grants received from Italian public agencies and bodies, as well as donations by Enel SpA and the fully consolidated subsidi- aries to companies, individuals and public and private enti- ties. The disclosure comprises: (i) grants received from Ital- ian public entities/State entities; and (ii) donations made by Enel SpA and Group subsidiaries to public or private parties resident or established in Italy. The following disclosure includes payments in excess of €10,000 made by the same grantor/donor during 2021, even if made in multiple financial transactions. They are recognized on a cash basis. Pursuant to the provisions of Article 3-quater of Decree Law 135 of December 14, 2018, ratified with Law 12 of Feb- ruary 11, 2019, for grants received, please refer to the in- formation contained in the National Register of State Aid referred to in Article 52 of Law 234 of December 24, 2012. Grants received in millions of euro Financial institution/Grantor Beneficiary Amount Notes Anpal Anpal Anpal Enel Green Power Italy Srl Enel Green Power Italy Srl Enel Green Power Italy Srl Invitalia Enel Green Power Italy Srl 0.02 0.05 0.09 8.44 Anpal Enel Energia SpA 0.03 Anpal Enel Energia SpA 0.15 Anpal Enel Energia SpA 0.04 Anpal Anpal Anpal Anpal Anpal Servizio Elettrico Nazionale SpA Servizio Elettrico Nazionale SpA Servizio Elettrico Nazionale SpA Enel Global Trading SpA Enel Global Trading SpA Anpal Enel X Srl 0.03 0.03 0.02 0.01 0.01 0.01 Anpal Enel X Srl 0.03 Instalment of grant received in first instance FNC-C-05468, financed through the New Skills Fund referred to in Article 88 of Decree Law of May 19, 2020 and the ministerial decree of October 9, 2020 Instalment of grant received in second instance FNC-C-06952, financed through the New Skills Fund referred to in Article 88 of Decree Law of May 19, 2020 and the ministerial decree of October 9, 2020 Instalment of grant received in first instance FNC-C-05468, financed through the New Skills Fund referred to in Article 88 of Decree Law of May 19, 2020 and the ministerial decree of October 9, 2020 Instalment of grant received under 3SUN Development Contract, financed under Invitalia Measure of November 17, 2017 Instalment of grant received in first instance FNC-C-05468, financed through the New Skills Fund referred to in Article 88 of Decree Law of May 19, 2020 and the ministerial decree of October 9, 2020 Instalment of grant received in second instance FNC-C-06952, financed through the New Skills Fund referred to in Article 88 of Decree Law of May 19, 2020 and the ministerial decree of October 9, 2020 Instalment of grant received in first instance FNC-C-10223, financed through the New Skills Fund referred to in Article 88 of Decree Law of May 19, 2020 and the ministerial decree of October 9, 2020 Instalment of grant received in first instance FNC-C-05468, financed through the New Skills Fund referred to in Article 88 of Decree Law of May 19, 2020 and the ministerial decree of October 9, 2020 Instalment of grant received in second instance FNC-C-06952, financed through the New Skills Fund referred to in Article 88 of Decree Law of May 19, 2020 and the ministerial decree of October 9, 2020 Instalment of grant received in first instance FNC-C-10223, financed through the New Skills Fund referred to in Article 88 of Decree Law of May 19, 2020 and the ministerial decree of October 9, 2020 Instalment of grant received in second instance FNC-C-06952, financed through the New Skills Fund referred to in Article 88 of Decree Law of May 19, 2020 and the ministerial decree of October 9, 2020 Instalment of grant received in first instance FNC-C-10223, financed through the New Skills Fund referred to in Article 88 of Decree Law of May 19, 2020 and the ministerial decree of October 9, 2020 Instalment of grant received in first instance FNC-C-05468, financed through the New Skills Fund referred to in Article 88 of Decree Law of May 19, 2020 and the ministerial decree of October 9, 2020 Instalment of grant received in second instance FNC-C-06952, financed through the New Skills Fund referred to in Article 88 of Decree Law of May 19, 2020 and the ministerial decree of October 9, 2020 Notes to the consolidated financial statements 417 417 Grants received in millions of euro Financial institution/Grantor Beneficiary Amount Notes Anpal Enel X Srl 0.01 Anpal Enel Sole Srl 0.01 Anpal Anpal Anpal Anpal Anpal Anpal Anpal Anpal Anpal Anpal Anpal Enel Produzione SpA Enel Produzione SpA Enel Produzione SpA Enel Global Services Srl Enel Global Services Srl Enel Global Services Srl e-distribuzione SpA e-distribuzione SpA e-distribuzione SpA Enel Global Infrastructure and Networks Srl Enel Global Infrastructure and Networks Srl 0.03 0.05 0.06 0.01 0.13 0.02 0.44 0.19 0.20 0.09 0.07 Anpal Enel Italia SpA 0.03 Anpal Enel Italia SpA 0.07 Instalment of grant received in third instance FNC-C-10223, financed through the New Skills Fund referred to in Article 88 of Decree Law of May 19, 2020 and the ministerial decree of October 9, 2020 Instalment of grant received in third instance FNC-C-10223, financed through the New Skills Fund referred to in Article 88 of Decree Law of May 19, 2020 and the ministerial decree of October 9, 2020 Instalment of grant received in first instance FNC-C-05468, financed through the New Skills Fund referred to in Article 88 of Decree Law of May 19, 2020 and the ministerial decree of October 9, 2020 Instalment of grant received in second instance FNC-C-06952, financed through the New Skills Fund referred to in Article 88 of Decree Law of May 19, 2020 and the ministerial decree of October 9, 2020 Instalment of grant received in third instance FNC-C-10223, financed through the New Skills Fund referred to in Article 88 of Decree Law of May 19, 2020 and the ministerial decree of October 9, 2020 Instalment of grant received in first instance FNC-C-05468, financed through the New Skills Fund referred to in Article 88 of Decree Law of May 19, 2020 and the ministerial decree of October 9, 2020 Instalment of grant received in second instance FNC-C-06952, financed through the New Skills Fund referred to in Article 88 of Decree Law of May 19, 2020 and the ministerial decree of October 9, 2020 Instalment of grant received in first instance FNC-C-10223, financed through the New Skills Fund referred to in Article 88 of Decree Law of May 19, 2020 and the ministerial decree of October 9, 2020 Instalment of grant received in first instance FNC-C-05468, financed through the New Skills Fund referred to in Article 88 of Decree Law of May 19, 2020 and the ministerial decree of October 9, 2020 Instalment of grant received in second instance FNC-C-06952, financed through the New Skills Fund referred to in Article 88 of Decree Law of May 19, 2020 and the ministerial decree of October 9, 2020 Instalment of grant received in third instance FNC-C-10223, financed through the New Skills Fund referred to in Article 88 of Decree Law of May 19, 2020 and the ministerial decree of October 9, 2020 Instalment of grant received in second instance FNC-C-06952, financed through the New Skills Fund referred to in Article 88 of Decree Law of May 19, 2020 and the ministerial decree of October 9, 2020 Instalment of grant received in third instance FNC-C-10223, financed through the New Skills Fund referred to in Article 88 of Decree Law of May 19, 2020 and the ministerial decree of October 9, 2020 Instalment of grant received in first instance FNC-C-05468, financed through the New Skills Fund referred to in Article 88 of Decree Law of May 19, 2020 and the ministerial decree of October 9, 2020 Instalment of grant received in second instance FNC-C-06952, financed through the New Skills Fund referred to in Article 88 of Decree Law of May 19, 2020 and the ministerial decree of October 9, 2020 Anpal Enel Italia SpA 0.02 Instalment of grant received in first instance FNC-C-10223, financed through the New Skills Fund referred to in Article 88 of Decree Law of May 19, 2020 and the ministerial decree of October 9, 2020 Ministry of Universities and Research (MUIR) Enel Italia SpA 0.03 Instalment of grant received for first and second progress status report for Project SE4I, financed under MUIR NOP “R&I” 2014-2020, Decree of Director 1735/Ric. of July 13, 2017 “Notice for the presentation of industrial research and experimental development projects in the 12 specialist areas indicated in the 2015-2020 NRP” 10.43 Total 418 418 Integrated Annual Report 2021 Donations made in millions of euro Grantor Enel SpA Enel SpA Enel SpA Enel SpA Enel SpA Beneficiary Enel Cuore Onlus OECD International Energy Agency (IEA) Ashoka Italy Onlus European University Institute Università Commerciale Luigi Bocconi Enel X Srl Enel Cuore Onlus Enel Produzione SpA Ente della zona industriale di Porto Marghera Enel Produzione SpA Assocarboni Enel Produzione SpA Fondazione Centro Studi Enel Enel Produzione SpA Enel Cuore Onlus Enel Produzione SpA Enel Cuore Onlus Enel Produzione SpA Enel Cuore Onlus Enel Produzione SpA Fondazione Centro Studi Enel Enel Produzione SpA Assonime Enel Italia SpA ASES - Agricoltori, Sostenibilità E Sviluppo (Associazione non profit) Enel Italia SpA Comune di Brindisi Enel Italia SpA Enel Cuore Onlus Enel Italia SpA Enel Italia SpA Enel Italia SpA Enel Italia SpA Enel Italia SpA Fondazione Accademia Nazionale “Santa Cecilia” Fondazione Centro Studi Enel Fondazione Maggio Musicale Fiorentino Moige - Movimento italiano genitori Onlus Società Cooperativa Sociale Camelot Onlus Enel Italia SpA Fondazione Teatro alla Scala e-distribuzione SpA Enel Cuore Onlus e-distribuzione SpA Enel Cuore Onlus e-distribuzione SpA Fondazione Centro Studi Enel e-distribuzione SpA Fondazione Centro Studi Enel e-distribuzione SpA Centro Vaccinale - Varese Enel Energia SpA Enel Energia SpA Enel Energia SpA Enel Energia SpA Enel Energia SpA Enel Energia SpA Enel Energia SpA Enel Energia SpA Enel Energia SpA Anigas Anigas Anigas Confimprese Fondazione Centro Studi Enel Fondazione Centro Studi Enel Assonime Enel Cuore Onlus Enel Cuore Onlus Enel Global Trading SpA Enel Cuore Onlus Enel Global Trading SpA Fondazione Centro Studi Enel Amount Notes 0.04 0.08 0.02 0.10 0.07 0.04 0.02 0.03 0.09 0.13 0.04 0.03 0.09 0.03 0.02 0.01 2021 donation 2021 donation 2021 donation 2021 donation Donation to support study grants 2021 donation 2021 association dues Enel 2021 participation 50% advance on 2021 donation Balance of 2021 donation 2021 donation 2021 special donation 2021 donation 2021 association dues Donation for #lanaturanonsiferma project Donation to support Brindisi Brilla project under patronage of City of Brindisi, implemented in collaboration with Associazione Il Cielo Itinerante. The project is intended to encourage young people to study STEM fields (Science, Technology, Engineering and Mathematics) 0.11 Donation to finance institutional activities, mainly aimed at supporting projects consistent with the purposes of the association 1.20 Donation to support the Foundation’s cultural activities 0.15 0.40 0.10 0.02 0.60 2.44 0.52 1.40 1.41 0.01 0.08 0.10 0.10 0.01 1.23 1.01 0.02 1.26 0.37 0.04 0.10 Donation to support research projects and advanced training Donation to support the Foundation’s cultural activities Donation to support the Young Ambassadors Campaign for digital citizenship to counter cyber risk, bullying and cyberbullying in all its forms Donation to support the project with the Sustainable Development School to create learning courses for teachers in order to promote global citizenship education Donation to support the Foundation’s cultural activities 80% balance of 2019 donation 20% of 2021 donation 50% balance of 2020 donation 50% of 2021 donation Donation of grid connection for healthcare facilities involved in fighting COVID-19 Balance of 2020 association dues Advance on 2021 association dues Balance of 2021 association dues 2021 association dues Balance of 2020 donation 50% advance on 2021 donation 2021 association dues 80% balance of 2019 donation 50% of 2021 donation 2021 donation 2021 donation to support research projects and advanced training 13.50 Total Notes to the consolidated financial statements 419 419 54. 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: at Dec. 31, 2021 at Dec. 31, 2020 Change - sureties and other guarantees granted to third parties 4,937 11,451 (6,514) Commitments to suppliers for: - electricity purchases - fuel purchases - various supplies - tenders - other Total TOTAL Compared with December 31, 2020, the increase of €3,844 million in commitments for electricity purchases is essential- ly attributable to companies in Latin America, in particular in Brazil, and mainly reflects exchange rate effects, high prices due to inflation in the period and differences in the state of progress of outstanding contracts. The increase of €16,187 million in commitments for fuel pur- chases mainly regards gas supplies, especially in Spain and Italy, and reflected the increase in demand for natural gas and in gas prices, as well as exchange rate effects. For more details on the expiry of commitments and guar- antees, please see the section “Commitments to purchase commodities” in note 47. The Group, acting through its subsidiary Enel Italia, has also entered into two guarantee contracts with which it provid- ed Open Fiber with the turnover necessary to participate in two calls for tenders organized by Infratel (respectively, on June 3, 2016 and August 8, 2016), which Open Fiber itself did not have at the time of participation in those tenders. None- theless, to date the profitability and financial position now achieved by Open Fiber makes it highly unlikely that the guar- antee will be called in. 55. Contingent assets and liabilities The following reports the main contingent assets and lia- bilities at December 31, 2021, which are not recognized in the consolidated financial statements as they do not meet the requirements provided for in IAS 37. 420 420 Integrated Annual Report 2021 71,244 58,042 1,631 4,668 6,187 141,772 146,709 67,400 41,855 1,511 3,604 4,348 118,718 130,169 3,844 16,187 120 1,064 1,839 23,054 16,540 Brindisi Sud thermal generation plant - Ash dispute - Italy With regard to the criminal investigation initiated by the Public Prosecutor’s Office of the Court of Lecce in 2017 concerning the use of fly ash in the cement industry, the Brindisi Sud power plant was involved in a criminal inves- tigation that resulted in the issue of a preventive seizure order that allowed operation of the plant subject to cer- tain technical requirements. The order also provided for the seizure of Enel Produzione assets and receivables in an amount of about €523 million. On August 1, 2018, the Lecce Public Prosecutor lifted its seizure of the plant, with the consequent termination of the judicial custody/ad- ministration of the facility and the restitution of the other seized assets to Enel Produzione. The lifting of the seizure order was granted as a result of the fact that during the investigation the independent experts appointed by the investigating magistrate at the Court of Lecce issued a re- port, filed first in preliminary form on July 16, 2018 and de- finitively on October 10, 2018, that confirmed the non-haz- ardous nature of the ash, finding it suitable for use in the cement-making process, as well as the appropriateness of the operation of the plant. Although the seizure was lifted, the preliminary investigation continued both against the accused individuals and the company pursuant to Legis- lative Decree 231 of June 8, 2001. Following the hearing of January 22, 2019, ordered by the investigating magistrate at the request of the Public Prosecutor to receive testimo- ny from the experts on their report, the experts reiterat- ed the non-hazardous nature of the ash produced by the plant and the possibility of their use in the production of cement. Subsequently, a pre-trial hearing was conducted in 2021, following which the pre-trial hearing judge granted peti- tions to participate in the trial as civil plaintiff filed by the City of Brindisi, which quantified damages at about €27 million, requesting a provisional award of €8 million, and by the Re- gion of Puglia, which has not yet quantified the damages requested. The pre-trial hearing judge remanded all of the defendants before the Court of Brindisi at the hearing of December 9, 2021. Brindisi Sud thermal generation plant - Criminal proceedings against Enel employees - Italy Again with regard to the Brindisi Sud thermal generation plant, a criminal proceeding was held before the Court of Brindisi. A number of employees of Enel Produzione – cit- ed as a liable party in civil litigation – have been accused of causing criminal damage and dumping of hazardous sub- stances with regard to the alleged contamination of land adjacent to the plant with coal dust as a result of actions be- tween 1999 and 2011. At the end of 2013, the accusations were extended to cover 2012 and 2013. As part of the pro- ceeding, injured parties, including the Province and City of Brindisi, have submitted claims for total damages of about €1.4 billion. In its decision of October 26, 2016, the Court of Brindisi: (i) acquitted nine of the thirteen defendants for not having committed the offense; (ii) ruled that it did not have to proceed for two of the defendants as the offense was time- barred; and (iii) convicted the remaining two defendants, sentencing them with all the allowances provided for by law to nine months’ imprisonment. With regard to payment of damages, the Court’s ruling also: (i) denied all claims of pub- lic parties and associations acting in the criminal proceed- ing to recover damages; and (ii) granted most of the claims filed by the private parties acting to recover damages, refer- ring the latter to the civil courts for quantification without granting a provisional award. The convicted employees and the civilly liable defendant, Enel Produzione, as well as one of the employees for whom the expiry of period of limitations had been declared, appealed the conviction. On February 8, 2019, the Lecce Court of Appeal: (i) confirmed the trial court ruling regarding the criminal convictions of two Enel Produzione executives; (ii) denied the claims for damages of some private appellants; (iii) granted some claims for dam- ages, which had been denied in the trial court, referring the parties, like the others – whose claims had been granted by the trial court – to the civil courts for quantification, without granting a provisional award; (iv) confirmed for the rest the ruling of the Court of Brindisi except for extending litigation costs to the Province of Brindisi, which had not been award- ed damages at either the trial court or on appeal. With a subsequent ruling, the Court of Appeal of Lec- ce granted the appeal lodged by the Province of Brindisi against the ruling, acknowledging that a material error had been made and therefore recognizing the generic entitle- ment of the Province to damages. The defendants filed an appeal against ruling with the Court of Cassation. Follow- ing the hearing of October 1, 2020, the Court of Cassation overturned the ruling of the Court of Appeal of Lecce, with referral to another section of the same court for a new pro- ceeding. The new proceeding was held before the mixed criminal section of the Court of Appeal of Lecce, which, at the hearing of November 10, 2021, acquitted the defend- ants for not having committed the offense and consequent- ly revoked the civil rulings. In addition to the proceeding above, two criminal proceed- ings are also under way before the Courts of Reggio Cal- abria and Vibo Valentia against a number of employees of Enel Produzione for the offense of illegal waste disposal in connection with alleged violations concerning the disposal of waste from the Brindisi plant. Enel Produzione was not named a liable party for civil damages in these proceedings. Both of the aforementioned trials were resolved positively for the employees of Enel Produzione: as regards the pro- ceedings before the Court of Vibo Valentia, at the hearing of June 17, 2021, the Court read out the operative portion of the ruling, declaring that it should not proceed against the defendants as the offences with which they were charged were time-barred under the statute of limitations, also de- nying the aggravating circumstance referred to in Article 434, paragraph 2 of the Criminal Code. The criminal pro- ceedings before the Court of Reggio Calabria had ended previously at the hearing of June 23, 2016. The court ac- quitted the defendants because it found that no crime had been committed for nearly all the most serious charges and for expiration of the statute of limitations for one serious charge and for all of the remaining charges involving minor offenses. Enel, Enel Energia and Servizio Elettrico Nazionale antitrust proceeding - Italy On May 11, 2017, the Competition Authority announced the beginning of proceedings for alleged abuse of a dominant position against Enel SpA (Enel), Enel Energia SpA (EE) and Servizio Elettrico Nazionale SpA (SEN), with the concomitant performance of inspections. The proceeding was initiated on the basis of complaints filed by the Italian Association of Energy Wholesalers and Traders (AIGET) and the company Green Network SpA (GN), as well as a number of complaints from individual consumers. On December 20, 2018 the Competition Authority issued its final ruling, with which it levied a fine on Enel SpA, SEN and EE of €93,084,790.50, for abuse of a dominant position in violation of Article 102 of the Treaty on the Functioning of the European Union (TFEU). Notes to the consolidated financial statements 421 421 The disputed conduct consisted in the adoption of a strat- egy to exclude competitors from the free market for retail power supply on the part of the Group’s operating compa- nies, in particular EE, who allegedly used the privacy con- sent given by consumers to channel their offers within the Group in order to contact SEN customers who were still being served on the regulated market. With regard to other allegations made with the measure to initiate the proceeding, concerning the organization and performance of sales activities at physical locations (Enel Points and Enel Point Partner Shops) and winback policies reported by GN, the Competition Authority reached the conclusion that the preliminary findings did not provide sufficient evidence of any abusive conduct on the part of Enel Group companies. The companies involved challenged the measures of the Competition Authority and filed an appeal to void the ruling before the Lazio Regional Administrative Court. The deci- sion of that court, filed on October 17, 2019, partially upheld the appeals filed by SEN and EE, declaring that the abusive conduct had been engaged in for a period of 1 year and 9 months, rather than the original period of 5 years and 5 months, and requiring the Authority to recalculate the pen- alty in accordance with the criteria specified in the ruling. With the same ruling, the Regional Administrative Court denied Enel’s appeal – which challenged the joint and sev- eral liability of the Parent with SEN and EE. The ruling had no autonomous financial impact on the Competition Author- ity’s obligation to recalculate the penalty. With a measure dated November 27, 2019, the Competition Authority set the recalculated penalty at €27,529,786.46. The rulings of the Regional Administrative Court were challenged on appeal before the Council of State by the three Enel Group companies and a precautionary request was presented at the same time asking for the suspension of the measure for recalculating the penalty levied by the Competition Authority. With an order of July 20, 2020, the Council of State, after the joinder of the three appeals, sus- pended the ruling and ordered that the issue be submitted for a preliminary ruling before the Court of Justice of the European Union (CJEU) pursuant to Article 267 of the TFEU, formulating a number of questions aimed at clarifying the interpretation of the concept of “abuse of a dominant po- sition” to be applied to the present case. On September 11 and 18, 2020, the CJEU notified EE and SEN and Enel, respectively, of the initiation of a proceeding pursuant to Article 267 of the TFEU. The companies then filed briefs and, subsequently, EE and SEN participated at a hearing on September 9, 2021. At the following hearing of December 9, 2021, the conclusions of the Advocate General were pre- sented to the CJEU. Pending the opening of the proceedings before the CJEU, Enel, EE and SEN filed an additional precautionary petition to the Council of State asking for the suspension of the en- 422 422 Integrated Annual Report 2021 forceability of the contested ruling of the Regional Admin- istrative Court and the measure recalculating the penalty. With three separate orders with identical content – pub- lished on November 16, 2020 – the Council of State grant- ed the request for suspension filed by the Enel companies and, as a guarantee of payment of the penalty in the event of an unfavorable final ruling, required the issue of a first demand surety in favor of the Competition Authority in an amount equal to that of the recalculated penalty suspend- ed with the precautionary orders. The guarantee was duly provided. With a separate ruling, the Council of State also set the date of the final trial session of the appeal for November 11, 2021. That hearing was postponed pending a decision from the CJEU. BEG litigation - Italy, France, the Netherlands, Luxembourg Following an arbitration proceeding initiated by BEG SpA (BEG) in Italy, Enelpower SpA (Enelpower) obtained a rul- ing in its favor in 2002, which was upheld by the Court of Cassation in 2010, which entirely rejected the petition for damages with regard to alleged breach by Enelpower of an agreement concerning the construction of a hydroelectric power station in Albania. Subsequently, BEG, acting through its subsidiary Albania BEG Ambient, filed suit against Enel- power and Enel SpA (Enel) in Albania concerning the matter, obtaining a ruling from the District Court of Tirana on March 24, 2009, upheld by the Albanian Court of Cassation, order- ing Enelpower and Enel to pay tortious damages of about €25 million for 2004 as well as an unspecified amount of tortious damages for subsequent years. Following the rul- ing, Albania BEG Ambient demanded payment of more than €430 million from Enel. With a ruling of June 16, 2015, the first level was complet- ed in the additional suit lodged by Enelpower SpA and Enel SpA with the Court of Rome asking the Court to ascertain the liability of BEG SpA for having evaded compliance with the arbitration ruling issued in Italy in favor of Enelpower SpA through the legal action taken by Albania BEG Ambient Shpk. With this action, Enelpower SpA and Enel SpA asked the Court to find BEG liable and order it to pay damages in the amount that the other could be required to pay to Al- bania BEG Ambient Shpk in the event of the enforcement of the ruling issued by the Albanian courts. With the ruling, the Court of Rome found that BEG SpA did not have stand- ing to be sued, or alternatively, that the request was not ad- missible for lack of an interest for Enel SpA and Enelpower SpA to sue, as the Albanian ruling had not yet been declared enforceable in any court. The Court ordered the setting off of court costs. Enel SpA and Enelpower SpA appealed the ruling before the Rome Court of Appeal, asking that it be overturned in full. The ruling is at the decision stage. On November 5, 2016, Enel SpA and Enelpower SpA filed a petition with the Albanian Court of Cassation, asking for the ruling issued by the District Court of Tirana on March 24, 2009 to be voided. The proceeding is still pending. On May 20, 2021, the European Court of Human Rights (ECHR) issued a ruling with which it decided the appeal brought by BEG against the Italian State for violation of Arti- cle 6.1 of the European Convention on Human Rights. With this decision, the Court denied BEG's request to reopen the arbitration proceedings, and also rejected BEG's claim for pecuniary damages amounting to about €1.2 billion due to the absence of a causal link with the disputed conduct, granting it only €15,000.00 in non-pecuniary damages. Nonetheless, on December 29, 2021, BEG, with an action that the Company and its legal counsel deem unfounded and specious, also decided to sue the Italian State before the Court of Milan, to demand, as a consequence of the ECHR ruling, damages for tortious liability in an amount of about €1.8 billion. In this case, BEG also involved Enel and Enelpower by way of a claim of joint and several liability. The initial hearing is currently scheduled for April 27, 2022. Enel and Enelpower are preparing their defense for the appear- ance in court. Proceedings undertaken by Albania BEG Ambient Shpk (ABA) to obtain enforcement of the ruling of the District Court of Tirana of March 24, 2009 France In February 2012, ABA filed suit against Enel and Enelpow- er with the Tribunal de Grande Instance in Paris in order to render the ruling of the Albanian court enforceable in France. Enel SpA and Enelpower SpA challenged the suit. Following the beginning of the case before the Tribunal de Grande Instance, between 2012 and 2013 Enel France was served with a number of “Saisie Conservatoire de Créanc- es” (orders for the precautionary attachment of receiva- bles) in favor of ABA to conserve any receivables of Enel in respect of Enel France. On January 29, 2018, the Tribunal de Grande Instance is- sued a ruling in favor of Enel and Enelpower, denying ABA the recognition and enforcement of the Tirana court’s rul- ing in France for lack of the requirements under French law for the purposes of granting exequatur. Among other issues, the Tribunal de Grande Instance ruled that: (i) the Al- banian ruling conflicted with an existing decision (the arbi- tration ruling of 2002); and that (ii) the fact that BEG sought to obtain in Albania what it was not able to obtain in the Italian arbitration proceeding, resubmitting the same claim through ABA, represented fraud. ABA appealed that ruling. With a ruling of May 4, 2021, the Paris Court of Appeal denied the appeal by ABA in full, or- dering it to reimburse Enel and Enelpower €200,000.00 each for legal costs. In particular, the Court of Appeal fully upheld the ruling of the Tribunal de Grande Instance with regard to the conflict of the Albanian ruling with the 2002 arbitration award, which, having the value of res judicata under French law, does not require the court to assess the issue raised. On June 21, 2021, ABA filed an appeal with the Cour de Cas- sation against the ruling of the Paris Court of Appeal. Enel and Enelpower are preparing their defense for the appear- ance before the Cour de Cassation. Finally, Enel and Enel- power initiated a separate proceeding to obtain release of the precautionary attachments granted to ABA and which are no longer valid as a result of the appeal ruling. The Netherlands At the end of July 2014, ABA filed suit with the Court of Amsterdam to render the ruling of the Albanian court en- forceable in the Netherlands. With a ruling of June 29, 2016, the trial court recognized the Albanian ruling in the Neth- erlands and therefore ordered Enel and Enelpower to pay €433,091,870.00 to ABA, in addition to costs and ancillary charges of €60,673.78. With the same ruling, the Court of Amsterdam denied ABA’s request to declare the ruling pro- visionally enforceable. In a ruling of July 17, 2018, the Amsterdam Court of Appeal upheld the appeal advanced by Enel and Enelpower, ruling that the Albanian judgment cannot be recognized and en- forced in the Netherlands. The Court of Appeal found that the Albanian decision was arbitrary and manifestly unrea- sonable and therefore contrary to Dutch public order. The proceeding before the Court of Appeal continued with regard to the subordinate question raised by ABA with which it asked the Dutch court to rule on the merits of the dispute in Albania and in particular the alleged tortious lia- bility of Enel and Enelpower in the failure to build the power plant in Albania. On December 3, 2019, the Amsterdam Court of Appeal issued a definitive ruling in which it fully quashed the trial court judgment of June 29, 2016, rejecting any claim made by ABA. The Court came to this conclusion after affirming its jurisdiction over ABA’s subordinate claim and re-analyz- ing the merits of the case under Albanian law, finding no tortious liability on the part of Enel and Enelpower. Accord- ingly, Enel and Enelpower are therefore not liable to pay any amount to ABA, which was in fact ordered by the Court of Appeal to reimburse the companies for the losses in- curred in illegitimate conservative seizures, to be quantified as part of a specific procedure, and the costs of the trial and appeal proceedings. ABA filed an appeal of the ruling with the Supreme Court of the Netherlands. Following the filing of the opinion of the Advocate General, who ruled in favor of Enel and Enelpower, requesting the denial of the appeal lodged by ABA, on July 16, 2021 the Supreme Court completely rejected ABA's claims, ordering it to reimburse Notes to the consolidated financial statements 423 423 court costs. The decision of the Court of Appeal has thus become final and, therefore, no more proceedings are pending in the Netherlands. Luxembourg In Luxembourg, again at the initiative of ABA, J.P. Morgan Bank Luxembourg SA was also served with an order for a number of precautionary seizures of any receivables of both Enel Group companies in respect of the bank. In parallel ABA filed a claim to obtain enforcement of the ruling of the Court of Tirana in Luxembourg. The pro- ceeding is still in the initial stages and no ruling has been issued. United States and Ireland In 2014, ABA had initiated two proceedings requesting execution of the Albanian ruling before the courts of the State of New York and Ireland, which both ruled in favor of Enel and Enelpower, respectively, on February 23 and February 26, 2018. Accordingly, there are no lawsuits pending in Ireland or New York State. Environmental incentives - Spain With the Decision of the European Commission of No- vember 27, 2017 on the issue of environmental incentives for thermal power plants, the Commission reached the preliminary conclusion that the environmental incen- tive for coal power plants provided for in Spain’s Order ITC/3860/2007 represents State aid pursuant to Article 107, paragraph 1, of the Treaty on the Functioning of the European Union (TFEU), expressing doubts about the compatibility of the incentive with the internal market while recognizing that the incentives are in line with the European Union’s environmental policy. The Commission's Directorate-General for Competition has initiated a for- mal enquiry pursuant to Article 108, paragraph 2, of the TFEU in order to establish whether the incentive in ques- tion constituted state aid compatible with the internal market. On April 13, 2018, Endesa Generación SA, acting as an interested third party, submitted comments con- testing this interpretation. Subsequently, on September 8, 2021, the appeal of the decision lodged by Gas Natural (now Naturgy) with the Court of Justice of the European Union (CJEU) was denied. The enquiry under Article 108 of the TFEU is still open. Social Bonus - Spain With the rulings of October 24 and 25, 2016 and No- vember 2, 2016, the Spanish Tribunal Supremo declared Article 45, paragraph 4 of the Spain’s Electricity Indus- try Law 24 of December 26, 2013 void for incompatibility with Directive 2009/72/EC of the European Parliament and of the Council of July 13, 2009, granting the appeals 424 424 Integrated Annual Report 2021 filed by Endesa against the obligation to finance the So- cial Bonus mechanism. The Tribunal Supremo recognized Endesa’s right to receive all amounts that had been paid to users under the Social Bonus system, provided for in the law declared void by the Tribunal Supremo, for a total of about €214 million plus interest. The government chal- lenged these rulings of the Tribunal Supremo, requesting that they be overturned, but the related appeals were de- nied. Subsequently, the government initiated two proceedings before the Constitutional Court requesting the reopen- ing of the Tribunal Supremo proceedings so that the lat- ter may ask for a preliminary ruling from the European Court of Justice (CJEU). The Constitutional Court granted the appeals and, accordingly, the Tribunal Supremo sub- mitted a petition for a preliminary ruling from the CJEU. All parties, including Endesa, presented their respective written conclusions. On October 14, 2021, after the Ad- vocate General had issued a favorable opinion to Endesa, the CJEU issued a preliminary ruling in favor of Endesa, recognizing the incompatibility of Article 45, paragraph 4, of the Electricity Industry Law with the Directive referred to above. On December 21, 2021 the Tribunal Supremo issued a final ruling with which it confirmed the provisions of the previous ruling of October 24, 2016. In particular, the Tribunal Supremo found that the social bonus financ- ing scheme provided for in Article 45, paragraph 4, of the Electricity Industry Law is inapplicable as it does not com- ply with Article 3.2 of Directive 2009/72/EC, and voided Royal Decree 968/2014. “Endesa I” industrial relations dispute - Spain After a series of meetings of the Comisión Negociado- ra of the 5th Endesa Collective Bargaining Agreement (Comisión Negociadora) which began in October 2017 and continued throughout 2018, in view of the impossi- bility of reaching an agreement between the social part- ners, Endesa notified the workers and their union repre- sentatives that, with effect from January 1, 2019, the 4th Collective Bargaining Agreement must be considered terminated under the terms of the “framework guarantee contract” and the “agreement on the voluntary suspen- sion or resolution of employment contracts in the peri- od 2013-2018”, applying from that date the provisions of general labor law, as well as the applicable legal criteria established in the matter. Despite the resumption of negotiations within the Comisión Negociadora in February 2019, the interpre- tative differences between Endesa and the trade union representatives regarding the effects of the resolution of the 4th Collective Bargaining Agreement with regard, in particular, to the social benefits granted to retired per- sonnel, led to the initiation of a suit by the unions rep- resented in the company. On March 26, 2019 a hearing was held before the court of first instance, which issued a ruling in favor of Endesa, upholding the company’s po- sition concerning the legitimacy of abolishing certain so- cial benefits for retired personnel as a consequence of the termination of the 4th Endesa Collective Bargaining Agreement. The unions appealed this decision before the Tribunal Supremo, while the initial ruling remained provi- sionally enforceable. Endesa entered the proceeding. In December 2019, Endesa’s largest union decided to waive its appeal before the Tribunal Supremo in order to volun- tarily submit the dispute to arbitration before the Servi- cio Interconfederal de Mediación y Arbitraje (SIMA) with a view to resolving the main issues concerning the 5th Endesa Collective Bargaining Agreement with the com- pany. The other trade unions involved refused to join the arbitration proceeding, electing to go ahead with the proceedings before the Tribunal Supremo. On January 21, 2020, the arbitration award was issued, with the amendment of certain parts of the 5th Ende- sa Collective Bargaining Agreement, which was subse- quently signed by the social partners. It entered force on January 23, 2020. On the same date, Endesa also signed two further collective bargaining agreements (a “frame- work guarantee contract” and an “agreement on vol- untary measures to suspend or terminate employment contracts”) with all the unions present in the company. On June 17, 2020, the 5th Endesa Collective Bargaining Agreement was published in the Spanish Official Journal (Boletín Oficial del Estado), taking full effect. On July 7, 2021, the Tribunal Supremo issued a decision (notified on July 22, 2021) in which it denied the appeals lodged by the aforementioned unions in full, upholding the ruling of the court of first instance of March 26, 2019. In particular, the Tribunal Supremo affirmed that social benefits (including those relating to electricity prices) originate exclusively in the collective bargaining agree- ments, both for employees currently in service and those who have retired, as well as for their family members, with the consequence that the termination of such agree- ments (as happened in the case of the 4th Collective Bargaining Agreement) produces the general contrac- tual regulation of the conditions established therein for employees currently in service and, for those who have retired and their family members, the definitive extinction of all their rights, until new regulations are introduced with the 5th Endesa Collective Bargaining Agreement. Numer- ous individual suits have been filed by staff and former employees who had agreed to participate in termination incentive agreements in order to obtain judicial confir- mation that the termination of the 4th Endesa Collective Bargaining Agreement did not affect them. The majori- ty of these proceedings were suspended or were being suspended pending the definition of the collective action pending before the Tribunal Supremo, as the ruling of the latter, in regarding a “collective dispute”, would have the value of res judicata in respect of individual proceedings concerning the same issue. As a result of the ruling of the Tribunal Supremo of July 7, 2021, the suspension of many of these proceedings was revoked in order to enable the court to deny the suits. “Endesa II” industrial relations dispute - Spain On December 30, 2020, the Audiencia Nacional noti- fied Endesa a petition for a “collective dispute” initiated by three trade unions with minority representation filed on December 16, 2020 concerning the cancellation of some “derogatory provisions” of the 5th Endesa Collec- tive Bargaining Agreement. The plaintiffs claim that the contested “derogatory provisions” would imply the ille- gitimate abolition of social benefits and economic rights of workers. Endesa considers these provisions to be fully legitimate, in line with the arguments made during pro- ceeding concerning the reduction of social benefits for retired personnel. With a ruling of November 15, 2021, the petitions of the plaintiff unions were rejected, with verifi- cation of the legitimacy of the 5th Endesa Collective Bar- gaining Agreement. The ruling was appealed by the trade unions before the Tribunal Supremo. Furnas-Tractebel litigation - Brazil In 1998 the Brazilian company CIEN (now Enel 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 consequence of the economic crisis in 2002, Enel CIEN was unable to make the electric- ity available to Tractebel. In October 2009, Tractebel sued Enel CIEN, which sub- mitted its defense. Enel CIEN cited force majeure as a re- sult of the Argentine crisis as the main argument in its defense. Out of court, the Tractebel has indicated that it plans to acquire 30% of the interconnection line involved in the dispute. On February 14, 2019, Enel CIEN received notice of an order beginning expert witness operations, which are still under way. The amount involved in the dis- pute is estimated at about R$118 million (about €28 mil- lion), plus interest, revaluations and unspecified damages. For analogous reasons, in May 2010 Furnas had also filed suit against Enel CIEN for failure to deliver electricity, re- questing payment of about R$571.6 million (about €91 million), in addition to unspecified damages, seeking to acquire ownership (in this case 70%) of the interconnec- tion line. The proceeding was decided in Enel CIEN’s favor with a ruling of the Tribunal de Justiça with a definitive ruling of October 18, 2019, which denied all of the claims of Furnas. Notes to the consolidated financial statements 425 425 tablished specifically to pursue the expansion project. The contracts provided for the payment of a monthly fee by Coelce, which was also required to maintain the net- works. Those contracts, between cooperatives established in special circumstances and the then public-sector com- pany, do not specifically identify the grids governed by the agreements, which prompted a number of the coop- eratives to sue Coelce asking for, among other things, a revision of the fees agreed in the contracts. These proceedings include the suit filed by Cooperativa de Eletrificação Rural do Vale do Acarau Ltda (Coperva) with a value of about R$374 million (about €59.3 million). Coelce was granted rulings in its favor from the trial court and the court of appeal, but Coperva filed a further ap- peal (Embargo de Declaração) based on procedural is- sues, which was also denied by the appeal court in a ruling of January 11, 2016. On February 3, 2016, Coperva lodged an extraordinary appeal before the Superior Tribunal de Justiça (STJ) against the appeal court ruling on the merits, which was granted on November 5, 2018 for the ruling issued in the previous appeal (Embargo de Declaração). On December 3, 2018, Coelce filed an appeal (Agravo In- terno) against this ruling of the STJ. The proceedings are currently pending. AGM litigation - Brazil In 1993, Celg-D,(42) the Association of Municipalities of Goiás (AGM), the State of Goiás and the Bank of Goiás reached an agreement (Convenio) for the payment of municipal debts to Celg-D through the transfer of the portion of ICMS - Imposto sobre Circulação de Merca- dorias e Serviços (tax on the circulation of goods and services) that the State would have transferred to those governments. In 2001 the parties to the agreement were sued by the individual municipal governments to obtain a ruling that the agreement was invalid, a position then up- held by the Supreme Federal Court on the grounds of the non-participation of the local governments themselves in the agreement process. In September 2004, Celg-D reached a settlement with 23 municipalities. Between 2007 and 2008, Celg-D was again sued on numerous occasions by a number of municipal governments (there are currently 65 pending suits) seeking the restitution of amounts paid under the agreement. Despite the ruling that the agreement was void, Celg-D argues that the pay- ment of the debts on the part of the local governments is legitimate, as electricity was supplied in accordance with the supply contracts and, accordingly, the claims for res- Cibran litigation - Brazil Companhia Brasileira de Antibióticos (Cibran) has filed six suits against the Enel Group company Ampla Energia e Serviços SA (Ampla)(40) to obtain damages for alleged losses incurred as a result of the interruption of electric- ity service by the Brazilian distribution company between 1987 and 2002, in addition to non-pecuniary damages. The Court ordered a unified technical appraisal for those cases, the findings of which were partly unfavorable to Ampla. The latter challenged the findings, asking for a new study, which led to the denial of part of Cibran’s peti- tions. Cibran subsequently challenged the findings of the new study and the ruling was in favor of Ampla. The first suit, filed in 1999 and regarding the years from 1995 to 1999, was adjudicated in September 2014 when the court of first instance issued a ruling against Amp- la, levying a fine of about R$200,000 (about €46,000) as well as other damages to be quantified separately. Ampla appealed the ruling and the appeal was upheld by the Tri- bunal de Justiça, which denied all of Cibran’s claims. The ruling became definitive on August 24, 2020. With regard to the second case, filed in 2006 and re- garding the years from 1987 to 1994, on June 1, 2015, the courts issued a ruling ordering Ampla to pay R$96,465,103 (about €23 million) plus interest in pecuniary damages and R$80,000 Brazilian (about €19,000) in non-pecuniary damages. On July 8, 2015 Ampla appealed the decision with the Tribunal de Justiça of Rio de Janeiro, which on November 6, 2019 issued a ruling on merits granting Am- pla’s petition and denying all of Cibran’s claims. On No- vember 25, 2019, Cibran filed an appeal against the rul- ing of the Tribunal de Justiça of Rio de Janeiro, which was preliminarily denied for formal reasons on September 10, 2020. On January 29, 2021, Cibran appealed (Agravo de Instrumento) the decisions before the Superior Tribunal de Justiça (STJ), which was denied on June 8, 2021. On June 22, 2021, Cibran filed an appeal (Agravo Interno) with the STJ and the proceeding is pending. A ruling from the court of first instance is still pending for the remaining four suits for the years 2001 and 2002. The value of all the disputes is estimated at about R$612.1 million (about €96.02 million). Coperva litigation - Brazil As part of the project to expand the grid in rural areas of Brazil, in 1982 Companhia Energética do Ceará SA (Coelce),(41) 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 es- (40) The trading name of Ampla is Enel Distribuição Rio de Janeiro. (41) The trading name of Coelce is Enel Distribuição Ceará. (42) The trading name of Eletropaulo is Enel Distribuição São Paulo. 426 426 Integrated Annual Report 2021 titution of amounts paid should be denied. The proceedings pending before the Goiás State Court include: (i) a suit filed by the Municipio de Aparecida de Goiânia, which is pending at the preliminary stage at first instance, for an amount of approximately R$726 million (about €113.4 million); (ii) a suit filed by the Municipio de Quirinópolis, also pending at the preliminary stage of the proceeding at first instance for an amount of about R$388 million (about €61.48 million); and (iii) a suit filed by the Municipio de Anápolis with the court of first instance after a failed attempt at conciliation between the parties and now pending in the preliminary stages, for an amount of about R$368.7 million (about €54.4 million). The total value of the suits is equal to about R$3.92 bil- lion (about €621.5 million). The contingent liability deriv- ing from this dispute is covered by the “Funac” provision established during the privatization of Celg-D. ANEEL litigation - Brazil In 2014, Eletropaulo(43) initiated an action before the Bra- zilian federal courts seeking to void the administrative measure of the Agência Nacional de Energia Elétrica (ANEEL, the national electricity agency), which in 2012 retroactively introduced a negative coefficient to be ap- plied in determining rates for the following regulatory period (2011-2015). With this provision, the Authority or- dered the restitution of the value of some components of the network previously included in rates because they were considered non-existent and denied Eletropaulo’s request to include additional components in rates. The administrative measure of ANEEL was challenged and on September 9, 2014 it was suspended on a precautionary basis. The first-instance proceeding is still in its prelim- inary stages and the value of the suit is about R$1,288 million (about €204.1 million). El Quimbo - Colombia A number of legal actions (“acciones de grupo” and “ac- ciones populares”) brought by residents and fishermen in the affected area are pending with regard to the El Quimbo project for the construction of a 400 MW hy- droelectric plant in the region of Huila (Colombia). More specifically, the first collective action, currently in the pre- liminary stage, was brought by around 1,140 residents of the municipality of Garzón, who claim that the construc- tion of the plant would reduce their business revenue by 30%. A second action was brought, between August 2011 and December 2012, by residents and businesses/asso- (43) The trading name of Eletropaulo is Enel Distribuição São Paulo. ciations of five municipalities of Huila claiming damages related to the closing of a bridge (Paso El Colegio). With regard to acciones populares, 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. As part of this action, on Septem- ber 11, 2020, the Huila Court issued an unfavorable ruling against Emgesa, sentencing it to fulfill the obligations al- ready provided for in the environmental license. ANLA has submitted a request for clarification of the ruling. 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. After a number of precaution- ary rulings, on 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 require- ments and to provide collateral of about 20,000,000,000 Colombian pesos (about €5.5 million). The Huila Court subsequently extended the six-month time limit, and therefore, in the absence of contrary court rulings the Quimbo plant is continuing to generate elec- tricity as the oxygenation system installed by Emgesa has so far demonstrated that it can maintain the oxygen lev- els required by the court. On March 22, 2018, ANLA and CAM jointly presented the final report on the monitoring of water quality downstream of the dam of the El Quimbo hydroelectric plant. Both authorities confirmed the com- pliance of Emgesa with the oxygen level requirements. After the parties had filed briefs, on January 12, 2021, it was learned that the ruling of first instance of the Court of Huila had been issued (it was subsequently notified to the company on February 1, 2021). The ruling, while ac- knowledging that the oxygenation system implemented by Emgesa had mitigated the risks associated with the protection of fauna in the Bethany basin, imposed a se- ries of obligations on the environmental authorities in- volved, as well as on Emgesa itself. In particular, the lat- ter is required to implement a decontamination project to ensure that the water in the basin does not generate risks for the flora and fauna of the river, which will be sub- ject to verification by ANLA, and to make permanent the operation of the oxygenation system, adapting it to com- ply with the parameters established by ANLA. On March 4, 2021, Emgesa challenged the appeal ruling before the Council of State. On December 31, 2021, the Council of State ruled that Emgesa’s appeal was admissible. The proceeding is con- tinuing at the appeal level. Notes to the consolidated financial statements 427 427 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 ap- ply 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 Resolu- tion no. 82/2002, as amended by Resolution no. 97/2008. The suit is at a preliminary stage. The estimated value of the proceeding is about 337 billion Colombian pesos (about €96 million). Gabčíkovo dispute - Slovakia Slovenské elektrárne (SE) is involved in a number of cas- es before the national courts concerning the 720 MW Gabčíkovo hydroelectric plant, which is administered by Vodohospodárska Výsatavba Štátny Podnik (VV) and whose operation and maintenance, as part of the privat- ization of SE in 2006, had been entrusted to SE for a pe- riod of 30 years under an operating agreement (the VEG Operating Agreement). Immediately after the closing of the privatization, the Pub- lic Procurement Office (PPO) filed suit with the Court of Bratislava seeking to void the VEG Operating Agreement on the basis of alleged violations of the regulations gov- erning public tenders, qualifying the contract as a service contract and as such governed by those regulations. In November 2011 the trial court ruled in favor of SE, where- upon the PPO immediately appealed the decision. In parallel with the PPO action, VV also filed a number of suits, asking in particular for the voidance of the VEG Op- erating Agreement. On December 12, 2014, VV withdrew unilaterally from the VEG Operating Agreement, notifying its termination on March 9, 2015, for breach of contract. On March 9, 2015, the decision of the appeals court overturned the ruling of the trial court and voided the contract as part of the ac- tion pursued by the PPO. SE lodged an extraordinary ap- peal against that decision before the Supreme Court. At a hearing of June 29, 2016, the Supreme Court denied the appeal. SE then appealed the ruling to the Constitutional Court, which denied the appeal on January 18, 2017. In addition, SE lodged a request for arbitration with the Vienna International Arbitral Centre (VIAC) under the VEG Indemnity Agreement. Under that accord, which had been signed as part of the privatization between the National Property Fund (now MH Manazment - MHM) of the Slovak Republic and SE, the latter is entitled to an indemnity in the event of the early termination of the VEG Operating Agreement for reasons not attributable to SE. The arbitra- tion court rejected the objection that it did not have juris- diction and the arbitration proceeding continued to ex- amine the merits of the case, with a ruling on the amount 428 428 Integrated Annual Report 2021 involved being deferred to any subsequent proceeding. On June 30, 2017, the arbitration court issued its ruling de- nying the request of SE. In parallel with the arbitration proceeding launched by SE, both VV and MHM filed two suits in the Slovakian courts to void the VEG Indemnity Agreement owing to the alleged connection of the latter with the VEG Operating Agree- ment. These proceedings were joindered and, on Septem- ber 27, 2017, a hearing was held before the Court of Brati- slava in which the judge denied the request of the plain- tiffs for procedural reasons. Both VV and MHM appealed that decision. The appeal filed by MHM was denied by the Bratislava Court of Appeal on June 8, 2019, upholding the decision of the court of first instance in favor of SE. Simi- larly, the appeal filed by VV was denied, upholding the trial court decision in favor of SE. VV filed a further appeal (do- volanie) against that decision on March 9, 2020, with the Supreme Court, to which SE replied with a brief submitted on June 8, 2020. On March 24, 2021, the Supreme Court overturned the decision of the Bratislava Court of Appeal, referring the judgment to the latter court. On July 21, 2021, SE filed an appeal before the Slovak Constitutional Court, which was denied on July 29, 2021, and the proceeding is currently pending before the Bratislava Court of Appeal. At the local level, SE was sued by VV for alleged unjustified enrichment (estimated at about €360 million plus interest) for the period from 2006 to 2015. SE filed counter-claims for all of the proceedings under way. Developments in those proceedings can be summarized as follows: • for 2006-2008, at the hearing of June 26, 2019, the Court of Bratislava denied the claims of both parties for procedural reasons. The ruling in first instance was ap- pealed by both VV and SE and the appeals for the years 2006 and 2008 are pending. As for the appeal pro- ceedings relating to 2007, in November 2019, SE had raised a preliminary question which was rejected by the Court of Appeal on January 15, 2020. On August 18, 2020, SE filed an appeal with the Constitutional Court but the appeal was denied on September 18, 2021. The proceeding is therefore continuing before the Court of Appeal; • the proceedings relating to the years from 2009 to 2011 and from 2013 to 2015 are all pending before the court of first instance. In a number of cases, briefs have been exchanged. For all the proceedings, hearings be- fore the court of first instance were scheduled but then were initially postponed to specified dates before be- ing postponed to dates to be determined owing to the pandemic; • the proceeding involving 2012 is pending before the Court of Appeal level following VV’s appeal of the ruling in favor of SE by the court of first instance. Finally, in another proceeding before the Court of Brati- slava, VV asked for SE to return the fee for the transfer from SE to VV of the technology assets of the Gabčíko- vo plant as part of the privatization, with a value of about €43 million plus interest. The parties exchanged briefs. At the hearing on November 19, 2019, the court issued a pre- liminary decision on the case in which it noted the lack of standing of VV. At the hearing of October 1, 2020, the parties filed their final briefs and on December 18, 2020, the court issued a decision in favor of SE, rejecting VV’s claims. On January 4, 2021, VV filed an appeal against that decision, and the proceeding is pending. Chucas arbitration - Costa Rica PH Chucas SA (Chucas) is a special purpose entity estab- lished by Enel Green Power Costa Rica SA after it won a tender organized in 2007 by the Instituto Costarricense de Electricidad (ICE) for the construction of a 50 MW hy- droelectric plant and the sale of the power generated by the plant to ICE under a build, operate and transfer con- tract (BOT). On May 27, 2015, Chucas initiated an arbitration proceed- ing before the Cámara Costarricense-Norteamericana de Comercio (AMCHAM CICA) seeking reimbursement of the additional costs incurred to build the plant and as a result of the delays in completing the project as well as voidance of the fine levied by ICE for alleged delays in finalizing the works. In a decision issued in November 2017, the arbitra- tion board ruled in Chucas’ favor, granting recognition of the additional costs incurred in the amount of about $113 million (about €91 million) and legal costs and found that Chucas was not liable to pay the fines to ICE. ICE appealed the arbitration ruling before the Supreme Court and on September 5, 2019 Chucas was notified of the ruling par- tially upholding ICE’s appeal to void the arbitration ruling for a number of formal procedural reasons. On September 11, 2019, Chucas filed a “recurso de aclaración y adición” with the same court and it was partially upheld on June 8, 2020. The Court’s decision expanded on the ruling of Sep- tember 5, 2019 with information concerning the admis- sion of evidence deposited by Chucas without, however, modifying the decision concerning the voidance of the arbitration award. On July 14, 2020, Chucas filed a new re- quest for arbitration with the AMCHAM CICA for a prelim- inary estimated amount of about $240 million. On August 14, 2020, ICE filed its response, requesting the dismissal of the proceeding for lack of jurisdiction on the part of the arbitration tribunal. The request for dismissal was denied by AMCHAM CICA. In parallel, ICE filed precautionary ap- peals to the Tribunal Contencioso Administrativo against Chucas and the AMCHAM CICA seeking to suspend the arbitration proceedings. While these appeals were pre- liminarily upheld, they were subsequently denied. In May 2021, Chucas filed its arbitration request complete with preliminary demands, quantifying the value of its claim at about $362 million (about €305 million). In June 2021, ICE filed its defense, continuing to assert a lack of juris- diction. ICE has not made a counterclaim. On August 4, 2021, the arbitration tribunal rejected ICE's claim of lack of jurisdiction. The matter has now been submitted for con- sideration to the first section of the Supreme Court. The arbitration proceedings remain suspended pending the Supreme Court decision on jurisdiction. GasAtacama Chile - Chile On August 4, 2016, the Superintendencia de Electricidad y Combustibles (SEC) fined GasAtacama Chile (now Enel Generación Chile) $8.3 million (about 5.8 billion Chilean pesos) for information provided by the latter to the CDEC- SING (Centro de Despacho Económico de Carga) between January 1, 2011 and October 29, 2015, relating to the Min- imum Technical and Minimum Operating Time variables at the Atacama plant. Enel Generación Chile appealed this measure with the SEC, which denied the appeal on November 2, 2016. Enel Generación Chile appealed this decision before the Santi- ago Court of Appeal, which on April 9, 2019, issued a ruling reducing the fine to $432,000 (about 290 million Chilean pesos). Both Enel Generación Chile and the SEC appealed this decision before the Supreme Court of Chile. On June 28, 2019, a hearing was held for both parties to submit arguments and on January 15, 2020 the Supreme Court upheld the ruling of the Santiago Court of Appeal, leaving unchanged the reduction in the fine established by that court. The adjusted fine was paid on March 12, 2020. In parallel, Enel Generación Chile had also filed an appeal before the Constitutional Court, claiming that the legal provisions under which the SEC imposed the fine had been repealed at the time the penalty was issued. On July 17, 2018, the Constitutional Court rejected Enel Gener- ación Chile’s appeal. In relation to this issue, some operators of the Sistema Interconectado del Norte Grande (SING), including Aes Gener SA, Eléctrica Angamos SA and Engie Energía Chile SA, sued Enel Generación Chile to obtain damages in an amount of about €58 million (the former) and about €141 million (the latter two). The disputes were joindered in part in a single proceeding and are currently pending. After the suspension of the proceeding under the state of national emergency declared in response to the COVID-19 pan- demic, the plaintiff asked for the proceeding to resume, a request the court granted. The court ordered the no- tification of a measure that determines the substantive, pertinent and disputed facts of the case. The preliminary phase has not yet begun. Kino arbitration - Mexico On September 16, 2020, Kino Contractor SA de Cv (Kino Contractor), Kino Facilities Manager SA de Cv (Kino Facili- ties) and Enel SpA (Enel) were notified of a request for arbi- Notes to the consolidated financial statements 429 429 tration filed by Parque Solar Don José SA de Cv, Villanueva Solar SA de Cv and Parque Solar Villanueva Tres SA de Cv (together, “Project Companies”) in which the Project Com- panies alleged the violation (i) by Kino Contractor of certain provisions of the EPC Contract and (ii) by Kino Facilities of certain provisions of the Asset Management Agreement, both contracts concerning solar projects owned by the three companies filing for arbitration. Enel — which is the guarantor of the obligations assumed by Kino Contractor and Kino Facilities under the above contracts — has also been called into the arbitration pro- ceeding, but no specific claims have been filed against it for the moment. The Project Companies, in which Enel Green Power SpA is a non-controlling shareholder, are controlled by CDPQ In- fraestructura Participación SA de Cv (which is controlled by Caisse de Dépôt et Placement du Québec) and CKD Infrae- structura México SA de Cv. After the request for arbitration and the related response from the defendants, the parties exchanged further intro- ductory briefs, in which the financial claim of the counter- parties was quantified at about $140 million, while Kino Fa- cilities quantified its own counterclaim at about $3.3 million. The document production phase is currently under way. Tax litigation in Brazil Withholding tax - Ampla In 1998, Ampla Energia e Serviços SA (Ampla) financed the acquisition of Coelce with the issue of bonds in the amount of $350 million (“Fixed Rate Notes” - FRN) subscribed by its Panamanian subsidiary, which had been established to raise funds abroad. Under the special rules then in force, subject to maintaining the bonds until 2008, the interest paid by Ampla to its subsidiary was not subject to with- holding tax in Brazil. However, the financial crisis of 1998 forced the Panama- nian company to refinance itself with its Brazilian parent, which for that purpose obtained loans from local banks. The tax authorities considered this financing to be the equivalent of the early redemption of the bonds, with the consequent loss of entitlement to the exemption from withholding tax. In December 2005, Ampla carried out a spin-off that in- volved the transfer of the residual FRN debt and the as- sociated rights and obligations to Ampla Investimentos e Serviços SA. On November 6, 2012, the Câmara Superior de Recursos Fiscais (the highest level of administrative courts) issued a ruling against Ampla, for which the company promptly asked that body for clarifications. On October 15, 2013, Ampla was notified of the denial of the request for clari- fication (Embargo de Declaração), thereby upholding the previous adverse decision. The company provided security 430 430 Integrated Annual Report 2021 for the debt and on June 27, 2014 continued litigation be- fore the ordinary courts (Tribunal de Justiça). In December 2017, the court appointed an expert to ex- amine the issue in greater detail in support of the future ruling. In September 2018, the expert submitted a report, requesting additional documentation. In December 2018, the company provided the additional documentation and is awaiting the court’s assessment of the arguments and documents presented. The amount involved in the dispute at December 31, 2021 was about €211 million. IRPJ/CSLL - Eletropaulo On October 5, 2021, Eletropaulo received an assessment notice from the Brazilian tax authorities contesting the deductibility for income tax purposes (Imposto sobre a Renda das Pessoas Jurídicas - IRPJ and Contribuição So- cial sobre o Lucro Líquido - CSLL) of the amortization of the increased amounts generated by extraordinary cor- porate transactions carried out before the acquisition of the company by the Enel Group. The contested period runs from 2017 to 2019. Considering its position sound, the company presented its defense at the first level of administrative adjudication. The amount involved in the dispute was about €110 million at December 31, 2021. PIS - Eletropaulo In July 2000, Eletropaulo filed suit seeking a tax credit for PIS (Programa Integração Social) paid in application of regulations (Decree Laws 2.445/1988 and 2.449/1988) that were subsequently declared unconstitutional by the Supremo Tribunal Federal (STF). In May 2012, the Superior Tribunal de Justiça (STJ) issued a final ruling in favor of the company that recognized the right to the credit. In 2002, before the issue of that favorable final ruling, the company had offset its credit against other federal taxes. This behavior was contested by the federal tax authorities but the company, claiming it had acted correctly, chal- lenged in court the assessments issued by the federal tax authorities. Following defeat at the initial level of adjudica- tion, the company appealed. The amount involved in the dispute at December 31, 2021 was about €106 million. ICMS - Ampla, Coelce and Eletropaulo The States of Rio de Janeiro, Ceará and São Paulo issued a number of tax assessments against Ampla Energia e Serviços SA (for the years 1996-1999 and 2007-2017), Companhia Energética do Ceará (Coelce) (2003, 2004, 2006-2012, 2015 and 2016) and Eletropaulo (2008-2020), challenging the deduction of ICMS - Imposto sobre Circu- lação de Mercadorias e Serviços (tax on the circulation of goods and services) in relation to the purchase of certain non-current assets. The companies challenged the as- sessments, arguing that they correctly deducted the tax and asserting that the assets, the purchase of which gen- erated the ICMS, are intended for use in their electricity distribution activities. The companies are continuing to defend their actions at the various levels of adjudication. The amount involved in the disputes totaled approximately €79 million at December 31, 2021. Withholding tax - Endesa Brasil On November 4, 2014, the Brazilian tax authorities issued an assessment against Endesa Brasil SA (now Enel Bras- il SA) alleging the failure to apply withholding tax to pay- ments of allegedly higher dividends to non-resident recip- ients. More specifically, in 2009, Endesa Brasil, as a result of the first-time application of the IFRS, had derecognized good- will, recognizing the effects in equity, on the basis of the correct application of the accounting standards it had adopted. The Brazilian tax authorities, however, asserted – during an audit – that the accounting treatment was in- correct and that the effects of the derecognition should have been recognized through profit or loss. As a result, the corresponding amount (about €202 million) was re- classified as a payment of income to non-residents and, therefore, subject to withholding tax of 15%. It should be noted that the accounting treatment adopted by the company was agreed with the external auditor and also confirmed by a specific legal opinion issued by a local firm. Following unfavorable rulings from the administrative courts, the company is continuing to defend its actions and the appropriateness of the accounting treatment in court. The overall amount involved in the dispute at December 31, 2021 was about €58 million. ICMS - Coelce The State of Ceará has filed various tax assessments against Companhia Energética do Ceará SA (Coelce) over the years (for tax periods from 2005 to 2014), contesting the determination of the deductible portion of the ICMS - Imposto sobre Circulação de Mercadorias e Serviços (tax on the circulation of goods and services) and in particular the method of calculation of the pro-rata deduction with reference to the revenue deriving from the application of a special rate envisaged by the Brazilian government for the sale of electricity to low-income households (Baixa Renda). The company has appealed the individual assessments, ar- guing that the tax deduction was calculated correctly. The company is defending its actions in the various levels of jurisdiction. The overall amount involved in the dispute at December 31, 2021 was about €40 million. PIS - Eletropaulo In December 1995, the Brazilian government increased the rate of the federal PIS (Programa Integração Social) tax from 0.50% to 0.65% with the issue of a provisional meas- ure (Executive Provisional Order). Subsequently, the provisional measure was re-issued five times before its definitive ratification into law in 1998. Un- der Brazilian legislation, an increase in the tax rate (or the establishment of a new tax) can only be ordered by law and take effect 90 days after its publication. Eletropaulo therefore filed suit arguing that an increase in the tax rate would only have been effective 90 days after the last Provisional Order, claiming that the effects of the first four provisional measures should be considered void (since they were never ratified into law). This dispute ended in April 2008 with recognition of the validity of the increase in the PIS rate starting from the first provisional measure. In May 2008, the Brazilian tax authorities filed a suit against Eletropaulo to request payment of taxes corresponding to the rate increase from March 1996 to December 1998. Eletropaulo has fought the request at the various levels of adjudication, arguing that the time limit for the issue of the notice of assessment had lapsed. In particular, since more than five years have passed since the taxable event (December 1995, the date of the first provisional measure) without issuing any formal instrument, the right of the tax authorities to request the payment of additional taxes and the authority to undertake legal action to obtain payment have been challenged. In 2017, following the unfavorable decisions issued in pre- vious rulings, Eletropaulo filed an appeal in defense of its rights and its actions with the Superior Tribunal de Justiça (STJ) and the Supremo Tribunal Federal (STF). The proceed- ings are still pending while the amounts subject to dispute have been covered by a bank guarantee. With regard to the request of the Office of the Attorney General of the Brazilian National Treasury Department to replace the bank guarantee with a deposit in court, the court of second instance granted the petition. The com- pany therefore replaced the bank guarantee with a cash deposit and filed a clarification motion against the related decision, which is currently awaiting a decision. The overall amount involved in the dispute at December 31, 2021 was about €39 million. FINSOCIAL - Eletropaulo Following a final ruling issued by the Federal Regional Court on September 11, 2011, Eletropaulo was recognized the right to compensation for certain FINSOCIAL credits (so- cial contributions) relating to sums paid from September 1989 to March 1992. Notes to the consolidated financial statements 431 431 Despite the expiration of the relative statute of limitations, the Federal Tax Authority contested the determination of some credits and rejected the corresponding offsetting, issuing tax assessments that the company promptly chal- lenged in the administrative courts, defending the legiti- macy of its calculations and actions. After an unfavorable ruling at first instance, the company filed an appeal before the administrative court of second instance. The overall amount involved in the dispute at December 31, 2021 was about €37 million. Tax litigation in Spain Income tax - Enel Iberia, Endesa and subsidiaries In 2018, the Spanish tax authorities completed a general audit involving the companies of the Group participating in the Spanish tax consolidation mechanism. This audit, which began in 2016, involved corporate income tax, value added tax and withholding taxes (mainly for the years 2012 to 2014). With reference to the main claims, the companies involved have challenged the related assessments at the first ad- ministrative level (Tribunal Económico-Administrativo Cen- tral - TEAC), defending the correctness of their actions. With regard to the disputes concerning corporate income tax, the issues for which an unfavorable outcome is con- sidered possible amounted to about €155 million at De- cember 31, 2021: • Enel Iberia is defending the appropriateness of the cri- terion adopted for determining the deductibility of cap- ital losses deriving from stock sales (around €106 mil- lion) and certain financial expense (around €18 million); • Endesa and its subsidiaries are mainly defending the appropriateness of the criteria adopted for the deduct- ibility of certain financial expense (about €25 million) and costs for decommissioning nuclear power plants (about €6 million). In 2021, the Spanish tax authorities concluded a new gen- eral audit for the years from 2015 to 2018. The companies involved challenged the related assessments at the first level of administrative adjudication (TEAC), arguing that they had acted correctly. In relation to the main dispute regarding corporate income tax, which concerned the deductibility of certain financial charges, the dispute for which an adverse outcome is con- sidered possible has a value of about €232 million at De- cember 31, 2021 (Enel Iberia €219 million and Endesa SA €13 million). Income tax - Enel Green Power España SL On June 7, 2017, the Spanish tax authorities issued a notice of assessment to Enel Green Power España SL, contesting the treatment of the merger of Enel Unión Fenosa Renova- bles SA (“EUFER”) into Enel Green Power España SL in 2011 432 432 Integrated Annual Report 2021 as a tax neutral transaction, asserting that the transaction had no valid economic reason. On July 6, 2017, the company appealed the assessment at the first administrative level (Tribunal Económico-Adminis- trativo Central - TEAC), defending the appropriateness of the tax treatment applied to the merger. The company has provided the supporting documentation demonstrating the synergies achieved as a result of the merger in order to prove the existence of a valid economic reason for the transaction. On December 10, 2019, the TEAC denied the appeal and the company is continuing to defend its ac- tions in court (Audiencia Nacional). The overall amount involved in the dispute at December 31, 2021 was about €98 million. Tax litigation in Italy Withholding tax - Enel Servizio Elettrico Nazionale As a result of a tax audit initiated in March 2018 and fol- lowing a subsequent investigation conducted with ques- tionnaires submitted to the banks involved as assignees in certain transfers of receivables from Servizio Elettrico Nazionale SpA (SEN) in respect of mass market customers under a framework agreement, on December 19, 2018, the Revenue Agency - Regional Directorate of Lazio - Large Taxpayers Office, notified the company of an assessment in respect of the alleged violation of withholding tax obli- gations relating to the amounts paid to the banks as part of the aforementioned transfers in 2013. In particular, the dispute arises from an assessment by the Office that: (i) reclassified, for tax purposes only, the assign- ment of receivables as a financing transaction; (ii) asserted an alleged withholding obligation for the company com- mensurate with the cost of the transaction (as the differ- ence between the nominal value of the assigned receiva- bles and the transfer price), reconstructing the subsequent transactions involving the assigned receivables (further sales and/or securitizations with non-residents carried out by the banks), in which the company had no role. In the first stages of the proceeding, which arose following SEN’s appeal of the assessment, the company’s objections concerning the illegitimacy of the Office’s reclassification of the transaction for tax purposes and, consequently, of the payment flows were not upheld, despite significant procedural violations in the assessment activity. Believing that it has valid legal grounds to continue the dispute, the company filed an appeal with the Court of Cassation, asserting the illegitimacy of the tax claim for vi- olation and false application of the rules that, in the view of the trial court, permit the classification of the income generated by the assignment of receivables as “property income”, which, consequently, would require SEN to apply withholding tax. The overall amount involved in the dispute at December 31, 2021 is about €81 million. 56. Future accounting standards The following provides a list of accounting standards, amendments and interpretations that will take effect for the Group after December 31, 2021. • “Amendments to IAS 1 - Classification of Liabilities as Current or Non-current”, issued in January 2020. The amendments regard the provisions of IAS 1 concern- ing the presentation of liabilities. More specifically, the changes clarify: – the criteria to adopt in classifying a liability as current or non-current, specifying the meaning of right of an entity to defer settlement and that that right must exist at the end of the reporting period; – that the classification is unaffected by the intentions or expectations of management about when the entity will exercise its right to defer settlement of a liability; – that the right to defer exists if and only if the enti- ty satisfies the terms of the loan at the end of the reporting period, even if the creditor does not verify compliance until later; and – that settlement regards the transfer to the coun- terparty of cash, equity instruments, other assets or services. The amendments will take effect, subject to endorse- ment, for annual periods beginning on or after January 1, 2023, with earlier application permitted. • “Amendments to IFRS 3 - Reference to the Conceptual Framework” issued in May 2020. The amendments are intended to replace a reference to the definitions of as- sets and liabilities provided by the Revised Conceptual Framework for Financial Reporting issued in March 2018 (Conceptual Framework) without significantly changing its provisions. The amendments also add to IFRS 3 a requirement that, for transactions and other events within the scope of “IAS 37 - Provisions, contingent liabilities and contin- gent assets” or “IFRIC 21 - Levies”, an acquirer applies IAS 37 or IFRIC 21 (instead of the Conceptual Frame- work) to identify the liabilities it has assumed in a busi- ness combination. Finally, the amendments clarify the existing guidelines in IFRS 3 for contingent assets acquired in a business combination, specifying that, if it is not sure that an as- set exists at the acquisition date, the contingent asset shall not be recognized. The amendments will take effect for annual periods be- ginning on or after January 1, 2022. • “Amendments to IAS 16 - Property, Plant and Equipment: Proceeds before Intended Use”, issued in May 2020. The amendments prohibit a company from deducting from the cost of property, plant and equipment amounts re- ceived from selling items produced while the company is preparing the asset for its intended use. Instead, a company will recognize such sales proceeds and relat- ed cost in profit or loss. The amendments will take ef- fect for annual periods beginning on or after January 1, 2022. Early application is permitted. • “Amendments to IAS 37 - Onerous Contracts - Costs of Fulfilling a Contract”, issued in May 2020. The amend- ments specify which costs an entity includes in deter- mining the cost of fulfilling a contract for the purpose of assessing whether the contract is onerous. To this end, the cost of fulfilling a contract comprises the costs that relate directly to the contract. These consist of the incremental costs of fulfilling that contract or the allotment of other costs that relate directly to fulfilling contracts. The amendments will take effect for annual periods beginning on or after January 1, 2022. Early ap- plication is permitted. • “Annual improvements to IFRS Standards 2018-2020”, issued in May 2020. The document mainly comprises amendments to the following standards: – “IFRS 1 - First-Time Adoption of International Finan- cial Reporting Standards”; the amendment simplifies the application of IFRS 1 by an investee (subsidiary, associate or joint venture) that becomes a first-time adopter of IFRS Standards after its parent has al- ready adopted them. More specifically, if the inves- tee adopts the IFRSs after its parent and applies IFRS 1.D16 (a), then the investee can elect to measure the cumulative translation differences for all foreign op- erations at the amounts that would be included in the parent’s consolidated financial statements, based on parent’s date of transition to the IFRSs; – “IFRS 9 - Financial Instruments”; with regard to fees included in the “10 per cent“ test for derecognition of financial liabilities, the amendment clarifies the fees that an entity includes when assessing whether the terms of a new or modified financial liability are substantially different from the terms of the origi- nal financial liability. In determining those fees paid net of fees received, the borrower shall include only fees paid or received between the borrower and the lender, including fees paid or received by either the borrower or lender on the other party’s behalf; – “IFRS 16 - Leases”; the International Accounting Standards Board amended Illustrative Example 13 accompanying “IFRS 16 - Leases”. Specifically, the amendment eliminates the potential for confu- sion in the application of IFRS 16 created by the way in which Illustrative Example 13 had illustrated the requirements for lease incentives. The example had included a reimbursement relating to lease- hold improvements without explaining whether the reimbursement qualified as a lease incentive. The amendment removes the illustration of a re- imbursement relating to leasehold improvements from the example; Notes to the consolidated financial statements 433 433 57. Events after the reporting period Enel completes acquisition of 527 MW of hydro capacity from ERG On January 3, 2022, Enel Produzione SpA finalized the ac- quisition of the entire share capital of ERG Hydro Srl from ERG Power Generation SpA. Enel Produzione paid around €1,039 million for the company, as well as an initial price adjustment at closing of around €226 million to reflect the mark-to-market valuation of certain hedging deriv- atives of ERG Power Generation concerning part of the future power to be generated by the ERG Hydro plants. The agreement also provides for an additional price ad- justment in the coming months, which will be calculated mainly on the basis of the changes in ERG Hydro’s net working capital and net financial position, and the level of water reserves in certain basins included in the sale. The plants owned by ERG Hydro, which are located in the Um- bria, Lazio, and Marche regions, have an installed capacity of 527 MW and an average annual output of around 1.5 TWh. Enel places a €2.75 billion “sustainability- linked bond” in three tranches on the eurobond market On January 10, 2022, Enel Finance International NV, the Dutch-registered finance company controlled by Enel SpA, placed a €2.75 billion “sustainability-linked bond” in three tranches, linked to the achievement of Enel’s sus- tainability objective for the reduction of direct green- house gas emissions (Scope 1), contributing to the achievement of the United Nations Sustainable Develop- ment Goal (SDG) 13 “Climate Action” and in line with the Group’s Sustainability-Linked Financing Framework. Fitch revises Enel’s long-term rating to “BBB+” and makes no change to the short- term rating of “F-2”. The outlook is stable On February 4, 2022, Fitch Ratings announced that it has revised Enel SpA’s long-term rating to “BBB+” from the previous “A-”. The agency also confirmed Enel’s short- term rating at “F-2”. The outlook remains stable. According to the agency, the change in Enel’s rating mainly reflects the expected increase in financial leverage in the medium term due to the investment opportunities that have prompted Enel to gradually expand its capital expenditure plans in response to the energy transition. – “IAS 41 - Agriculture”; the amendment removes the requirement for entities to exclude cash flows for tax- ation when measuring fair value. Accordingly, entities shall use pre-tax cash flows and a pre-tax rate to dis- count those cash flows. The amendments shall be applied prospectively for an- nual periods beginning on or after January 1, 2022. Early application is permitted. • “Amendments to IAS 1 and IFRS Practice Statement 2 - Disclosure of Accounting Policies”, issued in February 2021. The amendments are intended to support entities in deciding which accounting policies to disclose in the financial statements. The amendments to IAS 1 require companies to disclose their material accounting policy information rather than their significant accounting pol- icies. A guide on how to apply the concept of materiality to disclosures on accounting policies is provided in the amendments to IFRS Practice Statement 2. The amend- ments will take effect for annual periods beginning on or after January 1, 2023. Early application is permitted. • “Amendments to IAS 8 - Definition of Accounting Esti- mates”, issued in February 2021. The amendments clarify how companies should distinguish changes in account- ing policies from changes in accounting estimates. The definition of changes in accounting estimates has been replaced with a definition of accounting estimates as “monetary amounts in financial statements that are sub- ject to measurement uncertainty”. The amendments will take effect for annual periods beginning on or after Jan- uary 1, 2023. Early application is permitted. • “Amendments to IAS 12 Income Taxes: Deferred Tax relat- ed to Assets and Liabilities arising from a Single Transac- tion”, issued in May 2021. The amendments require enti- ties to recognize deferred tax on transactions that at in- itial recognition give rise to equal taxable and deductible temporary differences. The amendments will take effect, subject to endorsement, for annual periods beginning on or after January 1, 2023. Early application is permitted. • “Amendments to IFRS 10 and IAS 28 - Sale or Contribu- tion of Assets between an Investor and its Associate or Joint Venture”, issued in September 2014. The amend- ments clarify the accounting treatment for sales or con- tribution of assets between an investor and its associates or joint ventures. They confirm that the accounting treat- ment depends on whether the assets sold or contributed to an associate or joint venture constitute a “business“ (as defined in IFRS 3). The IASB has deferred the effective date of these amendments indefinitely. • “IFRS 17 - Insurance Contracts”, issued in May 2017. The standard will take effect for annual periods beginning on or after January 1, 2023, with earlier application permit- ted. The Group is assessing the potential impact of the future application of the new provisions. 434 434 Integrated Annual Report 2021 Russia-Ukraine conflict On February 24, 2022, the Russian President announced “a special military operation” in Ukrainian territory that led to the outbreak of conflict between the two countries. In the previous weeks, various attempts had been made to achieve a diplomatic solution to the strains between Russia and Ukraine that, following extensive and pro- longed military maneuvers by the Russian armed forces along the Ukrainian border, had persisted for some time. As the days went by, hostilities escalated, with an intensi- fication of clashes. The Russian military intervention in Ukraine triggered prompt reactions from various countries and interna- tional organizations. The European Council called on Russia to immediately cease hostilities and withdraw its armed forces from Ukraine in compliance with interna- tional law. The United Nations General Assembly, meet- ing in an emergency session, also approved a resolution condemning the Russian military action in Ukraine, asking Russia to withdraw the army. At the same time, the European Commission is address- ing the humanitarian crisis engendered by the conflict in Ukraine, with the deployment of humanitarian aid and emergency aid programs, including increased financial support to Ukraine. Negotiations are under way between the parties involved to seek a diplomatic solution that will prevent the situa- tion from becoming a threat to international peace and security. The European Union and other countries (e.g., the United States, the United Kingdom, Australia, Japan, Switzerland and others) have imposed severe sanctions on Russia, which, although of varying effectiveness, have impacted strategic sectors of the Russian economy and the finan- cial sector and imposed personal restrictions on the Rus- sian President and other political and business figures. The main European sanctions involve: • freezing Russian assets in the euro area; • blocking the access of Russian banks to European fi- nancial markets; • imposing export control measures (including a ban on the export of goods to Russia and Belarus in the avia- tion, maritime, space, technology and “dual-use” sec- tors); • freezing commercial transactions with the Ukrainian regions of Donetsk and Luhansk; • excluding major Russian banks from the international SWIFT transaction system; • blocking current accounts with the Sberbank banking group; • closing airspace to Russian flights; • freezing the personal assets of the Russian President, oligarchs, politicians and senior executives of the Rus- sian companies that support him. These sanctions have had an initial impact on the ex- change rate of the ruble, which has depreciated sharply against the euro and the US dollar, on local interest rates (which were increased to 20% by the Russian Central Bank) and on the share prices of companies listed on the Moscow Stock Exchange (with a significant decline being recorded in March). Financial difficulties have also been associated with an increased level of IT risk, to which businesses and gov- ernments are exposed, making it necessary to adopt ad- equate defense measures and stringent internal controls to safeguard their digital infrastructure. Considering this background, the Enel Group has activat- ed a task force to carefully monitor the status and evolu- tion of current developments and manage potential risks. Today, the Enel Group is present in Russia with a num- ber of companies in which it holds control or joint con- trol with other investors. More specifically, the Enel Group controls: • Enel Russia PJSC (56.43% owned by Enel SpA), a com- pany listed on the Moscow Stock Exchange that gen- erates electricity, mainly with three thermal generation plants, and holds 100% stakes in three renewable gen- eration companies; • Enel Green Power Rus LLC (a 100% indirect subsidiary of Enel SpA), a company that provides services for the de- velopment of renewable energy projects and which holds 100% stakes in four renewable generation companies; • Enel X Rus LLC (a 99% indirect subsidiary of Enel SpA). Enel SpA also directly holds an investment of 49.5% in a joint venture (Rusenergosbyt LLC) operating in the End-us- er Markets Business Line. At the end of 2021, the three thermal generation plants operating in Russia had an installed capacity of 5,276 MW, while renewables installed wind capacity was equal to 228 MW (including 138 MW of partial additional capacity of the Murmansk Kolskaya Wind Farm plant, which is under con- struction). The contribution of the Russian companies to the main consolidated performance aggregates in 2021 (consider- ing the average 2021 euro/ruble exchange rate of 87.18) is not significant and includes revenue of €564 million (0.6% of the total consolidated revenue of the Enel Group), op- erating profit of €51 million (0.7% of total Enel Group oper- ating profit) and profit of €64 million (2.0% of Enel Group profit). At December 31, 2021, considering the end-2021 euro/ru- ble exchange rate of 85.35, the main statement of financial position items of the Enel Group companies operating in Russia regarded: • under assets, €846 million of property, plant and equip- ment, €47 million in deferred tax assets, €44 million in trade receivables and €123 million in cash and cash equivalents; Notes to the consolidated financial statements 435435 • under liabilities, €428 million in borrowings, €54 million in deferred tax liabilities and €93 million in trade payables. The Enel Group is constantly monitoring the impact of the international crisis on its operations in Russia (with particu- lar regard to the procurement of materials, services and labor) and evaluating developments in market variables (exchange rates, interest rates), first and foremost taking consideration of the potential effects on performance and financial position of the depreciation of the ruble against the euro. Furthermore, the Enel Group is also assessing de- velopments associated with the counter-sanctions being deployed by Russia against investments in the country. The Enel Group is conducting analyses to assess the in- direct impacts of the war in Ukraine on operations, the financial situation and performance in the main euro-ar- ea countries in which it operates, with particular regard to shortages of raw materials from the areas affected by the conflict and the generalized increase in commodity prices. The Enel Group does not have gas supply contracts (pipeline and LNG) with Russia, but in Italy measures are being evaluated at the regulatory level to reduce the de- mand for gas and to contain price volatility on the mar- kets. In Spain (where the Group is present with its subsid- iary Endesa SA), in addition to regulatory developments, we are analyzing the effects on nuclear fuel orders from Russia. Particular attention is also paid to the impacts of the war on activities in Slovakia, where the Enel Group is present with the jointly controlled company Slovenské elektrárne AS (SE), of which Enel SpA indirectly holds 33%. It oper- ates in the generation of electricity from nuclear, thermal and hydroelectric sources with an installed capacity of 4 GW. SE’s nuclear plants have links with Russia involving technical-operational activities (supply of nuclear fuel and technology), investments (Russian suppliers involved in the construction of the MO3/4 plant who are currently not targeted by the sanctions) and loans (SE’s debt expo- sure to Sberbank). In this highly fluid situation, characterized by considera- ble regulatory uncertainty and high and volatile prices, the Enel Group is carefully monitoring macroeconomic and business variables in order to develop the most accurate real-time estimates of impacts connected with regulatory changes, sanctions and restrictions on assets, as well as on suppliers and contracts applicable to the Enel Group, taking due account of the recommendations issued by national and supranational organizations on this issue.(44) Enel finalizes renewal of partnership with Cinven in Ufinet Latam On March 24, 2022, Enel X International Srl (Enel X Inter- national), a wholly-owned subsidiary of Enel X Srl (Enel X), closed the agreement signed on December 21, 2021 with a holding company controlled by the Sixth Cinven Fund and a holding company controlled by the Seventh Cin- ven Fund acquiring indirectly, through a holding compa- ny, about 79% of the share capital of Ufinet Latam SLU (“Ufinet” or the “Company”) from the Sixth Cinven Fund and simultaneously selling 80.5% of the Company’s share capital to the Seventh Cinven Fund. As a result, Enel X In- ternational now indirectly retains a stake equal to 19.5% of Ufinet, renewing the partnership in the Company with Cinven. More specifically, Enel X International, which previously indirectly owned a stake of about 21% in the Company, exercised the call option to acquire around 79% of the share capital of Ufinet for €1,320 million. At the same time, Enel X International received around €207 million as a distribution of available reserves from Ufinet and simul- taneously sold 80.5% of the Company’s share capital to the Seventh Cinven Fund for about €1,186 million. Under the agreement, Enel X International, in addition to indirectly retaining 19.5% of the share capital of Ufinet, keeps representation on the latter and its holding com- pany’s boards of directors, retaining standard minority shareholder protection rights. (44) ESMA no. 71-99-1864 of March 14, 2022; CONSOB warning notice in the weekly bulletin of March 9-14, 2022. 436 436 Integrated Annual Report 2021 Declaration of the Chief Executive Officer and the officer in charge of financial reporting of the Enel Group at December 31, 2021, 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 no. 11971 of May 14, 1999 3. In addition, we certify that the consolidated financial statements of the Enel Group at December 31, 2021: a. have been prepared in compliance with the Inter- national Financial Reporting Standards endorsed by the European Union pursuant to Regulation (EC) no. 1606/2002 of the European Parliament and of the Council of July 19, 2002; b. correspond to the information in the books and oth- c. er accounting records; provide a true and fair representation of the financial position, financial performance and cash flows of the issuer and the companies included in the con- solidation scope. 4. Finally, we certify that the Report on Operations, ac- companied by the consolidated financial statements of the Enel Group at December 31, 2021, contains a relia- ble analysis of operations and performance, as well as the situation of the issuer and the companies included in the consolidation scope, together with a description of the main risks and uncertainties to which they are ex- posed. 1. The undersigned Francesco Starace and Alberto De Paoli, in their respective capacities as Chief Executive Officer and officer in charge of financial reporting of Enel SpA, hereby certify, taking account of the provi- sions of Article 154-bis, paragraphs 3 and 4, of Legisla- tive Decree 58 of February 24, 1998: a. the appropriateness with respect to the character- istics of the Enel Group and b. the effective adoption of the administrative and accounting procedures for the preparation of the consolidated financial state- ments of the Enel Group in the period between Jan- uary 1, 2021 and December 31, 2021. 2. In this regard, we report that: a. the appropriateness of the administrative and ac- counting 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 assess- ment was carried out on the basis of the guidelines set out in the “Internal Controls - Integrated Frame- work” issued by the Committee of Sponsoring Or- ganizations of the Treadway Commission (COSO); b. the assessment of the internal control system for fi- nancial reporting did not identify any material issues. Rome, March 17, 2022 Francesco Starace Alberto De Paoli Chief Executive Officer of Enel SpA Officer in charge of financial reporting of Enel SpA Declaration of the Chief Executive Officer and the officer in charge 437437 Reports Report of the Board of Statutory Auditors 438 Integrated Annual Report 2021 REPORT OF THE BOARD OF STATUTORY AUDITORS TO THE SHAREHOLDERS’ MEETING OF ENEL SpA CALLED TO APPROVE THE FINANCIAL STATEMENTS FOR 2021 (pursuant to Article 153 of Legislative Decree 58/1998 ) Shareholders, During the year ended December 31, 2021 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 Legislative 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 2020 edition of the Italian Corporate Governance Code (hereinafter, the “Corporate Governance Code”), which the Company adopted during the year;(1) - the appropriateness of the instructions given by the Company to its subsidiaries to enable Enel to meet statutory public 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 no. 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 participation in the meetings of the Board of Directors (1) In March 2021, the Board of Directors completed the adoption of measures to ensure that Enel had implemented the amendments to the Italian Corporate Governance Code. Until that time, the Company had adopted the corporate governance rules provided for in the 2018 edition of the Corporate Governance Code for listed companies. 439439 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 and the consolidated financial statements of the Enel Group for 2021 (in the section “Significant events in 2021”); • we did not find any atypical or unusual transactions conducted with third parties, Group companies or other related parties; • in the section “Related parties” of the notes to the separate financial statements for 2021 of the Company, the directors describe the main transactions with related- parties – the latter being identified on the basis of international accounting standards and the instructions 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 accordance 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 2021. All transactions with related parties reported in the notes to the separate financial statements for 2021 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 separate financial statements for 2021 on the basis of international accounting standards (IAS/IFRS) – and the interpretations issued by the IFRIC and the SIC – endorsed by the European Union pursuant to Regulation (EC) no. 1606/2002 and in force at the close of 2021, 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 Company’s separate financial statements for 2021 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 financial statements. The notes to the separate financial statements give detailed information on the accounting standards and measurement criteria adopted, accompanied by an indication of the standards applied for the first time in 2021, 2 440 Integrated Annual Report 2021 which as indicated in the notes did not have a significant impact in the year under review; • the separate financial statements for 2021 of the Company underwent the statutory audit by the audit firm, KPMG SpA, which issued an unqualified opinion, including with regard to the consistency of the report on operations and certain information in the report on corporate governance and ownership structure of the Company with the financial statements, as well as compliance with the provisions of law, pursuant to Article 14 of Decree 39/2010 and Article 10 of Regulation (EU) no. 537/2014. The report of KPMG SpA also includes: - a discussion of key aspects of the audit report on the separate financial statements; and - the declaration provided pursuant to Article 14, paragraph 2(e) of Decree 39/2010 stating that the audit firm did not identify any significant errors in the contents of the report on operations; • the Company declares that it has also prepared the consolidated financial statements of the Enel Group for 2021 on the basis of international accounting standards (IAS/IFRS) – and the interpretations issued by the IFRIC and the SIC – endorsed by the European Union pursuant to Regulation (EC) no. 1606/2002 and in force at the close of 2021, 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 2021 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 measurement 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 statements provide a detailed discussion of the accounting standards and measurement criteria adopted, accompanied by an indication of standards applied for the first time in 2021, which did not have a significant impact in the year under review. Note also that, starting from 2021, in compliance with the provisions of Delegated Regulation (EU) 2019/815 of December 17, 2018 (the “ESEF Regulation”), the Company has (i) drawn up its entire Annual Financial Report (including the separate financial statements and the consolidated financial statements, the respective reports on operations and the associated certifications pursuant to Article 154-bis, paragraph 5, of the Consolidated Law on Financial Intermediation) in the single electronic reporting format XHTML (Extensible Hypertext Markup Language), and (ii) marked up (with specific tags) the schedules of the consolidated financial statements and the related explanatory notes using the iXBRL markup language (Inline eXtensible Business Reporting Language), 3 441 in accordance with the ESEF taxonomy issued annually by ESMA, in order to facilitate the accessibility, analysis and comparability of the annual financial reports; • the consolidated financial statements for 2021 of the Enel Group underwent statutory audit by the audit firm KPMG SpA, which issued an unqualified opinion, including with regard to the consistency of the consistency of the report on operations and certain information in the report on corporate governance and ownership structure with the consolidated financial statements, as well as compliance with the provisions of law, pursuant to Article 14 of Decree 39/2010 and Article 10 of Regulation (EU) no. 537/2014. The report of KPMG SpA also includes: - - a discussion of key aspects of the audit report on the consolidated financial statements; and the declaration provided pursuant to Article 14, paragraph 2(e) of Decree 39/2010 and Article 4 of Consob Regulation no. 20267 (implementing Legislative Decree 254 of December 30, 2016) concerning, respectively, a statement that the audit firm did not identify any significant errors in the contents of the report on operations and that it verified that the Board of Directors had approved the consolidated non-financial statement; Under the terms of its engagement, KPMG SpA also issued unqualified opinions on the financial statements for 2021 of the most significant Italian companies of the Enel Group. Moreover, during periodic meetings with the representatives of the audit firm, KPMG SpA, the latter did not raise any issues concerning the reporting packages of the main foreign companies of the Enel Group, selected by the auditors 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 29, 2021, to ensure appropriate 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 no. 4 of March 3, 2010, and in the light of indications of Consob in its Communication no. 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 2022, i.e. prior to the date of approval of the financial statements for 2021; • we examined the Board of Directors’ proposal for the allocation of net profit for 2021 and the distribution of available reserves and have no comments in this regard; 4 442 Integrated Annual Report 2021 • we note that the Board of Directors of the Company certified, following appropriate checks by the Control and Risk Committee and the Board of Statutory Auditors in March 2022, that as at the date on which the 2021 financial statements were approved, the Enel Group continued to meet the conditions established by Consob (set out in Article 15 of the Market Rules, approved with Resolution no. 20249 of December 28, 2017) 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; • 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 global business lines and geographical areas. Taking account of the changes implemented most recently in 2021 and the early months of 2022, it is organized into: (i) global business lines, 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 global business lines are: Enel Green Power, and Thermal Generation, Global Energy and Commodity Management, Global Infrastructure and Networks, Enel X Global Retail and Global E- Mobility; (ii) regions and countries, which are responsible for managing relationships with local institutional bodies, regulatory authorities, the media and other local stakeholders, as well as optimizing the customer portfolio and generation assets, pursuing the best integrated margin, while also providing staff and other service support to the global business lines and adopting appropriate security, safety and environmental standards. Regions and countries comprise: Italy, Iberia, Europe, Latin America, North America, and Africa, Asia and Oceania; (iii) global service functions, which are responsible for managing information and communication technology activities (Global Digital Solutions), procurement at the Group level (Global Procurement) and invoicing, credit and customer care processes (Global Customer Operations); and (iv) holding company functions, which among other things are responsible for managing governance processes at the Group level. They include: Administration, Finance and Control, Personnel and Organization, Communication, Legal and Corporate Affairs, Audit, and Innovation and Sustainability. The Board of Statutory Auditors feels that the organizational system described above is adequate to support the strategic development of the Company and the Enel Group and is also consistent with control requirements; 5 443 • 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, having received today from KPMG specific written confirmation that they met that requirement (pursuant to the provisions of Article 6, paragraph 2(a), of Regulation (EU) 537/2014) and paragraph 17 of international standard on auditing (ISA Italia) 260 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(e), of Decree 39/2010 – the nature and the scale of non-audit services provided to the Company and other Enel Group companies by KPMG SpA and the entities belonging to its network. The fees due to KPMG SpA and the entities belonging to its network are reported in the notes to the separate financial statements of the Company. Following our examinations, the Board of Statutory Auditors feels that there are no critical issues concerning the independence of KPMG 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. With specific regard to the provisions of Article 11 of Regulation (EU) 537/2014, KPMG SpA today provided the Board of Statutory Auditors with the “additional report” for 2021 on the results of the statutory audit carried out, which indicates no significant difficulties encountered during the audit or any significant shortcomings in the internal control system for financial reporting or the Enel accounting system that would raise issues requiring mention in the opinion on the separate and consolidated financial statements. The Board of Statutory Auditors will transmit that report to the Board of Directors promptly, accompanied by any comments it may have, in accordance with Article 19, paragraph 1(a), of Decree 39/2010. As at the date of this report, the audit firm also reported that it did not prepare any management letter for 2021; • 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 performance 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 examinations performed by KPMG SpA. The Chief Executive Officer and the officer responsible for the preparation of the financial reports of Enel issued a statement (regarding the 6 444 Integrated Annual Report 2021 Company’s 2021 separate 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 (EC) no. 1606/2002; (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 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 administrative and accounting procedures used in the preparation of the separate 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 testing performed by a qualified external advisor) 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 2021 of the Enel Group.; • we monitored the adequacy and effectiveness of the internal control system, primarily through constant participation of the head of the Audit department of the Company in the meetings of the Board of Statutory Auditors and holding about half of the meetings jointly with the Control and Risk Committee, as well as through periodic meetings with the body charged with overseeing the operation of and compliance with the organizational and management model adopted by the Company pursuant to Legislative Decree 231/2001. 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 February 2022, the Board of Directors of the Company expressed an analogous assessment of the situation and also noted, in November 2021, that the main risks associated with the strategic targets set out in the 2022-2024 Business Plan were compatible with the management of the Company in a manner consistent with those targets; • in 2021 no petitions were received by the Board of Auditors nor did we receive any complaints concerning circumstances deemed censurable pursuant to Article 2408 of the Italian Civil Code; • we monitored the effective implementation of the Corporate Governance Code, verifying the compliance of Enel’s corporate governance arrangements with the recommendations of the Code. Detailed information on the Company’s corporate 7 445 governance system can be found in the report on corporate governance and ownership structure for 2021. In June 2021, the Board of Statutory Auditors verified that the Board of Directors, in evaluating 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 that must inform the application of the Code’s recommendations in general, adopting a transparent procedure, the details of which are discussed in the report on corporate governance and ownership structure for 2021. With regard to the so-called “self-assessment” of the independence of its members, the Board of Statutory Auditors - in June 2021 and February 2022 - ascertained that all standing statutory auditors met the relevant requirements set out in the Consolidated Law on Financial Intermediation and in the Corporate Governance Code. In the final part of 2021 and during the first two months of 2022, the Board of Statutory Auditors, with the support of an independent advisory firm, conducted a board review assessing the size, composition and functioning of the Board of Statutory Auditors, as has been done since 2018, similar to the review conducted for the Board of Directors since 2004. This is a best practice that the Board of Statutory Auditors intended to adopt even in the absence of a specific recommendation of the Corporate Governance Code, a “peer-to-peer review” approach, i.e. the assessment not only of the functioning of the body as a whole, but also of the style and content of the contribution provided by each of the auditors. The approach adopted in performing the board review for 2021 and the findings of that review are described in detail in the report on corporate governance and ownership structure for 2021, revealing the unanimous agreement of the members of the Board of Statutory Auditors concerning the complete adequacy of its size, membership and functioning. Compared with 2020, it was confirmed that the oversight body has adopted effective and efficient operating methods that comply with the reference regulatory framework. Note also that, based on the findings of the board review and taking account of the provisions of the policy on the diversity of its members (approved on January 29, 2018), the Board of Statutory Auditors - in view of the election of a new Board of Statutory Auditors following the expiry of its term, scheduled for the Shareholders' Meeting called to approve the separate financial statements of the Company for 2021 – issued specific guidance for the shareholders (available on the company website) regarding the qualifications that the members of the Board of Statutory Auditors should possess; 8 446 Integrated Annual Report 2021 • During 2021, the Board of Statutory Auditors also participated in an induction program, characterized by specific studies to update directors and statutory auditors on corporate governance and climate change issues, with the aim of further developing their skills with the support of a qualified external expert; • we monitored the application of the provisions of Legislative Decree 254 of December 30, 2016 (hereinafter “Decree 254) concerning the disclosure of non-financial and diversity information by certain large undertakings and groups. In performing that activity, we monitored the adequacy of the organizational, administrative, reporting and control system established by the Company in order to enable the accurate representation in the consolidated non-financial statement for 2021 of the activity of the Enel Group, its results and its impacts in the non-financial areas referred to in Article 3, paragraph 1, of Decree 254, and have no comments in this regard. The audit firm, KPMG SpA, has issued, pursuant to Article 3, paragraph 10, of Decree 254 and Article 5 of Consob Regulation no. 20267 of January 18, 2018, its certification of the conformity of the information provided in the consolidated non- financial statement with the requirements of applicable law; • since the listing of its shares, the Company has adopted specific rules (most recently amended in September 2018) 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 on the corporate website) contain appropriate provisions directed at subsidiaries to enable Enel to comply with statutory public 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, most recently in February 2021) a Code of Ethics (also available on the corporate website) 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 adapted to the characteristics of the various Italian companies of the Group, as well as a description of the purposes of the “Enel Global Compliance Program” for the Group’s foreign companies, please see the report on corporate 9 447 governance and ownership structure for 2021. The structure that monitors the operation and compliance with the program and is responsible for updating it is a collegial body. This body, appointed in July 2020, is still composed of three external members who jointly have specific professional expertise on corporate organization matters and corporate criminal law. The Board of Statutory Auditors received adequate information on the main activities carried out in 2021 by that body, including in meetings with its members. Our examination of those activities found no facts or situations that would require mention in this report; • in 2021, the Board of Statutory Auditors issued a favorable opinion (at the meeting of February 3, 2021) on the 2021 Audit Plan, in accordance with the provisions of Article 7.C.1, letter c) of the Corporate Governance Code for listed companies (which the Company still applied as at that date); • 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 2021 for their respective positions and any compensation instruments awarded to them is contained in the second section of the Report on Remuneration Policy for 2022 and Remuneration Paid in 2021 referred to in Article 123-ter of the Consolidated Law on Financial Intermediation (for the sake of brevity, “Remuneration Report” hereinafter), approved by the Board of Directors, acting on a proposal of the Nomination and Compensation Committee on April 6, 2022, which will be published in compliance with the time limits established by law. The design of these remuneration instruments is in line with best practices as it complies 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 entirely of independent directors, drawing on the findings of benchmark analyses, including at the international level, conducted by an independent consulting firm. In addition, the second section of the Remuneration Report contains, in compliance with the applicable Consob regulations, specific disclosures on the remuneration received in 2021 by the members of the oversight body and by key management personnel (in aggregate form for the latter). The Board of Statutory Auditors also supervised the process of preparing the remuneration policy for 2022 – described in full in the first section of the Remuneration Report, without finding any critical issues. In particular, oversight activity examined the consistency of the various measures envisaged by that policy with (i) the provisions of Directive (EU) 2017/828 as transposed into Italian law, with (ii) the recommendations of the Italian Corporate Governance Code, as well as with 10 448 Integrated Annual Report 2021 (iii) the results of the benchmark analysis carried out, including at the international level, by an independent consulting firm that the Nomination and Compensation Committee elected to engage. As indicated in the first section of the Remuneration Report, during the preparation of the remuneration policy for 2022, the Board of Statutory Auditors - taking account of the recommendations in this regard by the Corporate Governance Code – asked the independent consulting firm to conduct an additional benchmark analysis to ascertain the adequacy of the remuneration paid to the members of the oversight body. This analysis was performed on the basis of the data reported in the documentation published on the occasion of 2021 shareholders' meetings by issuers belonging to a peer group composed - unlike that used for the analogous analysis concerning the Board of Directors - exclusively of Italian companies belonging the FTSE MIB index (2). The functions that the Italian legal system assigns to the Board of Statutory Auditors differentiate the latter from the bodies with oversight functions provided for in the one-tier and two-tier governance systems commonly adopted in other countries. For the purpose of identifying the peer group, the consultant, in agreement with the Board of Statutory Auditors, decided to exclude certain industrial companies belonging to the FTSE MIB index that have concentrated ownership structures, while evaluating some companies in the FTSE MIB index operating in the financial services industry. The analysis showed that, on the basis of the data as at December 31, 2020, Enel exceeds the peer group in terms of capitalization, is above the ninth decile in terms of revenue and slightly below the ninth decile in terms of number of employees. The same analysis also found that – against Enel's very high positioning compared with the companies included in the panel in terms of capitalization, revenue and number of employees - the remuneration of the Chairman of the Board of Statutory Auditors and of the other Statutory Auditors is just under the peer group median for the Chairman and in line with the median for the other standing Statutory Auditors. The analysis also found that in 2020, on average, the boards of statutory auditors of the companies belonging to the panel were composed of four standing auditors compared with the three standing members of Enel's Board of Statutory Auditors, and held 25 meetings compared with the 27 meetings held by Enel's Board of Statutory Auditors. On the basis of the analysis, it therefore emerged that the competitiveness of the remuneration envisaged for the Chairman and the other standing members of Enel's Board of Statutory Auditors is similar to the positioning of the non-executive directors (2) The peer group consists of the following 19 companies: A2A, Atlantia, Assicurazioni Generali, Banco BPM, BPER Banca, Eni, Hera, Leonardo, Mediobanca, Nexi, Pirelli, Poste Italiane, Prysmian, Saipem, Snam, Terna, TIM, Unicredit and Unipol. 11 449 of Enel with regard to the remuneration paid to them in their capacity as directors. (net of attendance fees, which at Enel are not envisaged for participation in board meetings but are paid by some of the peer group companies used for the purpose of preparing the 2022 policy for directors’ remuneration). However, the consultant noted that to correctly assess the appropriateness of the remuneration paid to the members of the Board of Statutory Auditors, it would be advisable to assess its amount in the light of the overall effort required by the position, taking due consideration of the fact that the members of the Board of Statutory Auditors also participate in the meetings of the Board committees (a practice that enables them to perform their oversight of the effective implementation of the recommendations of the Corporate Governance Code within Enel) without receiving any additional remuneration for this activity. Finally, it should be noted that the benchmark analysis found a clear correlation between the competitiveness of the remuneration offered by the peer group companies to their respective boards of statutory auditors and the different work load required of them, as indicated by the number of meetings held in 2020. Accordingly, the analysis noted that companies in the financial services industry offer higher remuneration on average to the chairman and the standing members of their boards of statutory auditors, taking account of the greater number of meetings held. The analysis also found that the amount of remuneration paid to the Chairman and the standing members of Enel's Board of Statutory Auditors is substantially in line with that currently paid by the larger of the peer group companies in which the Ministry for the Economy and Finance holds a significant direct and/or indirect investment. The Board of Statutory Auditors’ oversight activity in 2021 was carried out in 28 meetings and with participation in the 16 meetings of the Board of Directors and participation in the annual Shareholders’ Meeting, and, through the chairman or one or more of its members, in the 17 meetings of the Control and Risk Committee (16 of which held jointly with the Board of Statutory Auditors), in the 12 meetings of the Nomination and Compensation Committee, in the 7 meetings of the Related Parties Committee and in the 5 meetings of the Corporate Governance and Sustainability Committee, for a total of 86 meetings. The delegated magistrate of the State Audit Court participated in the meetings of the Board of Statutory Auditors and those of the Board of Directors. During the course of this activity and on the basis of information obtained from KPMG 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. 12 450 Integrated Annual Report 2021 Finally, the Board of Statutory Auditors notes that in 2021 and until March 31, 2022, the health emergency associated with the COVID-19 pandemic was still under way in Italy. Through that date, Italian authorities maintained a number of limitations on freedom of movement within the country to contain the contagion, among other things imposing bans on gatherings. In this context, the Board of Statutory Auditors, in the light of the measures to contain the COVID-19 pandemic, held many of its meetings in 2021 exclusively with the use of audio/video conference systems by all participants, which nevertheless ensured their identification and the exchange of documentation - in accordance with the provisions of Article 25.4 of the Bylaws – and, more generally, the full performance of the oversight body’s functions. The Board of Statutory Auditors also notes that the Company's Board of Directors has called the ordinary Shareholders' Meeting for May 19, 2022 in a single call, establishing that – in the light of the uncertain developments in the COVID-19 pandemic and taking account of the continuing need to reduce travel and the risks associated with in-person participation at events and considering the provisions concerning the holding of company meetings in Article 106, paragraph 4, of Decree Law 18 of March 17, 2020, ratified with amendments by Law 27 of April 24, 2020(3) - it will be conducted in a manner that enables shareholders to participate exclusively through the shareholders’ representative designated by the Company referred to in Article 135-undecies of the Consolidated Law on Financial Intermediation, to whom shareholders may also confer proxies or sub- proxies pursuant to Article 135-novies of the Consolidated Law, also in derogation from the provisions of Article 135-undecies, paragraph 4, of the Consolidated Law. The Board of Statutory Auditors will ensure that the rights of the Shareholders can be exercised on the occasion of the aforementioned Shareholders' Meeting – as occurred on the occasion of the Enel Shareholders’ Meetings held using similar procedures on May 14, 2020 and May 20, 2021 - within the limits permitted by the special procedures envisaged for holding the Meeting. The Board of Statutory Auditors will continue to carry out its oversight activity until the expiry of its term in close coordination with the Board of Directors and the audit firm to monitor the impact – including economic and financial repercussions - of the COVID-19 pandemic, and more recently the sensitive geopolitical situation, on the Company and the Enel Group. In this latter regard, in performing its statutory oversight activities the Board of Statutory Auditors took due account of the recommendations contained in the joint Bank of Italy - Consob - IVASS - UIF press release of March 7, 2022, as well as (3) Whose validity was extended until July 31, 2022 by Article 3, paragraph 1, of Decree Law 228 of December 30, 2021, ratified with amendments by Law 15 of February 25, 2022. 13 451 Consob's warning notice of March 18, 2022, regarding the possible impact of the Russia- Ukraine conflict on the operations of listed companies. Based on the oversight activity performed and the information exchanged with the independent auditors KPMG SpA, we recommend that you approve the Company’s financial statements for the year ended December 31, 2021 in conformity with the proposals of the Board of Directors. Rome, April 14, 2022 The Board of Auditors [signed] ____________________ Barbara Tadolini - Chairman [signed] ____________________ Romina Guglielmetti - Auditor [signed] ____________________ Claudio Sottoriva - Auditor 452 Integrated Annual Report 2021 14 Report of the Audit Firm 453453 454 Integrated Annual Report 2021 455 456 Integrated Annual Report 2021 457 458 Integrated Annual Report 2021 459 Attachments Subsidiaries, associates and other significant equity investments of the Enel Group at December 31, 2021 In compliance with Articles 38 and 39 of Legislative Decree 127/1991 and CONSOB Notice no. DEM/6064293 of July 28, 2006, a list of subsidiaries and associates of Enel SpA at December 31, 2021, pursuant to Article 2359 of the Ita- lian 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, business segment, method of consolidation, Group companies that have a stake in the company and their respective ownership share, and the Group’s ownership share. The following provides a key to the icons representing the business segments. Business segment Description of business segments Group holding company Country holding company Enel Green Power Thermal Generation Trading Infrastructure and Networks Enel X End-user Markets Services Finance 460 460 Integrated Annual Report 2021 Company name Headquarters Country Share capital Currency Segment Consolidation method Held by % holding Group % holding Parent Enel SpA Rome IT 10,166,679,946.00 EUR Holding 100.00% Subsidiaries 25 Mile Creek Windfarm LLC Andover US 1.00 400 Manley Solar LLC Boston US - 4814 Investments LLC Andover US - USD USD USD Line-by-line Enel Kansas LLC 100.00% 100.00% Line-by-line Enel X Finance Partner LLC 100.00% 100.00% Line-by-line Tradewind Energy Inc. 100.00% 100.00% ABC Solar 11 SpA ABC Solar 3 SpA Santiago de Chile Santiago de Chile CL 1,000,000.00 CLP CL 1,000,000.00 CLP Equity Equity Abu Renewables India Private Limited Aced Renewables Hidden Valley (RF) (Pty) Ltd Gurugram IN 100,000.00 INR Line-by-line Johannesburg ZA 1,000.00 ZAR Acefat AIE Barcelona ES 793,340.00 EUR AFS - Adams Solar PV Project Two (RF) (Pty) Ltd Johannesburg ZA 10,000,000.00 ZAR Line-by-line Adria Link Srl Gorizia Aero-Tanna Srl Rome IT IT 300,297.00 EUR Equity 15,000.00 EUR Line-by-line Agassiz Beach LLC Minneapolis US - USD Line-by-line Agatos Green Power Trino Srl Rome IT 10,000.00 EUR Line-by-line Aguilón 20 SA Zaragoza ES 2,682,000.00 EUR Line-by-line Alba Energia Ltda Rio de Janeiro BR 16,045,169.00 BRL Line-by-line Albany Solar LLC Wilmington US - USD Line-by-line Enel Green Power Chile SA 100.00% 64.93% Enel Green Power Chile SA Enel Green Power India Private Limited 100.00% 64.93% 100.00% 100.00% Enel Green Power RSA 2 (RF) (Pty) Ltd 55.00% 55.00% Edistribución Redes Digitales SL (Sociedad Unipersonal) 14.29% 10.02% Enel Green Power RSA (Pty) Ltd 60.00% 60.00% Enel Produzione SpA 50.00% 50.00% Enel Green Power Italia Srl 100.00% 100.00% Chi Minnesota Wind LLC 51.00% 51.00% Enel Green Power Solar Energy Srl 100.00% 100.00% Enel Green Power España SLU 51.00% 35.76% Enel Brasil SA 100.00% Enel Green Power Desenvolvimento Ltda 0.00% 82.27% Aurora Distributed Solar LLC 100.00% 74.13% Alliance SA Managua Alpe Adria Energia Srl Udine NI IT 6,180,150.00 NIO Equity Ufinet Latam SLU 49.90% 10.28% 900,000.00 EUR Equity Enel Produzione SpA 50.00% 50.00% Alta Farms Azure Ranchland Holdings LLC Alta Farms Wind Project II LLC Dover US 100.00 Andover US 1.00 USD USD Line-by-line Enel Green Power North America Inc. 100.00% 100.00% Line-by-line Enel Green Power Azure Ranchland Holdings LLC 100.00% 100.00% Attachments 461 461 Company name Headquarters Country Share capital Currency Segment Consolidation method Held by % holding Group % holding Alvorada Energia SA Niterói BR 22,317,415.92 BRL Line-by-line Enel Brasil SA 100.00% 82.27% Ampla Energia e Serviços SA Rio de Janeiro BR 2,498,230,386.65 BRL Line-by-line Enel Brasil SA 99.73% 82.05% Annandale Solar LLC Wilmington US - USD Line-by-line Aurora Distributed Solar LLC 100.00% 74.13% Apiacás Energia SA Rio de Janeiro BR 14,216,846.33 BRL Line-by-line Enel Brasil SA 100.00% 82.27% Aquilla Wind Project LLC Aragonesa de Actividades Energéticas SA Andover US 1.00 USD Line-by-line Teruel ES 60,100.00 EUR Line-by-line Aranort Desarrollos SL Madrid ES 3,010.00 EUR Line-by-line Aravalli Surya (Project 1) Private Limited Gurugram IN 8,100,000.00 INR Line-by-line Tradewind Energy Inc. 100.00% 100.00% Endesa Red SA (Sociedad Unipersonal) Enel Green Power España SLU Enel Green Power India Private Limited 100.00% 70.11% 100.00% 70.11% 100.00% 100.00% Arcadia Power Inc. Washington DC US - Arena Power Solar 11 SLU Arena Power Solar 12 SLU Arena Power Solar 13 SLU Arena Power Solar 20 SLU Arena Power Solar 33 SLU Arena Power Solar 34 SLU Madrid ES 3,000.00 Madrid ES 3,000.00 Seville ES 3,000.00 Seville ES 3,000.00 Madrid ES 3,000.00 Madrid ES 3,000.00 Arena Power Solar 35 SLU Seville Asociación Nuclear Ascó-Vandellós II AIE Tarragona ES ES 3,000.00 USD EUR EUR EUR EUR EUR EUR EUR - Enel X North America Inc. 0.14% 0.14% Line-by-line Enel Green Power España SLU 100.00% 70.11% Line-by-line Enel Green Power España SLU 100.00% 70.11% Line-by-line Enel Green Power España SLU 100.00% 70.11% Line-by-line Enel Green Power España SLU 100.00% 70.11% Line-by-line Enel Green Power España SLU 100.00% 70.11% Line-by-line Enel Green Power España SLU 100.00% 70.11% Line-by-line Enel Green Power España SLU 100.00% 70.11% 19,232,400.00 EUR Proportional Endesa Generación SA 85.41% 59.88% Ateca Renovables SL Madrid ES 3,000.00 EUR Equity Athonet France SASU Paris FR 50,000.00 Athonet Srl Trieste IT 68,927.57 EUR EUR Athonet UK Ltd Battle, East Sussex GB 250,001.00 GBP Athonet USA Inc. Wilmington US 1.00 USD - - - - 462 462 Integrated Annual Report 2021 Baylio Solar SLU 19.72% Dehesa de los Guadalupes Solar SLU Seguidores Solares Planta 2 SL (Sociedad Unipersonal) 14.93% 35.06% 15.35% Athonet Srl 100.00% 16.00% Enel X Srl 16.00% 16.00% Athonet Srl 100.00% 16.00% Athonet Srl 100.00% 16.00% Company name Headquarters Country Share capital Currency Segment Consolidation method Held by % holding Group % holding Atlántico Photovoltaic SAS ESP Barranquilla CO 2,000,000.00 COP Line-by-line Enel Green Power Colombia SAS ESP 100.00% 82.27% Atwater Solar LLC Wilmington US - Aurora Distributed Solar LLC Aurora Land Holdings LLC Aurora Solar Holdings LLC Aurora Wind Holdings LLC Aurora Wind Project LLC Wilmington US - Wilmington US - Wilmington US - Andover US - Andover US 1.00 Autumn Hills LLC Wilmington US - USD USD USD USD USD USD USD Line-by-line Aurora Distributed Solar LLC 100.00% 74.13% Line-by-line Aurora Solar Holdings LLC 74.13% 74.13% Line-by-line Enel Kansas LLC 100.00% 100.00% Line-by-line Enel Kansas LLC 100.00% 100.00% Line-by-line Enel Kansas LLC 100.00% 100.00% Line-by-line Aurora Wind Holdings LLC 100.00% 100.00% Line-by-line Chi Minnesota Wind LLC 51.00% 51.00% Avikiran Energy India Private Limited Gurugram Avikiran Solar India Private Limited New Delhi Avikiran Surya India Private Limited Gurugram Avikiran Vayu India Private Limited Gurugram IN IN IN IN 73,300,000.00 INR Line-by-line 253,659,580.00 INR Line-by-line 100,000.00 INR Line-by-line 100,000.00 INR Line-by-line Enel Green Power India Private Limited Enel Green Power India Private Limited Enel Green Power India Private Limited Enel Green Power India Private Limited 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% Azure Blue Jay Holdings LLC Dover US 100.00 Azure Blue Jay Solar Holdings LLC Andover US 1.00 Azure Sky Solar Project LLC Andover US 1.00 Azure Sky Wind Holdings LLC Andover US - Azure Sky Wind Project LLC Andover US 1.00 Azure Sky Wind Storage LLC Baikal Enterprise SL Baleares Energy SL Andover US - Palma de Mallorca Palma de Mallorca ES 3,006.00 ES 4,509.00 Barnwell County Solar Project LLC Andover US - Baylio Solar SLU Seville ES 3,000.00 Beaver Falls Water Power Company Wilmington US - Beaver Valley Holdings LLC Wilmington US - USD USD USD USD USD USD EUR EUR USD EUR USD USD Line-by-line Enel Green Power North America Inc. 100.00% 100.00% Line-by-line Enel Green Power Azure Blue Jay Solar Holdings LLC 100.00% 100.00% Line-by-line Azure Blue Jay Solar Holdings LLC 100.00% 100.00% Line-by-line Enel Kansas LLC 100.00% 100.00% Line-by-line Enel Green Power Azure Ranchland Holdings LLC 100.00% 100.00% Line-by-line Enel Kansas LLC 100.00% 100.00% Line-by-line Enel Green Power España SLU 100.00% 70.11% Line-by-line Enel Green Power España SLU 100.00% 70.11% Line-by-line Tradewind Energy Inc. 100.00% 100.00% Line-by-line Enel Green Power España SLU 100.00% 70.11% Line-by-line Beaver Valley Holdings LLC 67.50% 67.50% Line-by-line Enel Green Power North America Inc. 100.00% 100.00% Attachments 463 463 Company name Headquarters Country Share capital Currency Segment Consolidation method Held by % holding Group % holding Belomechetskaya WPS Moscow RU 3,010,000.00 RUB Line-by-line Bijou Hills Wind LLC Andover US 1.00 USD Line-by-line Bioenergy Casei Gerola Srl Rome IT 100,000.00 EUR Line-by-line Enel Green Power Rus Limited Liability Company Tradewind Energy Inc. 100.00% 100.00% 100.00% 100.00% Enel Green Power Italia Srl 100.00% 100.00% Bison Meadows Wind Project LLC Andover US - Blair Solar I LLC Andover US 1.00 Blue Jay Solar I LLC Andover US 1.00 Blue Jay Solar II LLC Andover US 1.00 Blue Star Wind Project LLC Andover US 1.00 USD USD USD USD USD Line-by-line Enel Kansas LLC 100.00% 100.00% Line-by-line Brick Road Solar Holdings LLC 100.00% 100.00% Line-by-line Azure Blue Jay Solar Holdings LLC 100.00% 100.00% Line-by-line Enel Kansas LLC 100.00% 100.00% Line-by-line Tradewind Energy Inc. 100.00% 100.00% BluRe MA San José LU 7,092,970.00 EUR - Bogaris PV1 SLU Madrid ES 3,000.00 EUR Line-by-line Slovenské elektrárne AS 5.00% 1.65% Enel Green Power España SLU 100.00% 70.11% Codensa SA ESP 62.99% Bogotá ZE SAS Bogotá CO 503,609,700.00 COP Line-by-line 39.74% Boiro Energía SA Boiro ES 601,010.00 EUR Equity Bondia Energia Ltda Niterói BR 2,950,888.00 BRL Line-by-line Enel X Colombia SAS 37.01% Enel Green Power España SLU 40.00% 28.04% Enel Brasil SA 100.00% Enel Green Power Desenvolvimento Ltda 0.00% 82.27% Boone Stephens Solar I LLC Andover US 1.00 Bosa del Ebro SL Zaragoza ES 3,010.00 Bottom Grass Solar Project LLC Andover US - USD EUR USD Line-by-line Brick Road Solar Holdings LLC 100.00% 100.00% Line-by-line Enel Green Power España SLU 51.00% 35.75% Line-by-line Enel Kansas LLC 100.00% 100.00% Boujdour Wind Farm Casablanca MA 300,000.00 MAD Equity Nareva Enel Green Power Morocco SA Enel Green Power Bouldercombe Trust Enel Green Power Bouldercombe Holding (Pty) Ltd 90.00% 45.00% 100.00% 100.00% 100.00% 100.00% Enel Green Power North America Inc. 24.08% Sydney AU 10.00 Sydney AU 100.00 AUD AUD Line-by-line Line-by-line Bouldercombe Solar Farm Trust Bouldercombe Solar (Pty) Ltd Bp Hydro Finance Partnership Salt Lake City US - USD Line-by-line 100.00% Brandonville Solar I LLC Andover US 1.00 USD Line-by-line Enel Kansas LLC 75.92% Brick Road Solar Holdings LLC 100.00% 100.00% 464 464 Integrated Annual Report 2021 Company name Headquarters Country Share capital Currency Segment Bravo Dome Wind Project LLC Brazoria West Solar Project LLC Brazos Flat Solar Project LLC Brick Road Solar Holdings LLC Andover US 1.00 Andover US - Andover US - Andover US 1.00 Brush County Solar Project LLC Andover US - Buckshutem Solar I LLC Andover US 1.00 Buckshutem Solar II LLC Buffalo Dunes Wind Project LLC Andover US 1.00 Topeka US - USD USD USD USD USD USD USD USD Consolidation method Held by % holding Group % holding Line-by-line Tradewind Energy Inc. 100.00% 100.00% Line-by-line Tradewind Energy Inc. 100.00% 100.00% Line-by-line Enel Kansas LLC 100.00% 100.00% Line-by-line Tradewind Energy Inc. 100.00% 100.00% Line-by-line Tradewind Energy Inc. 100.00% 100.00% Line-by-line Brick Road Solar Holdings LLC 100.00% 100.00% Line-by-line Brick Road Solar Holdings LLC 100.00% 100.00% Line-by-line EGPNA Development Holdings LLC 75.00% 75.00% Enel Alberta Wind Inc. 0.10% Buffalo Jump LP Alberta CA 10.00 CAD Line-by-line 100.00% Buffalo Spirit Wind Project LLC Bungala One Finco (Pty) Ltd Andover US 1.00 Sydney AU 1,000.00 Bungala One Operation Holding Trust Sydney AU 100.00 Sydney AU 100.00 USD AUD AUD AUD Enel Green Power Canada Inc. 99.90% Line-by-line Tradewind Energy Inc. 100.00% 100.00% Line-by-line Bungala One Property (Pty) Ltd 100.00% 51.00% Line-by-line Enel Green Power Bungala (Pty) Ltd 50.00% 50.00% Line-by-line Enel Green Power Bungala (Pty) Ltd 51.00% 51.00% Sydney AU 1,000.00 AUD Line-by-line Bungala One Operations Holding (Pty) Ltd Bungala One Operations (Pty) Ltd Bungala One Operations Trust Bungala One Property Holding (Pty) Ltd Bungala One Property Holding Trust Bungala One Property (Pty) Ltd Sydney AU - Sydney AU 100.00 Sydney AU 100.00 AUD AUD AUD Sydney AU 1,000.00 AUD Line-by-line Bungala One Property Trust Sydney AU - Bungala Two Finco (Pty) Ltd Bungala Two Operations Holding (Pty) Ltd Bungala Two Operations Holding Trust Bungala Two Operations (Pty) Ltd Sydney AU - Sydney AU - Sydney AU - Sydney AU - AUD AUD AUD AUD AUD Bungala One Operations Holding (Pty) Ltd Bungala One Operations Holding (Pty) Ltd 100.00% 51.00% 100.00% 51.00% Line-by-line Line-by-line Enel Green Power Bungala (Pty) Ltd 51.00% 51.00% Line-by-line Enel Green Power Bungala (Pty) Ltd 50.00% 50.00% Bungala One Property Holding (Pty) Ltd Bungala One Property Holding (Pty) Ltd 100.00% 51.00% 100.00% 51.00% Line-by-line Line-by-line Bungala Two Property (Pty) Ltd 100.00% 51.00% Line-by-line Enel Green Power Bungala (Pty) Ltd 51.00% 51.00% Line-by-line Enel Green Power Bungala (Pty) Ltd 50.00% 50.00% Line-by-line Bungala Two Operations Holding (Pty) Ltd 100.00% 51.00% Attachments 465 465 Company name Headquarters Country Share capital Currency Segment Bungala Two Operations Trust Bungala Two Property Holding (Pty) Ltd Bungala Two Property Holding Trust Bungala Two Property (Pty) Ltd Sydney AU - Sydney AU - Sydney AU - Sydney AU - Bungala Two Property Trust Sydney AU 1.00 Business Venture Investments 1468 (Pty) Ltd Butterfly Meadows Solar Project LLC Johannesburg ZA 100.00 Andover US - AUD AUD AUD AUD AUD ZAR USD Consolidation method Line-by-line Held by % holding Group % holding Bungala Two Operations Holding (Pty) Ltd 100.00% 51.00% Line-by-line Enel Green Power Bungala (Pty) Ltd 51.00% 51.00% Line-by-line Enel Green Power Bungala (Pty) Ltd 50.00% 50.00% Line-by-line Line-by-line Bungala Two Property Holding (Pty) Ltd Bungala Two Property Holding (Pty) Ltd 100.00% 51.00% 100.00% 51.00% Line-by-line Enel Green Power RSA (Pty) Ltd 100.00% 100.00% Line-by-line Enel Kansas LLC 100.00% 100.00% C&C Castelvetere Srl Rome C&C Uno Energy Srl Rome IT IT 100,000.00 EUR Line-by-line 118,000.00 EUR Line-by-line Enel Green Power Italia Srl 100.00% 100.00% Enel Green Power Italia Srl 100.00% 100.00% Canastota Wind Power LLC Andover US - Caney River Wind Project LLC Overland Park US - Castiblanco Solar SL Madrid ES 3,000.00 USD USD EUR Line-by-line Fenner Wind Holdings LLC 100.00% 100.00% Equity Rocky Caney Wind LLC 100.00% 20.00% Line-by-line Enel Green Power España SLU 100.00% 70.11% Enel Alberta Wind Inc. 0.10% Enel Green Power Canada Inc. 99.90% Endesa Red SA (Sociedad Unipersonal) 0.94% 0.66% Enel Romania SA 9.52% 9.52% Enel Green Power Chile SA 6.00% 3.90% Tradewind Energy Inc. 100.00% 100.00% Castle Rock Ridge Limited Partnership Alberta CA - CAD Line-by-line 100.00% Catalana d’Iniciatives SCR SA Barcelona ES 30,862,800.00 EUR CCP.RO Bucharest SA Bucharest RO 79,800,000.00 RON Cdec - Sic Ltda Santiago de Chile CL 709,783,206.00 CLP - - - Andover US 1.00 USD Line-by-line Cedar Run Wind Project LLC Celg Distribuição SA - Celg D Goiás BR 5,664,951,979.22 BRL Line-by-line Enel Brasil SA 99.96% 82.24% Central Dock Sud SA Buenos Aires AR 1,231,270,567.54 ARS Line-by-line 33.94% Enel Argentina SA 0.24% Central Geradora Fotovoltaica Bom Nome Ltda Salvador BR 4,979,739.00 BRL Line-by-line Inversora Dock Sud SA 71.78% Enel Brasil SA 100.00% Enel Green Power Desenvolvimento Ltda 0.00% 82.27% 466 466 Integrated Annual Report 2021 Central Geradora Fotovoltaica São Francisco Ltda Central Geradora Termelétrica Fortaleza SA Company name Headquarters Country Share capital Currency Segment Consolidation method Held by % holding Niterói BR 113,749,250.00 BRL Line-by-line Enel Brasil SA 0.00% Enel X Brasil SA 100.00% Group % holding 82.27% Fortaleza BR 151,935,779.00 BRL Line-by-line Enel Brasil SA 100.00% 82.27% Central Hidráulica Güejar-Sierra SL Central Térmica de Anllares AIE Seville Madrid ES ES 364,213.34 EUR 595,000.00 EUR Equity Equity Enel Green Power España SLU 33.30% 23.35% Endesa Generación SA 33.33% 23.37% Central Vuelta de Obligado SA Buenos Aires AR 500,000.00 ARS Equity Central Dock Sud SA 6.40% Enel Generación Costanera SA 1.30% 20.93% Enel Generación El Chocón SA 33.20% Centrales Nucleares Almaraz-Trillo AIE Madrid ES - Centrum Pre Vedu A Vyskum SRO Kalná Nad Hronom SK 6,639.00 EUR EUR Equity Equity Endesa Generación SA Slovenské elektrárne AS 24.18% 16.95% 100.00% 33.00% CESI - Centro Elettrotecnico Sperimentale Italiano Giacinto Motta SpA Champagne Storage LLC Milan IT 8,550,000.00 EUR Equity Enel SpA 42.70% 42.70% Wilmington US 1.00 USD Line-by-line Enel Energy Storage Holdings LLC (formerly EGP Energy Storage Holdings LLC) 100.00% 100.00% Cheyenne Ridge II Wind Project LLC Andover US 1.00 Cheyenne Ridge Wind Project LLC Andover US 1.00 Chi Black River LLC Wilmington US - Chi Minnesota Wind LLC Wilmington US - Chi Operations Inc. Andover US 100.00 Chi Power Inc. Naples US 100.00 Chi Power Marketing Inc. Wilmington US 100.00 Chi West LLC San Francisco US 100.00 USD USD USD USD USD USD USD USD Line-by-line Enel Kansas LLC 100.00% 100.00% Line-by-line Tradewind Energy Inc. 100.00% 100.00% Line-by-line Enel Green Power North America Inc. 100.00% 100.00% Line-by-line Enel Green Power North America Inc. 100.00% 100.00% Line-by-line Enel Green Power North America Inc. 100.00% 100.00% Line-by-line Enel Green Power North America Inc. 100.00% 100.00% Line-by-line Enel Green Power North America Inc. 100.00% 100.00% Line-by-line Enel Green Power North America Inc. 100.00% 100.00% Chinango SAC San Miguel PE 295,249,298.00 PEN Line-by-line Enel Generación Perú SAA 80.00% 55.02% Chisago Solar LLC Wilmington US - Chisholm View II Holding LLC Wilmington US - Chisholm View Wind Project II LLC Wilmington US - USD USD USD Line-by-line Aurora Distributed Solar LLC 100.00% 74.13% Line-by-line Enel Kansas LLC 100.00% 100.00% Line-by-line Chisholm View II Holding LLC 62.79% 62.79% Attachments 467 467 Company name Headquarters Country Share capital Currency Segment Consolidation method Held by % holding Group % holding Chisholm View Wind Project LLC New York US - USD Equity EGPNA REP Wind Holdings LLC 100.00% 20.00% Cimarron Bend Assets LLC Wilmington US - USD Line-by-line Cimarron Bend Wind Project I LLC 49.00% Cimarron Bend Wind Project II LLC 49.00% Cimarron Bend Wind Project III LLC 1.00% Enel Kansas LLC 1.00% 100.00% USD USD USD USD USD USD USD USD USD EUR EUR Cimarron Bend III HoldCo LLC Andover US 1.00 Cimarron Bend Wind Holdings I LLC Wilmington US - Cimarron Bend Wind Holdings II LLC Cimarron Bend Wind Holdings III LLC Cimarron Bend Wind Holdings LLC Cimarron Bend Wind Project I LLC Dover US 100.00 Andover US - Wilmington US - Wilmington US - Cimarron Bend Wind Project II LLC Wilmington US - Cimarron Bend Wind Project III LLC Cipher Solar Project LLC Wilmington US - Andover US 1.00 CityPoste Payment Digital Srl Teramo CityPoste Payment SpA Teramo CivDrone Haifa IT IT IL 10,000.00 - 1,093,350.00 ILS Clear Sky Wind Project LLC Andover US 1.00 Clinton Farms Wind Project LLC Cloudwalker Wind Project LLC Andover US 1.00 Andover US 1.00 USD USD USD Line-by-line Line-by-line Line-by-line Enel Green Power Cimarron Bend Wind Holdings III LLC Cimarron Bend Wind Holdings II LLC Cimarron Bend Wind Holdings LLC 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% Line-by-line Enel Kansas LLC 100.00% 100.00% Line-by-line Enel Green Power North America Inc. 100.00% 100.00% Line-by-line Line-by-line Line-by-line Cimarron Bend Wind Holdings I LLC Cimarron Bend Wind Holdings I LLC Cimarron Bend Wind Holdings III LLC 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% Line-by-line Enel Kansas LLC 100.00% 100.00% AFS AFS - CityPoste Payment SpA 100.00% 100.00% Enel X Srl 100.00% 100.00% Enel Global Infrastructure and Networks Srl 4.27% 4.27% Line-by-line Tradewind Energy Inc. 100.00% 100.00% Line-by-line Tradewind Energy Inc. 100.00% 100.00% Line-by-line Enel Kansas LLC 100.00% 100.00% Codensa SA ESP Bogotá CO 13,487,545,000.00 COP Line-by-line Enel Américas SA 48.30% 39.74% Cogein Sannio Srl Rome IT 10,000.00 EUR Line-by-line Cogeneración El Salto SL Zaragoza ES 36,060.73 EUR Equity Enel Green Power Italia Srl 100.00% 100.00% Enel Green Power España SLU 20.00% 14.02% 468 468 Integrated Annual Report 2021 Company name Headquarters Country Share capital Currency Segment Consolidation method Held by % holding Group % holding Cogenio Srl Rome IT 2,310,000.00 EUR Equity Enel X Italia Srl 20.00% 20.00% Cohuna Solar Farm (Pty) Ltd Cohuna Solar Farm Trust Comanche Crest Ranch LLC Comercializadora Eléctrica de Cádiz SA Compagnia Porto di Civitavecchia SpA in liquidation Companhia Energética do Ceará - Coelce Compañía de Trasmisión del Mercosur SA - CTM Compañía Energética Veracruz SAC Compañía Eólica Tierras Altas SA Sydney AU 100.00 Sydney AU 1.00 Andover US 1.00 AUD AUD USD Cadiz ES 600,000.00 EUR Rome IT 14,730,800.00 EUR Line-by-line Enel Green Power Cohuna Holdings (Pty) Ltd 100.00% 100.00% Line-by-line Enel Green Power Cohuna Trust 100.00% 100.00% Line-by-line Tradewind Energy Inc. 100.00% 100.00% Equity Equity Endesa Red SA (Sociedad Unipersonal) 33.50% 23.49% Enel Produzione SpA 25.00% 25.00% Fortaleza BR 914,346,885.76 BRL Line-by-line Enel Brasil SA 74.05% 60.92% Buenos Aires AR 2,025,191,313.00 ARS Line-by-line Enel CIEN SA 25.85% 82.27% Enel Brasil SA 74.15% Enel SpA 0.00% San Miguel PE 2,886,000.00 PEN Line-by-line Enel Perú SAC 100.00% 82.27% Soria ES 13,222,000.00 EUR Equity 26.29% Compañía Eólica Tierras Altas SA 5.00% Concert Srl Rome IT 10,000.00 EUR Line-by-line Concho Solar I LLC Andover US 1.00 Wilmington US - Wilmington US - USD USD USD Line-by-line Tradewind Energy Inc. 100.00% 100.00% Line-by-line Enel Green Power North America Inc. 100.00% 100.00% Line-by-line Enel Green Power North America Inc. 100.00% 100.00% Enel Green Power España SLU 35.63% Enel Global Thermal Generation Srl 100.00% 100.00% Wilmington US 550,000.00 USD Line-by-line Rome IT 73,000.00 EUR Line-by-line Enel Green Power North America Inc. 81.83% 81.83% Enel Green Power Italia Srl 100.00% 100.00% Andover US - USD Line-by-line Enel Kansas LLC 100.00% 100.00% Badajoz ES 44,538,000.00 EUR - Endesa SA 1.01% 0.71% Consolidated Hydro New Hampshire LLC Consolidated Hydro Southeast LLC Consolidated Pumped Storage Inc. Conza Green Energy Srl Copper Landing Solar Project LLC Corporación Empresarial de Extremadura SA Corporación Eólica de Zaragoza SL La Puebla de Alfinden ES 271,652.00 EUR Equity Enel Green Power España SLU 25.00% 17.53% Country Roads Solar Project LLC Cow Creek Wind Project LLC Andover US 1.00 Andover US 1.00 USD USD Line-by-line Enel Kansas LLC 100.00% 100.00% Line-by-line Tradewind Energy Inc. 100.00% 100.00% Attachments 469 469 Company name Headquarters Country Share capital Currency Segment Crockett Solar I LLC Andover US 1.00 Cross Trails Energy Storage Project LLC Dairy Meadows Wind Project 1 LLC Dairy Meadows Wind Project 2 LLC Dairy Meadows Wind Project 3 LLC Daisy Patch Solar Project LLC Andover US - Andover US 1.00 Andover US 1.00 Andover US 1.00 Andover US - Danax Energy (Pty) Ltd Sandton ZA 100.00 USD USD USD USD USD USD ZAR Consolidation method Held by % holding Group % holding Line-by-line Tradewind Energy Inc. 100.00% 100.00% Line-by-line Enel Kansas LLC 100.00% 100.00% Line-by-line Enel Kansas LLC 100.00% 100.00% Line-by-line Enel Kansas LLC 100.00% 100.00% Line-by-line Enel Kansas LLC 100.00% 100.00% Line-by-line Enel Kansas LLC 100.00% 100.00% Line-by-line Enel Green Power RSA (Pty) Ltd 100.00% 100.00% Dara Solar Investment Srl Bucharest RO 592,400.00 RON Line-by-line Dauphin Solar I LLC Andover US 1.00 USD Line-by-line Enel Green Power Romania Srl 100.00% 100.00% Brick Road Solar Holdings LLC 100.00% 100.00% Enel Green Power Romania Srl 100.00% De Rock Int’l Srl Bucharest RO 5,629,000.00 RON Line-by-line 100.00% Dehesa de los Guadalupes Solar SLU Dehesa PV Farm 03 SLU Dehesa PV Farm 04 SLU Seville ES 3,000.00 Madrid ES 3,000.00 Madrid ES 3,000.00 EUR EUR EUR Enel Green Power SpA 0.00% Line-by-line Enel Green Power España SLU 100.00% 70.11% Line-by-line Enel Green Power España SLU 100.00% 70.11% Line-by-line Enel Green Power España SLU 100.00% 70.11% Depuración Destilación Reciclaje SL Boiro ES 600,000.00 EUR Equity Enel Green Power España SLU 40.00% 28.04% Derivex SA Bogotá CO 715,292,000.00 COP - Emgesa SA ESP 5.00% 1.99% Mexico City MX 33,101,350.00 MXN Line-by-line Rome IT 436,535.29 EUR - Enel Green Power México S de RL de Cv 99.99% Energía Nueva Energía Limpia México S de RL de Cv 0.01% 100.00% Enel Produzione SpA 1.76% 1.76% Wilmington US 1.00 USD Line-by-line Enel Kansas LLC 100.00% 100.00% Barcelona ES 108,240.00 EUR Line-by-line Distribuidora Eléctrica del Puerto de la Cruz SA Santa Cruz de Tenerife ES 12,621,210.00 EUR Line-by-line 470 470 Integrated Annual Report 2021 Endesa Red SA (Sociedad Unipersonal) 55.00% Hidroeléctrica de Catalunya SL 45.00% 70.11% Endesa Red SA (Sociedad Unipersonal) 100.00% 70.11% Desarrollo de Fuerzas Renovables S de RL de Cv DI.T.N.E. - Distretto Tecnologico Nazionale sull’Energia - Società Consortile a Responsabilità Limitata Diamond Vista Holdings LLC Distribuidora de Energía Eléctrica del Bages SA Company name Headquarters Country Share capital Currency Segment Consolidation method Held by % holding Group % holding Distrilec Inversora SA Buenos Aires AR 497,612,021.00 ARS Line-by-line Enel Américas SA 51.50% 42.37% Dmd Holding AS in liquidation Trenčín- Zlatovce SK 199,543,284.87 EUR - Dodge Center Distributed Solar LLC Wilmington US - USD Line-by-line Dolores Wind SA de Cv Mexico City MX 200.00 MXN Line-by-line Mexico City MX 2,070,600,646.00 MXN Equity Slovenské elektrárne AS 2.94% 0.97% Aurora Distributed Solar LLC 100.00% 74.13% Enel Rinnovabile SA de Cv 99.00% Hidroelectricidad del Pacífico S de RL de Cv Tenedora de Energía Renovable Sol y Viento SAPI de Cv 100.00% 1.00% 60.80% 20.00% Line-by-line Tradewind Energy Inc. 100.00% 100.00% Line-by-line Tradewind Energy Inc. 100.00% 100.00% Line-by-line Tradewind Energy Inc. 100.00% 100.00% Equity Enel Kansas LLC 50.00% 50.00% Equity Drift Sand Wind Holdings LLC Enel Green Power India Private Limited 100.00% 50.00% 100.00% 100.00% Line-by-line Aurora Distributed Solar LLC 100.00% 74.13% Line-by-line Brick Road Solar Holdings LLC 100.00% 100.00% Enel X MA Holdings LLC Endesa Red SA (Sociedad Unipersonal) 100.00% 100.00% 100.00% 70.11% Dominica Energía Limpia SA de Cv Dorset Ridge Wind Project LLC Andover US 1.00 Dover Solar I LLC Andover US - Dragonfly Fields Solar Project LLC Andover US - Drift Sand Wind Holdings LLC Wilmington US - Drift Sand Wind Project LLC Wilmington US - Dwarka Vayu 1 Private Limited Gurgaon E.S.CO. Comuni Srl Bergamo IN IT Eastwood Solar LLC Wilmington US - Ebenezer Solar I LLC Andover US 1.00 USD USD USD USD USD USD USD USD 100,000.00 INR Line-by-line 1,000,000.00 EUR Line-by-line Enel X Italia Srl 60.00% 60.00% Edgartown Depot Solar 1 LLC Edistribución Redes Digitales SL (Sociedad Unipersonal) Boston US - Line-by-line Madrid ES 1,204,540,060.00 EUR Line-by-line E-Distribuţie Banat SA Timisoara RO 382,158,580.00 RON Line-by-line Enel SpA 51.00% 51.00% E-Distribuţie Dobrogea SA E-Distribuţie Muntenia SA Constanţa RO 280,285,560.00 RON Line-by-line Enel SpA 51.00% 51.00% Bucharest RO 271,635,250.00 RON Line-by-line Enel SpA 78.00% 78.00% e-distribuzione SpA Rome IT 2,600,000,000.00 EUR Line-by-line Enel Italia SpA 100.00% 100.00% EF Divesture LLC Andover US 1.00 USD Line-by-line Tradewind Energy Inc. 100.00% 100.00% Efficientya Srl Bergamo IT 100,000.00 EUR Equity Enel X Italia Srl 50.00% 50.00% EGP Australia (Pty) Ltd Sydney AU 10,000.00 AUD Line-by-line Enel Green Power Australia (Pty) Ltd 100.00% 100.00% Attachments 471 471 Company name Headquarters Country Share capital Currency Segment Consolidation method Held by % holding Group % holding EGP Bioenergy Srl Rome IT 1,000,000.00 EUR Line-by-line Bogotá CO 8,000,000.00 COP Line-by-line EGP Fotovoltaica La Loma SAS in liquidation EGP Geronimo Holding Company Inc. Wilmington US 1,000.00 Enel Green Power Puglia Srl 100.00% 100.00% Enel Green Power Colombia SAS ESP 100.00% 82.27% EGP HoldCo 1 LLC Andover US - EGP HoldCo 10 LLC Andover US - EGP HoldCo 11 LLC Andover US - EGP HoldCo 12 LLC Andover US - EGP HoldCo 13 LLC Andover US - EGP HoldCo 14 LLC Andover US - EGP HoldCo 15 LLC Andover US - EGP HoldCo 16 LLC Andover US - EGP HoldCo 17 LLC Andover US - EGP HoldCo 18 LLC Andover US - EGP HoldCo 2 LLC Andover US - EGP HoldCo 3 LLC Andover US - EGP HoldCo 4 LLC Andover US - EGP HoldCo 5 LLC Andover US - EGP HoldCo 6 LLC Andover US - EGP HoldCo 7 LLC Andover US - EGP HoldCo 8 LLC Andover US - EGP HoldCo 9 LLC Andover US - USD USD USD USD USD USD USD USD USD USD USD USD USD USD USD USD USD USD USD Line-by-line Enel Green Power North America Inc. 100.00% 100.00% Line-by-line Enel Kansas LLC 100.00% 100.00% Line-by-line Enel Kansas LLC 100.00% 100.00% Line-by-line Enel Kansas LLC 100.00% 100.00% Line-by-line Enel Kansas LLC 100.00% 100.00% Line-by-line Enel Kansas LLC 100.00% 100.00% Line-by-line Enel Kansas LLC 100.00% 100.00% Line-by-line Enel Kansas LLC 100.00% 100.00% Line-by-line Enel Kansas LLC 100.00% 100.00% Line-by-line Enel Kansas LLC 100.00% 100.00% Line-by-line Enel Kansas LLC 100.00% 100.00% Line-by-line Enel Kansas LLC 100.00% 100.00% Line-by-line Enel Kansas LLC 100.00% 100.00% Line-by-line Enel Kansas LLC 100.00% 100.00% Line-by-line Enel Kansas LLC 100.00% 100.00% Line-by-line Enel Kansas LLC 100.00% 100.00% Line-by-line Enel Kansas LLC 100.00% 100.00% Line-by-line Enel Kansas LLC 100.00% 100.00% Line-by-line Enel Kansas LLC 100.00% 100.00% EGP Magdalena Solar SA de Cv EGP Matimba NewCo 1 Srl Mexico City MX 691,771,740.00 MXN Line-by-line Rome IT 10,000.00 EUR Line-by-line Enel Rinnovabile SA de Cv 99.00% Hidroelectricidad del Pacífico S de RL de Cv 1.00% 100.00% Enel Green Power SpA 100.00% 100.00% 472 472 Integrated Annual Report 2021 Company name Headquarters Country Share capital Currency Segment Consolidation method Held by % holding Group % holding EGP Matimba NewCo 2 Srl Rome IT 10,000.00 EUR Line-by-line Enel Green Power SpA 100.00% 100.00% EGP Nevada Power LLC Wilmington US - EGP Salt Wells Solar LLC EGP San Leandro Microgrid I LLC Wilmington US - Wilmington US - EGP Solar Services LLC Andover US - EGP Stillwater Solar LLC Wilmington US - EGP Stillwater Solar PV II LLC Wilmington US 1.00 EGP Timber Hills Project LLC EGPNA 2020 HoldCo 1 LLC EGPNA 2020 HoldCo 10 LLC EGPNA 2020 HoldCo 11 LLC EGPNA 2020 HoldCo 12 LLC EGPNA 2020 HoldCo 13 LLC EGPNA 2020 HoldCo 14 LLC EGPNA 2020 HoldCo 15 LLC EGPNA 2020 HoldCo 16 LLC EGPNA 2020 HoldCo 17 LLC EGPNA 2020 HoldCo 18 LLC EGPNA 2020 HoldCo 19 LLC EGPNA 2020 HoldCo 2 LLC EGPNA 2020 HoldCo 20 LLC EGPNA 2020 HoldCo 21 LLC EGPNA 2020 HoldCo 22 LLC EGPNA 2020 HoldCo 23 LLC EGPNA 2020 HoldCo 24 LLC Los Angeles US - Andover US 1.00 Andover US 1.00 Andover US 1.00 Andover US 1.00 Andover US 1.00 Andover US 1.00 Andover US 1.00 Andover US 1.00 Andover US 1.00 Andover US 1.00 Andover US 1.00 Andover US 1.00 Andover US 1.00 Andover US 1.00 Andover US 1.00 Andover US 1.00 Andover US 1.00 USD USD USD USD USD USD USD USD USD USD USD USD USD USD USD USD USD USD USD USD USD USD USD USD Line-by-line Enel Green Power North America Inc. 100.00% 100.00% Line-by-line Enel Green Power North America Inc. 100.00% 100.00% Line-by-line Enel Green Power North America Inc. 100.00% 100.00% Line-by-line Tradewind Energy Inc. 100.00% 100.00% Line-by-line Enel Stillwater LLC 100.00% 100.00% Line-by-line Stillwater Woods Hill Holdings LLC 100.00% 100.00% Line-by-line Padoma Wind Power LLC 100.00% 100.00% Line-by-line Enel Kansas LLC 100.00% 100.00% Line-by-line Enel Kansas LLC 100.00% 100.00% Line-by-line Enel Kansas LLC 100.00% 100.00% Line-by-line Enel Kansas LLC 100.00% 100.00% Line-by-line Enel Kansas LLC 100.00% 100.00% Line-by-line Enel Kansas LLC 100.00% 100.00% Line-by-line Enel Kansas LLC 100.00% 100.00% Line-by-line Enel Kansas LLC 100.00% 100.00% Line-by-line Enel Kansas LLC 100.00% 100.00% Line-by-line Enel Kansas LLC 100.00% 100.00% Line-by-line Enel Kansas LLC 100.00% 100.00% Line-by-line Enel Kansas LLC 100.00% 100.00% Line-by-line Enel Kansas LLC 100.00% 100.00% Line-by-line Enel Kansas LLC 100.00% 100.00% Line-by-line Enel Kansas LLC 100.00% 100.00% Line-by-line Enel Kansas LLC 100.00% 100.00% Line-by-line Enel Kansas LLC 100.00% 100.00% Attachments 473 473 Company name Headquarters Country Share capital Currency Segment EGPNA 2020 HoldCo 25 LLC EGPNA 2020 HoldCo 26 LLC EGPNA 2020 HoldCo 27 LLC EGPNA 2020 HoldCo 28 LLC EGPNA 2020 HoldCo 29 LLC EGPNA 2020 HoldCo 3 LLC EGPNA 2020 HoldCo 30 LLC EGPNA 2020 HoldCo 4 LLC EGPNA 2020 HoldCo 5 LLC EGPNA 2020 HoldCo 6 LLC EGPNA 2020 HoldCo 7 LLC EGPNA 2020 HoldCo 8 LLC EGPNA 2020 HoldCo 9 LLC Andover US 1.00 Andover US 1.00 Andover US 1.00 Andover US 1.00 Andover US 1.00 Andover US 1.00 Andover US 1.00 Andover US 1.00 Andover US 1.00 Andover US 1.00 Andover US 1.00 Andover US 1.00 Andover US 1.00 EGPNA Development Holdings LLC Wilmington US - EGPNA Hydro Holdings LLC EGPNA Preferred Wind Holdings II LLC EGPNA Preferred Wind Holdings LLC Wilmington US - Wilmington US - Wilmington US - EGPNA Project HoldCo 1 LLC Dover US 100.00 EGPNA Project HoldCo 2 LLC Dover US 100.00 EGPNA Project HoldCo 5 LLC Dover US 100.00 EGPNA Project HoldCo 6 LLC Dover US 100.00 EGPNA Project HoldCo 7 LLC Dover US 100.00 EGPNA Renewable Energy Partners LLC EGPNA REP Holdings LLC Wilmington US - Wilmington US - 474 474 Integrated Annual Report 2021 USD USD USD USD USD USD USD USD USD USD USD USD USD USD USD USD USD USD USD USD USD USD USD USD Consolidation method Held by % holding Group % holding Line-by-line Enel Kansas LLC 100.00% 100.00% Line-by-line Enel Kansas LLC 100.00% 100.00% Line-by-line Enel Kansas LLC 100.00% 100.00% Line-by-line Enel Kansas LLC 100.00% 100.00% Line-by-line Enel Kansas LLC 100.00% 100.00% Line-by-line Enel Kansas LLC 100.00% 100.00% Line-by-line Enel Kansas LLC 100.00% 100.00% Line-by-line Enel Kansas LLC 100.00% 100.00% Line-by-line Enel Kansas LLC 100.00% 100.00% Line-by-line Enel Kansas LLC 100.00% 100.00% Line-by-line Enel Kansas LLC 100.00% 100.00% Line-by-line Enel Kansas LLC 100.00% 100.00% Line-by-line Enel Kansas LLC 100.00% 100.00% Line-by-line Enel Green Power North America Development LLC 100.00% 100.00% Line-by-line Enel Green Power North America Inc. 100.00% 100.00% Line-by-line Enel Green Power North America Inc. 100.00% 100.00% Line-by-line Enel Green Power North America Inc. 100.00% 100.00% Line-by-line Enel Kansas LLC 100.00% 100.00% Line-by-line Enel Green Power North America Inc. 100.00% 100.00% Line-by-line Enel Green Power North America Inc. 100.00% 100.00% Line-by-line Enel Green Power North America Inc. 100.00% 100.00% Line-by-line Enel Green Power North America Inc. 100.00% 100.00% Equity EGPNA REP Holdings LLC 20.00% 20.00% Line-by-line Enel Green Power North America Inc. 100.00% 100.00% Company name Headquarters Country Share capital Currency Segment EGPNA REP Solar Holdings LLC EGPNA REP Wind Holdings LLC EGPNA Wind Holdings 1 LLC EGPNA-SP Seven Cowboy Holdings LLC Wilmington US - Wilmington US - Wilmington US - Andover US 1.00 USD USD USD USD Consolidation method Held by % holding Group % holding Line-by-line Enel Green Power North America Inc. 100.00% 100.00% Equity Equity EGPNA Renewable Energy Partners LLC EGPNA REP Wind Holdings LLC 100.00% 20.00% 100.00% 20.00% Line-by-line Enel Kansas LLC 100.00% 100.00% Endesa Generación SA 40.99% Elcogas SA in liquidation Puertollano (Ciudad Real) ES 809,690.40 EUR Equity 33.06% Enel SpA 4.32% Enel Green Power Romania Srl 100.00% Elcomex Solar Energy Srl Bucharest RO 4,590,000.00 RON Line-by-line 100.00% Enel Green Power SpA 0.00% Endesa Generación Portugal SA 50.00% 35.06% Enel Green Power RSA (Pty) Ltd 60.00% 60.00% Endesa Red SA (Sociedad Unipersonal) 52.54% Hidroeléctrica de Catalunya SL 47.46% 70.11% Endesa Red SA (Sociedad Unipersonal) Endesa Red SA (Sociedad Unipersonal) Endesa Red SA (Sociedad Unipersonal) 50.00% 35.06% 100.00% 70.11% 50.00% 35.06% Slovenské elektrárne AS 4.00% 1.32% Livister Guatemala SA 1.00% Elecgas SA Pego PT 50,000.00 EUR Equity Electra Capital (RF) (Pty) Ltd Johannesburg ZA 10,000,000.00 ZAR Line-by-line Eléctrica de Jafre SA Barcelona ES 165,876.00 EUR Line-by-line Eléctrica de Lijar SL Cadiz ES 1,081,821.79 EUR Equity Barcelona ES 500,000.00 EUR Line-by-line Cadiz ES 4,960,246.40 EUR Equity Eléctrica del Ebro SA (Sociedad Unipersonal) Electricidad de Puerto Real SA Electrometalúrgica del Ebro SL Eletropaulo Metropolitana Eletricidade de São Paulo SA Barcelona ES 2,906,862.00 EUR - Enel Green Power España SLU 0.18% 0.12% São Paulo BR 3,079,524,934.33 BRL Line-by-line Enel Brasil SA 100.00% 82.27% Elini Antwerp BE 76,273,810.00 EUR - Emerging Networks El Salvador SA de Cv Emerging Networks Latam Inc. Emerging Networks Panama SA San Salvador SV 2,000.00 USD Equity 20.60% Livister Latam SLU 99.00% Wilmington US 100.00 Panama City PA 300.00 USD USD Equity Ifx Networks Ltd 100.00% 20.60% Equity Ifx/eni - Spc Panama Inc. 100.00% 20.60% Emgesa SA ESP Bogotá CO 655,222,312,800.00 COP Line-by-line Enel Américas SA 48.48% 39.89% Attachments 475 475 Company name Headquarters Country Share capital Currency Segment Consolidation method Held by % holding Group % holding Emintegral Cycle SLU Madrid Empresa Carbonífera del Sur SA Madrid ES ES 3,000.00 EUR Line-by-line 18,030,000.00 EUR Line-by-line Empresa de Alumbrado Eléctrico de Ceuta Distribución SA (Sociedad Unipersonal) Ceuta ES 9,335,000.00 EUR Line-by-line Empresa de Alumbrado Eléctrico de Ceuta SA Ceuta ES 16,562,250.00 EUR Line-by-line Enel Green Power España SLU 100.00% 70.11% Endesa Generación SA Empresa de Alumbrado Eléctrico de Ceuta SA Endesa Red SA (Sociedad Unipersonal) 100.00% 70.11% 100.00% 67.59% 96.41% 67.59% Enel Green Power Perú SAC 100.00% Empresa de Generación Eléctrica Los Pinos SA Empresa de Generación Eléctrica Marcona SAC Empresa Distribuidora Sur SA - Edesur San Miguel PE 7,928,044.00 PEN Line-by-line 82.27% Energética Monzón SAC 0.00% Enel Green Power Perú SAC 100.00% San Miguel PE 3,368,424.00 PEN Line-by-line 82.27% Energética Monzón SAC 0.00% Distrilec Inversora SA 56.36% Buenos Aires AR 898,585,028.00 ARS Line-by-line 59.33% Enel Argentina SA 43.10% Empresa Eléctrica Pehuenche SA Santiago de Chile CL 175,774,920,733.00 CLP Line-by-line Enel Generación Chile SA 92.65% 56.27% Empresa Propietaria de la Red SA Panama City PA 58,500,000.00 USD - Enel SpA 11.11% 11.11% Endesa Capital SA Madrid ES 60,200.00 EUR Line-by-line Endesa SA 100.00% 70.11% Endesa Comercialização de Energia SA Endesa Energía Renovable SL (Sociedad Unipersonal) Porto PT 250,000.00 EUR Line-by-line Endesa Energía SA 100.00% 70.11% Madrid ES 100,000.00 EUR Line-by-line Endesa Energía SA 100.00% 70.11% Endesa Energía SA Madrid Endesa Financiación Filiales SA Madrid Endesa Generación II SA Endesa Generación Nuclear SA Seville Seville ES ES ES ES 14,445,575.90 EUR Line-by-line Endesa SA 100.00% 70.11% 4,621,003,006.00 EUR Line-by-line Endesa SA 100.00% 70.11% 63,107.00 60,000.00 EUR EUR Line-by-line Endesa SA 100.00% 70.11% Line-by-line Endesa Generación SA 100.00% 70.11% Endesa Generación Portugal SA Lisbon PT 50,000.00 EUR Line-by-line Endesa Energía SA 0.20% Endesa Generación SA 99.20% 70.11% Enel Green Power España SLU 0.60% Endesa Generación SA Seville ES 1,940,379,735.35 EUR Line-by-line Endesa SA 100.00% 70.11% Endesa Ingeniería SLU Seville ES 965,305.00 EUR Line-by-line Endesa Red SA (Sociedad Unipersonal) 100.00% 70.11% 476 476 Integrated Annual Report 2021 Company name Headquarters Country Share capital Currency Segment Consolidation method Held by % holding Group % holding Endesa Medios y Sistemas SL (Sociedad Unipersonal) Endesa Operaciones y Servicios Comerciales SL Endesa Red SA (Sociedad Unipersonal) Madrid ES 89,999,790.00 EUR Line-by-line Endesa SA 100.00% 70.11% Madrid ES 10,138,580.00 EUR Line-by-line Endesa Energía SA 100.00% 70.11% Madrid ES 719,901,723.26 EUR Line-by-line Endesa SA 100.00% 70.11% Endesa SA Madrid ES 1,270,502,540.40 EUR Line-by-line 70.11% Enel Iberia Srl 70.10% Endesa SA 0.02% Endesa Soluciones SL Madrid Endesa X Servicios SLU Madrid ES ES 2,874,621.80 EUR Equity Endesa X Servicios SLU 20.00% 14.02% 60,000.00 EUR Line-by-line Endesa SA 100.00% 70.11% Enel Alberta Wind Inc. Alberta CA 16,251,021.00 CAD Line-by-line Enel Green Power Canada Inc. 100.00% 100.00% Enel Américas SA 0.00% Enel Américas SA Santiago de Chile CL 15,799,498,544.85 USD Line-by-line 82.27% Enel and Shikun & Binui Innovation Infralab Ltd Airport City IL 38,000.00 ILS Equity Enel SpA 82.27% Enel Global Infrastructure and Networks Srl 50.00% 50.00% Enel Américas SA 99.92% Enel Argentina SA Buenos Aires AR 2,297,711,908.00 ARS Line-by-line 82.25% Enel Bella Energy Storage LLC Wilmington US - USD Line-by-line Enel Generación Chile SA 0.08% Enel Energy Storage Holdings LLC (formerly EGP Energy Storage Holdings LLC) 100.00% 100.00% Enel Brasil Central SA Rio de Janeiro BR 10,000.00 BRL Line-by-line Enel Brasil SA 100.00% 82.27% Enel Américas SA 99.50% Enel Brasil SA Niterói BR 32,387,634,190.06 BRL Line-by-line Enel Brasil SA 0.50% 82.27% Energía y Servicios South America SpA 0.00% Enel Chile SA Santiago de Chile CL 3,882,103,470,184.00 CLP Line-by-line Enel SpA 64.93% 64.93% Enel CIEN SA Rio de Janeiro BR 285,044,682.00 BRL Line-by-line Enel Brasil SA 100.00% 82.27% Enel Colina SA Santiago de Chile CL 82,222,000.00 CLP Line-by-line 64.34% Enel Chile SA 0.00% Enel Distribución Chile SA 100.00% Enel Cove Fort II LLC Wilmington US - Enel Cove Fort LLC Beaver US - USD USD Line-by-line Enel Green Power North America Inc. 100.00% 100.00% Line-by-line Enel Geothermal LLC 100.00% 100.00% Attachments 477 477 Company name Headquarters Country Share capital Currency Segment Consolidation method Held by % holding Group % holding Enel Distribución Chile SA Santiago de Chile CL 177,568,664,063.00 CLP Line-by-line Enel Chile SA 99.09% 64.34% Enel Distribución Perú SAA San Miguel PE 638,563,900.00 PEN Line-by-line Enel Perú SAC 83.15% 68.41% Enel Energia SpA Rome IT 302,039.00 EUR Line-by-line Enel Italia SpA 100.00% 100.00% Enel Energía SA de Cv Mexico City MX 25,000,100.00 MXN Line-by-line Enel Green Power México S de RL de Cv 100.00% Energía Nueva de Iguu S de RL de Cv 0.00% 100.00% Enel Energie Muntenia SA Bucharest RO 37,004,350.00 RON Line-by-line Enel SpA 78.00% 78.00% Enel Energie SA Bucharest RO 140,000,000.00 RON Line-by-line Enel SpA 51.00% 51.00% Enel Energy Australia (Pty) Ltd Enel Energy South Africa Enel Energy Storage Holdings LLC (formerly EGP Energy Storage Holdings LLC) Enel Finance America LLC Enel Finance International NV Sydney AU 200,100.00 AUD Line-by-line Wilmington ZA 100.00 ZAR Line-by-line Andover US 100.00 USD Line-by-line Wilmington US 200,000,000.00 USD Line-by-line Enel Green Power Australia (Pty) Ltd 100.00% 100.00% Enel X International Srl 100.00% 100.00% Enel Green Power North America Inc. 100.00% 100.00% Enel North America Inc. Enel Holding Finance Srl 100.00% 100.00% 75.00% Amsterdam NL 1,478,810,371.00 EUR Line-by-line 100.00% Enel Fortuna SA Panama City PA 100,000,000.00 USD Line-by-line Enel SpA 25.00% Enel Green Power Panamá Srl 50.06% 41.18% Enel Future Project 2020 #1 LLC Enel Future Project 2020 #10 LLC Enel Future Project 2020 #11 LLC Enel Future Project 2020 #12 LLC Enel Future Project 2020 #13 LLC Enel Future Project 2020 #14 LLC Enel Future Project 2020 #15 LLC Enel Future Project 2020 #16 LLC Enel Future Project 2020 #17 LLC Enel Future Project 2020 #18 LLC Andover US - Andover US - Andover US - Andover US - Andover US - Andover US - Andover US - Andover US - Andover US - Andover US - 478 478 Integrated Annual Report 2021 USD USD USD USD USD USD USD USD USD USD Line-by-line Tradewind Energy Inc. 100.00% 100.00% Line-by-line Tradewind Energy Inc. 100.00% 100.00% Line-by-line Tradewind Energy Inc. 100.00% 100.00% Line-by-line Tradewind Energy Inc. 100.00% 100.00% Line-by-line Tradewind Energy Inc. 100.00% 100.00% Line-by-line Tradewind Energy Inc. 100.00% 100.00% Line-by-line Tradewind Energy Inc. 100.00% 100.00% Line-by-line Tradewind Energy Inc. 100.00% 100.00% Line-by-line Tradewind Energy Inc. 100.00% 100.00% Line-by-line Tradewind Energy Inc. 100.00% 100.00% Company name Headquarters Country Share capital Currency Segment Enel Future Project 2020 #19 LLC Enel Future Project 2020 #2 LLC Enel Future Project 2020 #20 LLC Enel Future Project 2020 #3 LLC Enel Future Project 2020 #4 LLC Enel Future Project 2020 #5 LLC Enel Future Project 2020 #6 LLC Enel Future Project 2020 #7 LLC Enel Future Project 2020 #8 LLC Enel Future Project 2020 #9 LLC Andover US - Andover US - Andover US - Andover US - Andover US - Andover US - Andover US - Andover US - Andover US - Andover US - USD USD USD USD USD USD USD USD USD USD Consolidation method Held by % holding Group % holding Line-by-line Tradewind Energy Inc. 100.00% 100.00% Line-by-line Tradewind Energy Inc. 100.00% 100.00% Line-by-line Tradewind Energy Inc. 100.00% 100.00% Line-by-line Tradewind Energy Inc. 100.00% 100.00% Line-by-line Tradewind Energy Inc. 100.00% 100.00% Line-by-line Tradewind Energy Inc. 100.00% 100.00% Line-by-line Tradewind Energy Inc. 100.00% 100.00% Line-by-line Tradewind Energy Inc. 100.00% 100.00% Line-by-line Tradewind Energy Inc. 100.00% 100.00% Line-by-line Tradewind Energy Inc. 100.00% 100.00% Enel Generación Chile SA Santiago de Chile CL 552,777,320,871.00 CLP Line-by-line Enel Chile SA 93.55% 60.74% Enel Generación Costanera SA Enel Generación El Chocón SA Enel Generación Perú SAA Enel Generación Piura SA Enel Generación SA de Cv Buenos Aires AR 701,988,378.00 ARS Line-by-line Enel Argentina SA 75.68% 62.25% Buenos Aires AR 18,321,776,559.00 ARS Line-by-line 54.07% Hidroinvest SA 59.00% Enel Argentina SA 8.67% San Miguel PE 2,108,101,266.48 PEN Line-by-line Enel Perú SAC 83.60% 68.78% San Miguel PE 73,982,594.00 PEN Line-by-line Enel Perú SAC 96.50% 79.39% Mexico City MX 7,100,100.00 MXN Line-by-line Enel Green Power México S de RL de Cv 100.00% Energía Nueva de Iguu S de RL de Cv 0.00% 100.00% Enel Green Power North America Inc. 100.00% 100.00% Enel Geothermal LLC Wilmington US - USD Line-by-line Enel Global Infrastructure and Networks Srl Rome Enel Global Services Srl Rome Enel Global Thermal Generation Srl Enel Global Trading SpA Rome Rome IT IT IT IT 10,100,000.00 EUR Line-by-line Enel SpA 100.00% 100.00% 10,000.00 EUR Line-by-line Enel SpA 100.00% 100.00% 1,000,000.00 EUR Line-by-line Enel SpA 100.00% 100.00% 90,885,000.00 EUR Line-by-line Enel SpA 100.00% 100.00% Attachments 479 479 Company name Headquarters Country Share capital Currency Segment Consolidation method Held by % holding Group % holding Enel Green Power Argentina SA Buenos Aires AR 463,577,761.00 ARS Line-by-line Enel Américas SA 99.86% Enel Green Power SpA 0.00% 82.27% Energía y Servicios South America SpA 0.14% Enel Brasil SA 99.90% Enel Green Power Desenvolvimento Ltda 0.10% Enel Brasil SA 99.90% Enel Green Power Desenvolvimento Ltda 0.10% Enel Brasil SA 99.90% Enel Green Power Desenvolvimento Ltda 0.10% Enel Brasil SA 99.90% Enel Green Power Desenvolvimento Ltda 0.10% Enel Brasil SA 99.90% Enel Green Power Desenvolvimento Ltda 0.10% Enel Brasil SA 99.90% Enel Green Power Desenvolvimento Ltda 0.10% Enel Brasil SA 99.90% Enel Green Power Desenvolvimento Ltda 0.10% Enel Brasil SA 99.90% Enel Green Power Desenvolvimento Ltda 0.10% Enel Brasil SA 99.90% Enel Green Power Desenvolvimento Ltda 0.10% 82.27% 82.27% 82.27% 82.27% 82.27% 82.27% 82.27% 82.27% 82.27% Rio de Janeiro BR 1,000.00 BRL Line-by-line Rio de Janeiro BR 1,000.00 BRL Line-by-line Rio de Janeiro BR 1,000.00 BRL Line-by-line Rio de Janeiro BR 1,000.00 BRL Line-by-line Rio de Janeiro BR 1,000.00 BRL Line-by-line Rio de Janeiro BR 1,000.00 BRL Line-by-line Rio de Janeiro BR 1,000.00 BRL Line-by-line Rio de Janeiro BR 1,000.00 BRL Line-by-line Rio de Janeiro BR 1,000.00 BRL Line-by-line Enel Green Power Aroeira 01 SA Enel Green Power Aroeira 02 SA Enel Green Power Aroeira 03 SA Enel Green Power Aroeira 04 SA Enel Green Power Aroeira 05 SA Enel Green Power Aroeira 06 SA Enel Green Power Aroeira 07 SA Enel Green Power Aroeira 08 SA Enel Green Power Aroeira 09 SA (formerly Enel Green Power São Gonçalo Participações SA) Enel Green Power Australia (Pty) Ltd Enel Green Power Australia Trust Enel Green Power Azure Blue Jay Solar Holdings LLC Sydney AU 100.00 Sydney AU 100.00 Andover US 1.00 AUD AUD USD Line-by-line Enel Green Power SpA 100.00% 100.00% Line-by-line Enel Green Power SpA 100.00% 100.00% Line-by-line Enel Kansas LLC 100.00% 100.00% 480 480 Integrated Annual Report 2021 Company name Headquarters Country Share capital Currency Segment Consolidation method Held by % holding Group % holding Enel Green Power Azure Ranchland Holdings LLC Enel Green Power Boa Vista 01 Ltda Enel Green Power Boa Vista Eólica SA Enel Green Power Bouldercombe Holding (Pty) Ltd Enel Green Power Bouldercombe Trust Enel Green Power Brejolândia Solar SA Enel Green Power Bungala (Pty) Ltd Enel Green Power Bungala Trust Enel Green Power Cabeça de Boi SA Andover US - USD Line-by-line Enel Kansas LLC 100.00% 100.00% Salvador BR 3,554,607.00 BRL Line-by-line Enel Brasil SA 100.00% Enel Green Power Desenvolvimento Ltda 0.00% 82.27% Rio de Janeiro BR 104,890,000.00 BRL Line-by-line Enel Brasil SA 100.00% 82.27% Sydney AU 100.00 Sydney AU 10.00 AUD AUD Line-by-line Enel Green Power Australia (Pty) Ltd 100.00% 100.00% Line-by-line Enel Green Power Australia Trust 100.00% 100.00% Rio de Janeiro BR 1,000.00 BRL Line-by-line Enel Brasil SA 99.90% Enel Green Power Desenvolvimento Ltda 0.10% 82.27% Sydney AU 100.00 Sydney AU - AUD AUD Line-by-line Enel Green Power Australia (Pty) Ltd 100.00% 100.00% Line-by-line Enel Green Power Australia (Pty) Ltd 100.00% 100.00% Niterói BR 270,114,539.00 BRL Line-by-line Enel Brasil SA 100.00% 82.27% Enel Green Power Cachoeira Dourada SA Cachoeira Dourada BR 64,339,835.85 BRL Line-by-line Enel Green Power Calabria Srl Enel Green Power Canada Inc. Enel Green Power Cerrado Solar SA Rome IT 10,000.00 EUR Line-by-line Montreal CA 85,681,857.00 CAD Line-by-line Rio de Janeiro BR 1,000.00 BRL Line-by-line Enel Brasil SA 99.61% Enel Green Power Cachoeira Dourada SA 0.15% 82.07% Enel Green Power Italia Srl 100.00% 100.00% Enel Green Power North America Inc. 100.00% 100.00% Enel Brasil SA 99.90% Enel Green Power Desenvolvimento Ltda 0.10% Enel Chile SA 99.99% 82.27% Enel Green Power Chile SA Santiago de Chile CL 842,121,530.67 USD Line-by-line 64.93% Enel SpA 0.01% Enel Green Power Cimarron Bend Wind Holdings III LLC Enel Green Power Cohuna Holdings (Pty) Ltd Enel Green Power Cohuna Trust Enel Green Power Colombia SAS ESP Enel Green Power Costa Rica SA Andover US 1.00 USD Line-by-line Enel Kansas LLC 100.00% 100.00% Sydney AU 3,419,700.00 AUD Line-by-line Sydney AU - AUD Line-by-line Enel Green Power Australia (Pty) Ltd 100.00% 100.00% Enel Green Power Australia Trust 100.00% 100.00% Bogotá CO 13,849,425,000.00 COP Line-by-line Enel Américas SA 100.00% 82.27% San José CR 27,500,000.00 USD Line-by-line ESSA2 SpA 100.00% 82.27% Attachments 481 481 Company name Headquarters Country Share capital Currency Segment Consolidation method Held by % holding Group % holding Enel Green Power Cove Fort Solar LLC Enel Green Power Cremzow GmbH & Co. Kg Enel Green Power Cremzow Verwaltungs GmbH Wilmington US 1.00 USD Line-by-line Enel Kansas LLC 100.00% 100.00% Schenkenberg DE 1,000.00 EUR Line-by-line Schenkenberg DE 25,000.00 EUR Line-by-line Enel X Germany GmbH 90.00% 90.00% Enel X Germany GmbH 90.00% 90.00% Enel Brasil SA 99.17% Enel Green Power Cristal Eólica SA Rio de Janeiro BR 144,784,899.00 BRL Line-by-line Enel Green Power Cristal Eólica SA 0.00% 82.27% Enel Green Power Cumaru 01 SA Enel Green Power Cumaru 02 SA Enel Green Power Cumaru 03 SA Enel Green Power Cumaru 04 SA Enel Green Power Cumaru 05 SA Niterói BR 204,653,590.90 BRL Line-by-line Niterói BR 210,001,000.00 BRL Line-by-line Rio de Janeiro BR 200,001,000.00 BRL Line-by-line Rio de Janeiro BR 200,001,000.00 BRL Line-by-line Rio de Janeiro BR 180,208,000.90 BRL Line-by-line Enel Green Power Cumaru Participações SA Rio de Janeiro BR 1,000.00 BRL Line-by-line Enel Green Power Cumaru Solar 01 SA Rio de Janeiro BR 1,000.00 BRL Line-by-line Enel Green Power Cumaru Solar 02 SA Rio de Janeiro BR 1,000.00 BRL Line-by-line Enel Green Power Desenvolvimento Ltda 0.83% Enel Brasil SA 100.00% Enel Green Power Desenvolvimento Ltda 0.00% Enel Brasil SA 100.00% Enel Green Power Desenvolvimento Ltda 0.00% Enel Brasil SA 100.00% Enel Green Power Desenvolvimento Ltda 0.00% Enel Brasil SA 100.00% Enel Green Power Desenvolvimento Ltda 0.00% Enel Brasil SA 100.00% Enel Green Power Desenvolvimento Ltda 0.00% Enel Brasil SA 99.90% Enel Green Power Desenvolvimento Ltda 0.10% Enel Brasil SA 99.90% Enel Green Power Desenvolvimento Ltda 0.10% Enel Brasil SA 99.90% Enel Green Power Desenvolvimento Ltda 0.10% 82.27% 82.27% 82.27% 82.27% 82.27% 82.27% 82.27% 82.27% 482 482 Integrated Annual Report 2021 Company name Headquarters Country Share capital Currency Segment Consolidation method Held by % holding Enel Green Power Damascena Eólica SA Rio de Janeiro BR 83,709,003.00 BRL Line-by-line Enel Brasil SA 99.16% Enel Green Power Desenvolvimento Ltda 0.84% Group % holding 82.27% Enel Green Power Delfina A Eólica SA Enel Green Power Delfina B Eólica SA Enel Green Power Delfina C Eólica SA Enel Green Power Delfina D Eólica SA Enel Green Power Delfina E Eólica SA Enel Green Power Desenvolvimento Ltda Enel Green Power Development Srl Enel Green Power Diamond Vista Wind Project LLC Enel Green Power Dois Riachos Eólica SA Enel Green Power Egypt SAE Enel Green Power El Salvador SA de Cv Enel Green Power Elkwater Wind Limited Partnership Enel Green Power Elmsthorpe Wind LP Enel Green Power Emiliana Eólica SA Enel Green Power España SLU Rio de Janeiro BR 549,062,483.00 BRL Line-by-line Enel Brasil SA 100.00% 82.27% Rio de Janeiro BR 93,068,000.00 BRL Line-by-line Enel Brasil SA 100.00% 82.27% Rio de Janeiro BR 31,105,000.00 BRL Line-by-line Enel Brasil SA 100.00% 82.27% Rio de Janeiro BR 105,864,000.00 BRL Line-by-line Enel Brasil SA 100.00% 82.27% Niterói BR 105,936,000.00 BRL Line-by-line Enel Brasil SA 100.00% 82.27% Rio de Janeiro BR 46,617,590.35 BRL Line-by-line Rome IT 20,000.00 EUR Line-by-line Wilmington US 1.00 USD Line-by-line Enel Brasil SA 100.00% Energía y Servicios South America SpA 0.00% 82.27% Enel Green Power SpA 100.00% 100.00% Diamond Vista Holdings LLC 100.00% 100.00% Rio de Janeiro BR 130,354,009.00 BRL Line-by-line Enel Brasil SA 100.00% 82.27% Cairo EG 250,000.00 EGP Line-by-line Enel Green Power SpA 100.00% 100.00% El Salvador SV 22,860.00 USD Line-by-line Enel Green Power SpA 99.96% Energía y Servicios South America SpA 0.04% Enel Alberta Wind Inc. 1.00% 99.99% Alberta CA 1,000.00 CAD Line-by-line 100.00% Enel Green Power Canada Inc. 99.00% Enel Alberta Wind Inc. 0.10% Calgary CA 1,000.00 CAD Line-by-line 100.00% Rio de Janeiro BR 135,191,530.00 BRL Line-by-line Seville ES 11,152.74 EUR Line-by-line Enel Green Power Canada Inc. 99.90% Enel Brasil SA 98.81% Enel Green Power Desenvolvimento Ltda 1.19% 82.27% Enel Green Power Emiliana Eólica SA 0.00% Endesa Generación SA 100.00% 70.11% Attachments 483 483 Group % holding 82.27% 82.27% Enel Brasil SA 99.14% Enel Green Power Desenvolvimento Ltda 0.86% Enel Brasil SA 99.90% Enel Green Power Desenvolvimento Ltda 0.10% Enel Brasil SA 100.00% Enel Green Power Desenvolvimento Ltda 0.00% Enel Brasil SA 100.00% Enel Green Power Desenvolvimento Ltda 0.00% Enel Brasil SA 99.90% Enel Green Power Desenvolvimento Ltda 0.10% Enel Brasil SA 99.90% Enel Green Power Desenvolvimento Ltda 0.10% 82.27% 82.27% 82.27% 82.27% Enel Green Power SpA 100.00% 100.00% Enel Green Power SpA 100.00% 100.00% Company name Headquarters Country Share capital Currency Segment Consolidation method Held by % holding Enel Green Power Esperança Eólica SA Rio de Janeiro BR 129,418,174.00 BRL Line-by-line Rio de Janeiro BR 1,000.00 BRL Line-by-line Niterói BR 264,141,174.00 BRL Line-by-line Enel Brasil SA 100.00% 82.27% Enel Green Power Esperança Solar SA Enel Green Power Fazenda SA Enel Green Power Fontes II Participações SA Enel Green Power Fontes Solar SA Enel Green Power France SAS Enel Green Power Germany GmbH Enel Green Power Girgarre Holdings (Pty) Ltd Enel Green Power Girgarre Trust Enel Green Power Global Investment BV Enel Green Power Guatemala SA Enel Green Power Hadros Wind Limited Partnership - Enel Green Power Fontes dos Ventos 2 SA Rio de Janeiro BR 283,315,219.00 BRL Line-by-line Enel Green Power Fontes dos Ventos 3 SA Rio de Janeiro BR 221,001,000.00 BRL Line-by-line Rio de Janeiro BR 1,000.00 BRL Line-by-line Rio de Janeiro BR 1,000.00 BRL Line-by-line Paris FR 100,000.00 EUR Line-by-line Berlin DE 25,000.00 EUR Line-by-line Sydney AU 100.00 Sydney AU 10.00 AUD AUD Line-by-line Enel Green Power Australia (Pty) Ltd 100.00% 100.00% Line-by-line Enel Green Power Australia Trust 100.00% 100.00% Amsterdam NL 10,000.00 EUR Line-by-line Enel Green Power SpA 100.00% 100.00% Enel Américas SA 0.00% Guatemala City GT 67,208,000.00 GTQ Line-by-line 82.27% CA 1,000.00 CAD Line-by-line 100.00% ESSA2 SpA 100.00% Enel Alberta Wind Inc. 1.00% Enel Green Power Hellas SA Enel Green Power Hellas Supply Single Member SA Maroussi GR 159,187,850.00 EUR Line-by-line Maroussi GR 600,000.00 EUR Line-by-line 484 484 Integrated Annual Report 2021 Enel Green Power Canada Inc. 99.00% Enel Green Power SpA 100.00% 100.00% Enel Green Power Hellas SA 100.00% 100.00% Company name Headquarters Country Share capital Currency Segment Consolidation method Held by % holding Group % holding Enel Green Power Hellas Wind Parks South Evia Single Member SA Enel Green Power Hilltopper Wind LLC (formerly Hilltopper Wind Power LLC) Enel Green Power Horizonte Mp Solar SA Maroussi GR 141,569,641.00 EUR Line-by-line Enel Green Power Hellas SA 100.00% 100.00% Dover US 1.00 USD Line-by-line Hilltopper Wind Holdings LLC 100.00% 100.00% Rio de Janeiro BR 431,566,053.00 BRL Line-by-line 82.27% Enel Brasil SA 99.99% Alba Energia Ltda 0.01% Enel Green Power India Private Limited New Delhi Enel Green Power Italia Srl Rome IN IT 113,504,823.00 INR Line-by-line Enel Green Power Development Srl 100.00% 100.00% 272,000,000.00 EUR Line-by-line Enel Italia SpA 100.00% 100.00% Enel Green Power Ituverava Norte Solar SA Enel Green Power Ituverava Solar SA Enel Green Power Ituverava Sul Solar SA Enel Green Power Joana Eólica SA Enel Green Power Kenya Limited Enel Green Power Korea LLC Enel Green Power Lagoa do Sol 01 SA Enel Green Power Lagoa do Sol 02 SA Rio de Janeiro BR 210,706,645.67 BRL Line-by-line Enel Brasil SA 99.91% 82.27% Bondia Energia Ltda 0.09% Enel Green Power Brasil Participações Ltda 0.00% Bondia Energia Ltda 0.00% Rio de Janeiro BR 219,235,933.00 BRL Line-by-line 82.27% Rio de Janeiro BR 407,279,143.00 BRL Line-by-line 82.27% Enel Brasil SA 100.00% Bondia Energia Ltda 0.00% Rio de Janeiro BR 130,259,530.00 BRL Line-by-line Enel Brasil SA 100.00% Enel Brasil SA 98.84% Enel Green Power Desenvolvimento Ltda 1.16% Enel Green Power RSA (Pty) Ltd 1.00% 82.27% Nairobi KE 100,000.00 KES Line-by-line 100.00% Seoul KR 4,350,000,000.00 KRW Line-by-line Teresina BR 1,000.00 BRL Line-by-line Teresina BR 1,000.00 BRL Line-by-line Enel Green Power SpA 99.00% Enel Green Power SpA 100.00% 100.00% Enel Brasil SA 99.90% Enel Green Power Desenvolvimento Ltda 0.10% Enel Brasil SA 99.90% Enel Green Power Desenvolvimento Ltda 0.10% 82.27% 82.27% Attachments 485 485 Company name Headquarters Country Share capital Currency Segment Consolidation method Held by % holding Enel Green Power Lagoa do Sol 03 SA Enel Green Power Lagoa do Sol 04 SA Enel Green Power Lagoa do Sol 05 SA Enel Green Power Lagoa do Sol 06 SA Enel Green Power Lagoa do Sol 07 SA Enel Green Power Lagoa do Sol 08 SA Enel Green Power Lagoa do Sol 09 SA Enel Green Power Lagoa II Participações SA Enel Green Power Lagoa III Participações SA Enel Green Power Lagoa Participações SA (formerly Enel Green Power Projetos 45 SA) Enel Green Power Lily Solar Holdings LLC Enel Green Power Maniçoba Eólica SA Teresina BR 1,000.00 BRL Line-by-line Teresina BR 1,000.00 BRL Line-by-line Teresina BR 1,000.00 BRL Line-by-line Teresina BR 1,000,000.00 BRL Line-by-line Teresina BR 1,000.00 BRL Line-by-line Teresina BR 1,000.00 BRL Line-by-line Teresina BR 1,000.00 BRL Line-by-line Rio de Janeiro BR 1,000.00 BRL Line-by-line Rio de Janeiro BR 1,000.00 BRL Line-by-line Rio de Janeiro BR 1,000.00 BRL Line-by-line Enel Brasil SA 99.90% Enel Green Power Desenvolvimento Ltda 0.10% Enel Brasil SA 99.90% Enel Green Power Desenvolvimento Ltda 0.10% Enel Brasil SA 99.90% Enel Green Power Desenvolvimento Ltda 0.10% Enel Brasil SA 99.90% Enel Green Power Desenvolvimento Ltda 0.10% Enel Brasil SA 99.90% Enel Green Power Desenvolvimento Ltda 0.10% Enel Brasil SA 99.90% Enel Green Power Desenvolvimento Ltda 0.10% Enel Brasil SA 99.90% Enel Green Power Desenvolvimento Ltda 0.10% Enel Brasil SA 99.90% Enel Green Power Desenvolvimento Ltda 0.10% Enel Brasil SA 99.90% Enel Green Power Desenvolvimento Ltda 0.10% Enel Brasil SA 99.90% Enel Green Power Desenvolvimento Ltda 0.10% Group % holding 82.27% 82.27% 82.27% 82.27% 82.27% 82.27% 82.27% 82.27% 82.27% 82.27% Andover US 1.00 USD Line-by-line Enel Kansas LLC 100.00% 100.00% Rio de Janeiro BR 90,722,530.00 BRL Line-by-line Enel Brasil SA 99.20% Enel Green Power Desenvolvimento Ltda 0.80% 82.27% 486 486 Integrated Annual Report 2021 Company name Headquarters Country Share capital Currency Segment Consolidation method Held by % holding Group % holding Enel Green Power Matimba Srl Rome IT 10,000.00 EUR Equity Enel Green Power Metehara Solar Private Limited Company - ET 5,600,000.00 ETB Line-by-line Enel Green Power SpA Enel Green Power Solar Metehara SpA 50.00% 50.00% 80.00% 80.00% Enel Green Power SpA 100.00% Enel Green Power México S de RL de Cv Enel Green Power Modelo I Eólica SA Enel Green Power Modelo II Eólica SA Enel Green Power Morocco SARLAU Enel Green Power Morro do Chapéu I Eólica SA Enel Green Power Morro do Chapéu II Eólica SA Enel Green Power Morro do Chapéu Solar 01 SA (formerly Enel Green Power São Gonçalo III Participações SA) Enel Green Power Mourão SA Enel Green Power Namibia (Pty) Ltd Enel Green Power North America Development LLC Enel Green Power North America Inc. Mexico City MX 662,949,966.00 MXN Line-by-line 100.00% Enel Rinnovabile SA de Cv 0.00% Rio de Janeiro BR 132,642,000.00 BRL Line-by-line Enel Brasil SA 100.00% 82.27% Rio de Janeiro BR 107,742,000.00 BRL Line-by-line Enel Brasil SA 100.00% 82.27% Casablanca MA 480,000,000.00 MAD Line-by-line Enel Green Power SpA 100.00% 100.00% Rio de Janeiro BR 248,138,287.11 BRL Line-by-line Enel Brasil SA 100.00% 82.27% Rio de Janeiro BR 206,050,114.05 BRL Line-by-line Enel Brasil SA 100.00% 82.27% Rio de Janeiro BR 1,000.00 BRL Line-by-line Enel Brasil SA 99.90% Enel Green Power Desenvolvimento Ltda 0.10% 82.27% Rio de Janeiro BR 25,600,100.00 BRL Line-by-line Enel Brasil SA 100.00% 82.27% Windhoek NA 10,000.00 NAD Line-by-line Enel Green Power SpA 100.00% 100.00% Wilmington US - Andover US - USD USD Line-by-line Enel North America Inc. 100.00% 100.00% Line-by-line Enel North America Inc. 100.00% 100.00% Enel Green Power Nova Olinda 01 SA Teresina BR 1,000.00 BRL Line-by-line Enel Green Power Nova Olinda 02 SA Teresina BR 1,000.00 BRL Line-by-line Enel Green Power Nova Olinda 03 SA Teresina BR 1,000.00 BRL Line-by-line Enel Green Power Nova Olinda 04 SA Teresina BR 1,000.00 BRL Line-by-line Enel Brasil SA 99.90% Enel Green Power Desenvolvimento Ltda 0.10% Enel Brasil SA 99.90% Enel Green Power Desenvolvimento Ltda 0.10% Enel Brasil SA 99.90% Enel Green Power Desenvolvimento Ltda 0.10% Enel Brasil SA 99.90% Enel Green Power Desenvolvimento Ltda 0.10% 82.27% 82.27% 82.27% 82.27% Attachments 487 487 Company name Headquarters Country Share capital Currency Segment Consolidation method Held by % holding Enel Green Power Nova Olinda 05 SA Teresina BR 1,000.00 BRL Line-by-line Enel Green Power Nova Olinda 06 SA Teresina BR 1,000.00 BRL Line-by-line Enel Green Power Nova Olinda 07 SA Teresina BR 1,000.00 BRL Line-by-line Enel Green Power Nova Olinda 08 SA Teresina BR 1,000.00 BRL Line-by-line Enel Green Power Nova Olinda 09 SA Teresina BR 1,000.00 BRL Line-by-line Enel Green Power Novo Lapa 01 SA Rio de Janeiro BR 1,000.00 BRL Line-by-line Enel Green Power Novo Lapa 02 SA Rio de Janeiro BR 1,000.00 BRL Line-by-line Enel Green Power Novo Lapa 03 SA Rio de Janeiro BR 1,000.00 BRL Line-by-line Enel Green Power Novo Lapa 04 SA Rio de Janeiro BR 1,000.00 BRL Line-by-line Enel Green Power Novo Lapa 05 SA Rio de Janeiro BR 1,000.00 BRL Line-by-line Enel Green Power Novo Lapa 06 SA Rio de Janeiro BR 1,000.00 BRL Line-by-line Enel Brasil SA 99.90% Enel Green Power Desenvolvimento Ltda 0.10% Enel Brasil SA 99.90% Enel Green Power Desenvolvimento Ltda 0.10% Enel Brasil SA 99.90% Enel Green Power Desenvolvimento Ltda 0.10% Enel Brasil SA 99.90% Enel Green Power Desenvolvimento Ltda 0.10% Enel Brasil SA 99.90% Enel Green Power Desenvolvimento Ltda 0.10% Enel Brasil SA 99.90% Enel Green Power Desenvolvimento Ltda 0.10% Enel Brasil SA 99.90% Enel Green Power Desenvolvimento Ltda 0.10% Enel Brasil SA 99.90% Enel Green Power Desenvolvimento Ltda 0.10% Enel Brasil SA 99.90% Enel Green Power Desenvolvimento Ltda 0.10% Enel Brasil SA 99.90% Enel Green Power Desenvolvimento Ltda 0.10% Enel Brasil SA 99.90% Enel Green Power Desenvolvimento Ltda 0.10% Group % holding 82.27% 82.27% 82.27% 82.27% 82.27% 82.27% 82.27% 82.27% 82.27% 82.27% 82.27% 488 488 Integrated Annual Report 2021 Group % holding 82.27% 82.27% Enel Brasil SA 99.90% Enel Green Power Desenvolvimento Ltda 0.10% Enel Brasil SA 99.90% Enel Green Power Desenvolvimento Ltda 0.10% Enel Green Power SpA 100.00% 100.00% Enel Brasil SA 98.77% Enel Green Power Desenvolvimento Ltda Enel Green Power Pau Ferro Eólica SA 1.23% 82.27% 0.00% Enel Brasil SA 98.86% Enel Green Power Desenvolvimento Ltda 1.14% Enel Américas SA 100.00% Energía y Servicios South America SpA 0.00% Enel Brasil SA 99.00% Enel Green Power Desenvolvimento Ltda 1.00% 82.27% 82.27% 82.27% Enel Green Power Italia Srl 100.00% 100.00% Enel Green Power Egypt SAE 100.00% 100.00% Company name Headquarters Country Share capital Currency Segment Consolidation method Held by % holding Enel Green Power Novo Lapa 07 SA Rio de Janeiro BR 1,000.00 BRL Line-by-line Enel Green Power Novo Lapa 08 SA Enel Green Power O&M Solar LLC Enel Green Power Panamá Srl Enel Green Power Paranapanema SA Enel Green Power Partecipazioni Speciali Srl Rio de Janeiro BR 1,000.00 BRL Line-by-line Andover US - USD Line-by-line Enel Kansas LLC 100.00% 100.00% Panama City PA 3,001.00 USD Line-by-line 82.27% ESSA2 SpA 99.97% Enel Américas SA 0.03% Niterói BR 162,567,500.00 BRL Line-by-line Enel Brasil SA 100.00% 82.27% Rome IT 10,000.00 EUR Line-by-line Enel Green Power Pau Ferro Eólica SA Rio de Janeiro BR 125,124,000.00 BRL Line-by-line Enel Green Power Pedra do Gerônimo Eólica SA Rio de Janeiro BR 184,319,527.57 BRL Line-by-line Enel Green Power Perú SAC San Miguel PE 973,213,507.00 PEN Line-by-line Rio de Janeiro BR 143,674,900.01 BRL Line-by-line Rome IT 1,000,000.00 EUR Line-by-line Cairo EG 15,000,000.00 EGP Line-by-line Enel Green Power Primavera Eólica SA Enel Green Power Puglia Srl Enel Green Power RA SAE in liquidation Enel Green Power Rattlesnake Creek Wind Project LLC (formerly Rattlesnake Creek Wind Project LLC) Enel Green Power Roadrunner Solar Project Holdings II LLC Delaware US 1.00 USD Line-by-line Rattlesnake Creek Holdings LLC 100.00% 100.00% Andover US - USD Line-by-line Enel Kansas LLC 100.00% 100.00% Attachments 489 489 Company name Headquarters Country Share capital Currency Segment Consolidation method Held by % holding Group % holding Enel Green Power Roadrunner Solar Project Holdings LLC Enel Green Power Roadrunner Solar Project II LLC Enel Green Power Rockhaven Ranchland Holdings LLC Enel Green Power Romania Srl Enel Green Power Roseland Solar LLC Enel Green Power RSA (Pty) Ltd Enel Green Power RSA 2 (RF) (Pty) Ltd Enel Green Power Rus Limited Liability Company Andover US - Dover US 100.00 Andover US 1.00 USD USD USD Line-by-line Enel Kansas LLC 100.00% 100.00% Line-by-line Enel Roadrunner Solar Project Holdings II LLC 100.00% 100.00% Line-by-line Enel Kansas LLC 100.00% 100.00% Bucharest RO 2,430,631,000.00 RON Line-by-line Enel Green Power SpA 100.00% 100.00% Andover US 1.00 Johannesburg ZA 1,000.00 Johannesburg ZA 120.00 USD ZAR ZAR Line-by-line Enel Kansas LLC 100.00% 100.00% Line-by-line EGP Matimba NewCo 1 Srl 100.00% 100.00% AFS Enel Green Power RSA (Pty) Ltd 100.00% 100.00% Moscow RU 60,500,000.00 RUB Line-by-line Enel Green Power Partecipazioni Speciali Srl 1.00% Enel Green Power SpA 99.00% 100.00% Enel Green Power SpA Rome IT 272,000,000.00 EUR Line-by-line Enel SpA 100.00% 100.00% Enel Green Power Salto Apiacás SA (formerly Enel Green Power Damascena Eólica SA) Enel Green Power Sannio Srl Enel Green Power São Abraão Eólica SA Enel Green Power São Gonçalo 01 SA (formerly Enel Green Power Projetos 10) Enel Green Power São Gonçalo 02 SA (formerly Enel Green Power Projetos 11) Enel Green Power São Gonçalo 07 SA (formerly Enel Green Power Projetos 42 SA) Enel Green Power São Gonçalo 08 SA (formerly Enel Green Power Projetos 43 SA) Enel Green Power São Gonçalo 10 SA (formerly Enel Green Power Projetos 15) Rio de Janeiro BR 274,420,832.00 BRL Line-by-line Enel Brasil SA 100.00% 82.27% Rome IT 750,000.00 EUR Line-by-line Enel Green Power Italia Srl 100.00% 100.00% Rio de Janeiro BR 91,300,000.00 BRL Line-by-line Enel Brasil SA 100.00% 82.27% Teresina BR 105,245,553.82 BRL Line-by-line 82.27% Alba Energia Ltda 0.00% Teresina BR 129,213,750.53 BRL Line-by-line 82.27% Enel Brasil SA 100.00% Alba Energia Ltda 0.00% Teresina BR 142,249,180.00 BRL Line-by-line Teresina BR 77,008,993.34 BRL Line-by-line Enel Brasil SA 100.00% Enel Brasil SA 100.00% Enel Green Power Desenvolvimento Ltda 0.00% Enel Brasil SA 100.00% Enel Green Power Desenvolvimento Ltda 0.00% Alba Energia Ltda 0.00% 82.27% 82.27% Teresina BR 124,817,216.25 BRL Line-by-line 82.27% Enel Brasil SA 100.00% 490 490 Integrated Annual Report 2021 Enel Green Power São Gonçalo 11 SA (formerly Enel Green Power Projetos 44 SA) Enel Green Power São Gonçalo 12 SA (formerly Enel Green Power Projetos 22 SA) Enel Green Power São Gonçalo 14 Enel Green Power São Gonçalo 17 SA Enel Green Power São Gonçalo 18 SA (formerly Enel Green Power Ventos de Santa Ângela 13 SA) Enel Green Power São Gonçalo 19 SA Enel Green Power São Gonçalo 21 SA (formerly Enel Green Power Projetos 16) Enel Green Power São Gonçalo 22 SA (formerly Enel Green Power Projetos 30) Enel Green Power São Gonçalo 3 SA (formerly Enel Green Power Projetos 12) Enel Green Power São Gonçalo 4 SA (formerly Enel Green Power Projetos 13) Enel Green Power São Gonçalo 5 SA (formerly Enel Green Power Projetos 14) Company name Headquarters Country Share capital Currency Segment Consolidation method Held by % holding Group % holding Teresina BR 82,202,330.00 BRL Line-by-line Enel Brasil SA 100.00% 82.27% Teresina BR 75,750,090.00 BRL Line-by-line Teresina BR 210,001,000.00 BRL Line-by-line Enel Green Power São Gonçalo 15 Teresina BR 180,779,180.90 BRL Line-by-line Teresina BR 175,728,754.90 BRL Line-by-line Teresina BR 177,703,455.40 BRL Line-by-line Teresina BR 174,189,501.00 BRL Line-by-line Enel Brasil SA 100.00% Enel Green Power Desenvolvimento Ltda 0.00% Enel Brasil SA 100.00% Enel Green Power Desenvolvimento Ltda 0.00% Enel Brasil SA 100.00% Enel Green Power Desenvolvimento Ltda 0.00% Enel Brasil SA 100.00% Enel Green Power Desenvolvimento Ltda 0.00% Enel Brasil SA 100.00% Enel Green Power Desenvolvimento Ltda 0.00% Enel Brasil SA 100.00% Enel Green Power Desenvolvimento Ltda 0.00% Alba Energia Ltda 0.00% 82.27% 82.27% 82.27% 82.27% 82.27% 82.27% Teresina BR 139,939,932.22 BRL Line-by-line 82.27% Enel Brasil SA 100.00% Alba Energia Ltda 0.00% Teresina BR 138,733,692.21 BRL Line-by-line 82.27% Enel Brasil SA 100.00% Alba Energia Ltda 0.00% Teresina BR 216,609,843.02 BRL Line-by-line 82.27% Enel Brasil SA 100.00% Alba Energia Ltda 0.00% Teresina BR 124,870,989.57 BRL Line-by-line 82.27% Enel Brasil SA 100.00% Alba Energia Ltda 0.00% Teresina BR 123,176,257.11 BRL Line-by-line 82.27% Enel Brasil SA 100.00% Attachments 491 491 Enel Green Power São Gonçalo 6 SA (formerly Enel Green Power Projetos 19 SA) Enel Green Power São Judas Eólica SA Enel Green Power São Micael 01 SA (formerly Enel Green Power São Gonçalo 9 SA) Enel Green Power São Micael 02 SA (formerly Enel Green Power São Gonçalo 13) Enel Green Power São Micael 03 SA (formerly Enel Green Power São Gonçalo 16 SA) Enel Green Power São Micael 04 SA (formerly Enel Green Power São Gonçalo 20 SA) Enel Green Power São Micael 05 SA Enel Green Power Services LLC Company name Headquarters Country Share capital Currency Segment Consolidation method Held by % holding Group % holding Alba Energia Ltda 0.00% Teresina BR 180,887,848.28 BRL Line-by-line Enel Brasil SA 100.00% 82.27% Niterói BR 143,674,900.00 BRL Line-by-line Enel Green Power Brasil Participações Ltda 0.00% Enel Brasil SA 99.00% Enel Green Power Desenvolvimento Ltda 1.00% Alba Energia Ltda 0.10% 82.27% Teresina BR 1,000.00 BRL Line-by-line 82.27% Enel Brasil SA 99.90% Alba Energia Ltda 0.10% Teresina BR 1,000.00 BRL Line-by-line 82.27% Enel Brasil SA 99.90% Alba Energia Ltda 0.10% Teresina BR 1,000.00 BRL Line-by-line 82.27% Enel Brasil SA 99.90% Enel Brasil SA 99.90% Enel Green Power Desenvolvimento Ltda 0.10% Enel Brasil SA 99.90% Enel Green Power Desenvolvimento Ltda 0.10% 82.27% 82.27% Enel Green Power North America Inc. 100.00% 100.00% Enel Green Power Egypt SAE 100.00% 100.00% Enel Green Power SpA 100.00% 100.00% Enel Green Power Italia Srl 100.00% 100.00% Enel Green Power SpA 100.00% 100.00% Teresina BR 1,000.00 BRL Line-by-line Teresina BR 1,000.00 BRL Line-by-line Wilmington US 100.00 USD Line-by-line Enel Green Power Shu SAE in liquidation Cairo EG 15,000,000.00 EGP Line-by-line Enel Green Power Singapore Pte Ltd Singapore SG 6,100,000.00 SGD Line-by-line 10,000.00 EUR Line-by-line 50,000.00 EUR Line-by-line Enel Green Power Solar Energy Srl Rome Enel Green Power Solar Metehara SpA Rome Enel Green Power Solar Ngonye SpA (formerly Enel Green Power Africa Srl) Rome IT IT IT 50,000.00 EUR AFS EGP Matimba NewCo 2 Srl 100.00% 100.00% Enel Green Power South Africa (Pty) Ltd Enel Green Power South Africa 3 (Pty) Ltd Johannesburg ZA 1,000.00 Gauteng ZA 1,000.00 ZAR ZAR Line-by-line Enel Green Power SpA 100.00% 100.00% Line-by-line Enel Green Power SpA 100.00% 100.00% 492 492 Integrated Annual Report 2021 Company name Headquarters Country Share capital Currency Segment Consolidation method Held by % holding Enel Green Power Swift Wind LP Calgary CA 1,000.00 CAD Line-by-line Group % holding 100.00% 82.27% Enel Alberta Wind Inc. 0.10% Enel Green Power Canada Inc. 99.90% Enel Brasil SA 98.76% Enel Green Power Desenvolvimento Ltda 1.24% Enel Green Power Tacaicó Eólica SA Enel Green Power Tefnut SAE in liquidation Enel Green Power Turkey Enerjí Yatirimlari Anoním Şírketí Enel Green Power UB33 GmbH & Co. Kg Enel Green Power Ventos de Santa Ângela 1 SA Enel Green Power Ventos de Santa Ângela 10 SA (formerly Enel Green Power Projetos 21) Enel Green Power Ventos de Santa Ângela 11 SA (formerly Enel Green Power Projetos 23) Enel Green Power Ventos de Santa Ângela 14 SA (formerly Enel Green Power Projetos 24) Enel Green Power Ventos de Santa Ângela 15 SA (formerly Enel Green Power Projetos 25) Enel Green Power Ventos de Santa Ângela 17 SA (formerly Enel Green Power Projetos 26) Enel Green Power Ventos de Santa Ângela 19 SA (formerly Enel Green Power Projetos 27) Enel Green Power Ventos de Santa Ângela 2 SA Rio de Janeiro BR 86,034,360.00 BRL Line-by-line Cairo EG 15,000,000.00 EGP Line-by-line Enel Green Power Egypt SAE 100.00% 100.00% Istanbul TR 65,654,658.00 TRY Line-by-line Enel Green Power SpA 100.00% 100.00% Berlin DE 75,000.00 EUR Line-by-line Enel Green Power Germany GmbH 100.00% 100.00% Teresina BR 132,001,000.00 BRL Line-by-line Teresina BR 171,001,000.00 BRL Line-by-line Teresina BR 185,001,000.00 BRL Line-by-line Teresina BR 241,769,350.00 BRL Line-by-line Teresina BR 182,001,000.00 BRL Line-by-line Teresina BR 198,001,000.00 BRL Line-by-line Teresina BR 126,001,000.00 BRL Line-by-line Teresina BR 249,650,000.00 BRL Line-by-line Enel Brasil SA 100.00% Ventos de Santa Ângela Energias Renováveis SA 0.00% Enel Brasil SA 100.00% Ventos de Santa Ângela Energias Renováveis SA 0.00% Enel Brasil SA 100.00% Ventos de Santa Ângela Energias Renováveis SA 0.00% Enel Brasil SA 100.00% Ventos de Santa Ângela Energias Renováveis SA 0.00% Enel Brasil SA 100.00% Ventos de Santa Ângela Energias Renováveis SA 0.00% Enel Brasil SA 100.00% Ventos de Santa Ângela Energias Renováveis SA 0.00% Enel Brasil SA 100.00% Ventos de Santa Ângela Energias Renováveis SA 0.00% Enel Brasil SA 100.00% Ventos de Santa Ângela Energias Renováveis SA 0.00% 82.27% 82.27% 82.27% 82.27% 82.27% 82.27% 82.27% 82.27% Attachments 493 493 Company name Headquarters Country Share capital Currency Segment Consolidation method Held by % holding Enel Green Power Ventos de Santa Ângela 20 SA (formerly Enel Green Power Projetos 28) Enel Green Power Ventos de Santa Ângela 21 SA (formerly Enel Green Power Projetos 29) Enel Green Power Ventos de Santa Ângela 3 SA (formerly Enel Green Power Projetos 4) Enel Green Power Ventos de Santa Ângela 4 SA (formerly Enel Green Power Projetos 6) Enel Green Power Ventos de Santa Ângela 5 SA (formerly Enel Green Power Projetos 7) Enel Green Power Ventos de Santa Ângela 6 SA (formerly Enel Green Power Projetos 8) Enel Green Power Ventos de Santa Ângela 7 SA (formerly Enel Green Power Projetos 9) Enel Green Power Ventos de Santa Ângela 8 SA (formerly Enel Green Power Projetos 18) Enel Green Power Ventos de Santa Ângela 9 SA (formerly Enel Green Power Projetos 20) Enel Green Power Ventos de Santa Ângela ACL 12 (formerly Enel Green Power Projetos 36) Enel Green Power Ventos de Santa Ângela ACL 13 SA (formerly Enel Green Power Projetos 17 SA) Teresina BR 126,001,000.00 BRL Line-by-line Teresina BR 113,001,000.00 BRL Line-by-line Teresina BR 132,001,000.00 BRL Line-by-line Teresina BR 132,001,000.00 BRL Line-by-line Teresina BR 132,001,000.00 BRL Line-by-line Teresina BR 132,001,000.00 BRL Line-by-line Teresina BR 106,001,000.00 BRL Line-by-line Teresina BR 132,001,000.00 BRL Line-by-line Teresina BR 185,001,000.00 BRL Line-by-line Teresina BR 125,853,581.00 BRL Line-by-line Teresina BR 115,001,000.00 BRL Line-by-line Enel Brasil SA 100.00% Ventos de Santa Ângela Energias Renováveis SA 0.00% Enel Brasil SA 100.00% Ventos de Santa Ângela Energias Renováveis SA 0.00% Enel Brasil SA 100.00% Ventos de Santa Ângela Energias Renováveis SA 0.00% Enel Brasil SA 100.00% Ventos de Santa Ângela Energias Renováveis SA 0.00% Enel Brasil SA 100.00% Ventos de Santa Ângela Energias Renováveis SA 0.00% Enel Brasil SA 100.00% Ventos de Santa Ângela Energias Renováveis SA 0.00% Enel Brasil SA 100.00% Ventos de Santa Esperança Energias Renováveis SA 0.00% Enel Brasil SA 100.00% Ventos de Santa Ângela Energias Renováveis SA 0.00% Enel Brasil SA 100.00% Ventos de Santa Ângela Energias Renováveis SA 0.00% Enel Brasil SA 100.00% Enel Green Power Desenvolvimento Ltda 0.00% Enel Brasil SA 100.00% Enel Green Power Desenvolvimento Ltda 0.00% Group % holding 82.27% 82.27% 82.27% 82.27% 82.27% 82.27% 82.27% 82.27% 82.27% 82.27% 82.27% 494 494 Integrated Annual Report 2021 Company name Headquarters Country Share capital Currency Segment Consolidation method Held by % holding Enel Green Power Ventos de Santa Ângela ACL 16 SA (formerly Enel Green Power Projetos 38 SA) Enel Green Power Ventos de Santa Ângela ACL 18 SA (formerly Enel Green Power Projetos 47 SA) Enel Green Power Ventos de Santa Esperança 08 SA (formerly Enel Green Power Projetos 34 SA) Enel Green Power Ventos de Santa Esperança 1 SA (formerly Enel Green Power Fonte dos Ventos 1 SA) Enel Green Power Ventos de Santa Esperança 13 (formerly Enel Green Power Projetos 33 SA) Enel Green Power Ventos de Santa Esperança 15 SA Enel Green Power Ventos de Santa Esperança 16 SA (formerly Enel Green Power Projetos 35 SA) Enel Green Power Ventos de Santa Esperança 17 SA (formerly Enel Green Power Projetos 31 SA) Enel Green Power Ventos de Santa Esperança 21 SA (formerly Enel Green Power Projetos 37 SA) Enel Green Power Ventos de Santa Esperança 22 SA (formerly Enel Green Power Projetos 39 SA) Enel Green Power Ventos de Santa Esperança 25 SA (formerly Enel Green Power Projetos 40 SA) Teresina BR 128,700,091.00 BRL Line-by-line Teresina BR 128,279,231.00 BRL Line-by-line Rio de Janeiro BR 110,200,000.00 BRL Line-by-line Rio de Janeiro BR 1,000.00 BRL Line-by-line Rio de Janeiro BR 147,000,000.00 BRL Line-by-line Rio de Janeiro BR 202,100,000.00 BRL Line-by-line Rio de Janeiro BR 183,700,000.00 BRL Line-by-line Rio de Janeiro BR 183,700,000.00 BRL Line-by-line Rio de Janeiro BR 202,100,000.00 BRL Line-by-line Rio de Janeiro BR 202,100,000.00 BRL Line-by-line Rio de Janeiro BR 110,200,000.00 BRL Line-by-line Enel Brasil SA 100.00% Enel Green Power Desenvolvimento Ltda 0.00% Enel Brasil SA 100.00% Enel Green Power Desenvolvimento Ltda 0.00% Enel Brasil SA 100.00% Enel Green Power Desenvolvimento Ltda 0.00% Enel Brasil SA 99.90% Enel Green Power Desenvolvimento Ltda 0.10% Enel Brasil SA 100.00% Enel Green Power Desenvolvimento Ltda 0.00% Enel Brasil SA 100.00% Enel Green Power Desenvolvimento Ltda 0.00% Enel Brasil SA 100.00% Enel Green Power Desenvolvimento Ltda 0.00% Enel Brasil SA 100.00% Enel Green Power Desenvolvimento Ltda 0.00% Enel Brasil SA 100.00% Enel Green Power Desenvolvimento Ltda 0.00% Enel Brasil SA 100.00% Enel Green Power Desenvolvimento Ltda 0.00% Enel Brasil SA 100.00% Enel Green Power Desenvolvimento Ltda 0.00% Group % holding 82.27% 82.27% 82.27% 82.27% 82.27% 82.27% 82.27% 82.27% 82.27% 82.27% 82.27% Attachments 495 495 Company name Headquarters Country Share capital Currency Segment Consolidation method Held by % holding Group % holding Enel Green Power Ventos de Santa Esperança 26 SA (formerly Enel Green Power Projetos 41 SA) Enel Green Power Ventos de Santa Esperança 3 SA Enel Green Power Ventos de Santa Esperança 7 SA (formerly Enel Green Power Lagedo Alto SA) Enel Green Power Ventos de Santa Esperança Participações SA (formerly Enel Green Power Cumaru 06 SA) Enel Green Power Ventos de Santo Orestes 1 SA Enel Green Power Ventos de Santo Orestes 2 SA Enel Green Power Ventos de São Roque 01 SA Enel Green Power Ventos de São Roque 02 SA Enel Green Power Ventos de São Roque 03 SA Enel Green Power Ventos de São Roque 04 SA Rio de Janeiro BR 202,100,000.00 BRL Line-by-line Rio de Janeiro BR 1,000.00 BRL Line-by-line Rio de Janeiro BR 1,000.00 BRL Line-by-line Rio de Janeiro BR 1,000.00 BRL Line-by-line Rio de Janeiro BR 1,000.00 BRL Line-by-line Rio de Janeiro BR 1,000.00 BRL Line-by-line Teresina BR 313,963,791.98 BRL Line-by-line Teresina BR 300,285,891.00 BRL Line-by-line Teresina BR 1,000.00 BRL Line-by-line Teresina BR 270,507,771.00 BRL Line-by-line Enel Brasil SA 100.00% Enel Green Power Desenvolvimento Ltda Enel Green Power Ventos de Santa Esperança 26 SA (formerly Enel Green Power Projetos 41 SA) 0.00% 0.00% Enel Brasil SA 99.90% Enel Green Power Desenvolvimento Ltda 0.10% Enel Brasil SA 99.90% Enel Green Power Desenvolvimento Ltda 0.10% Enel Brasil SA 99.90% Enel Green Power Desenvolvimento Ltda 0.10% Enel Brasil SA 99.90% Enel Green Power Desenvolvimento Ltda 0.10% Enel Brasil SA 99.90% Enel Green Power Desenvolvimento Ltda 0.10% Enel Brasil SA 100.00% Enel Green Power Desenvolvimento Ltda 0.00% Enel Brasil SA 100.00% Enel Green Power Desenvolvimento Ltda 0.00% Enel Brasil SA 99.90% Enel Green Power Desenvolvimento Ltda 0.10% Enel Brasil SA 100.00% Enel Green Power Desenvolvimento Ltda 0.00% 82.27% 82.27% 82.27% 82.27% 82.27% 82.27% 82.27% 82.27% 82.27% 82.27% 496 496 Integrated Annual Report 2021 Company name Headquarters Country Share capital Currency Segment Consolidation method Held by % holding Enel Green Power Ventos de São Roque 05 SA Enel Green Power Ventos de São Roque 06 SA Enel Green Power Ventos de São Roque 07 SA Enel Green Power Ventos de São Roque 08 SA Enel Green Power Ventos de São Roque 11 SA Enel Green Power Ventos de São Roque 13 SA Enel Green Power Ventos de São Roque 16 SA Enel Green Power Ventos de São Roque 17 SA Enel Green Power Ventos de São Roque 18 SA Enel Green Power Ventos de São Roque 19 SA Enel Green Power Ventos de São Roque 22 SA Teresina BR 1,000.00 BRL Line-by-line Teresina BR 1,000.00 BRL Line-by-line Teresina BR 1,000.00 BRL Line-by-line Teresina BR 138,001,000.00 BRL Line-by-line Teresina BR 301,267,691.98 BRL Line-by-line Teresina BR 1,000.00 BRL Line-by-line Teresina BR 283,811,791.98 BRL Line-by-line Teresina BR 138,001,000.00 BRL Line-by-line Teresina BR 138,001,000.00 BRL Line-by-line Teresina BR 1,000.00 BRL Line-by-line Teresina BR 1,000.00 BRL Line-by-line Enel Brasil SA 99.90% Enel Green Power Desenvolvimento Ltda 0.10% Enel Brasil SA 99.90% Enel Green Power Desenvolvimento Ltda 0.10% Enel Brasil SA 99.90% Enel Green Power Desenvolvimento Ltda 0.10% Enel Brasil SA 100.00% Enel Green Power Desenvolvimento Ltda 0.00% Enel Brasil SA 100.00% Enel Green Power Desenvolvimento Ltda 0.00% Enel Brasil SA 99.90% Enel Green Power Desenvolvimento Ltda 0.10% Enel Brasil SA 100.00% Enel Green Power Desenvolvimento Ltda 0.00% Enel Brasil SA 100.00% Enel Green Power Desenvolvimento Ltda 0.00% Enel Brasil SA 100.00% Enel Green Power Desenvolvimento Ltda 0.00% Enel Brasil SA 99.90% Enel Green Power Desenvolvimento Ltda 0.10% Enel Brasil SA 99.90% Enel Green Power Desenvolvimento Ltda 0.10% Group % holding 82.27% 82.27% 82.27% 82.27% 82.27% 82.27% 82.27% 82.27% 82.27% 82.27% 82.27% Attachments 497 497 Group % holding 82.27% 82.27% Company name Headquarters Country Share capital Currency Segment Consolidation method Held by % holding Enel Green Power Ventos de São Roque 26 SA Enel Green Power Ventos de São Roque 29 SA Enel Green Power Verwaltungs GmbH Enel Green Power Vietnam LLC (Công ty TNHH Enel Green Power Viêt Nam) Enel Green Power Villoresi Srl Enel Green Power Volta Grande SA (formerly Enel Green Power Projetos 1 SA) Enel Green Power Zambia Limited Enel Green Power Zeus II - Delfina 8 SA Enel Green Power Zeus Sul 1 Ltda Enel Green Power Zeus Sul 2 SA Enel Holding Finance Srl Teresina BR 1,000.00 BRL Line-by-line Teresina BR 1,000.00 BRL Line-by-line Enel Brasil SA 99.90% Enel Green Power Desenvolvimento Ltda 0.10% Enel Brasil SA 99.90% Enel Green Power Desenvolvimento Ltda 0.10% Berlin DE 25,000.00 EUR Line-by-line Enel Green Power Germany GmbH 100.00% 100.00% Ho Chi Minh City VN 231,933.00 USD Line-by-line Enel Green Power SpA 100.00% 100.00% Rome IT 1,200,000.00 EUR Line-by-line Enel Green Power Italia Srl 51.00% 51.00% Niterói BR 565,756,528.00 BRL Line-by-line Enel Brasil SA 100.00% 82.27% Lusaka ZM 15,000.00 ZMW Line-by-line 100.00% Enel Green Power RSA (Pty) Ltd 99.00% Enel Green Power Development Srl 1.00% Rio de Janeiro BR 129,639,980.00 BRL Line-by-line Enel Brasil SA 100.00% 82.27% Rio de Janeiro BR 6,986,993.00 BRL Line-by-line Rio de Janeiro BR 1,000.00 BRL Line-by-line Enel Brasil SA 100.00% Enel Green Power Desenvolvimento Ltda 0.00% Enel Brasil SA 99.90% Enel Green Power Desenvolvimento Ltda 0.10% 82.27% 82.27% Rome IT 10,000.00 EUR Line-by-line Enel SpA 100.00% 100.00% Enel Iberia Srl Madrid ES 336,142,500.00 EUR Line-by-line Enel SpA 100.00% 100.00% Enel Innovation Hubs Srl Rome IT 1,100,000.00 EUR Line-by-line Enel SpA 100.00% 100.00% Enel Insurance NV Amsterdam NL 60,000.00 EUR Line-by-line Enel SpA 100.00% 100.00% Enel Investment Holding BV Amsterdam NL 1,000,000.00 EUR Line-by-line Enel SpA 100.00% 100.00% Enel Italia SpA Rome IT 100,000,000.00 EUR Line-by-line Enel SpA 100.00% 100.00% Enel Kansas Development Holdings LLC Andover US - Enel Kansas LLC Wilmington US - USD USD Line-by-line Enel Kansas LLC 100.00% 100.00% Line-by-line Enel Green Power North America Inc. 100.00% 100.00% 498 498 Integrated Annual Report 2021 Company name Headquarters Country Share capital Currency Segment Consolidation method Held by % holding Group % holding Enel Land HoldCo LLC Andover US - USD Line-by-line Enel Kansas LLC 100.00% 100.00% Enel Logistics Srl Rome IT 1,000,000.00 EUR Line-by-line Enel Italia SpA 100.00% 100.00% Enel Minnesota Holdings LLC Minneapolis US - Enel Nevkan Inc. Wilmington US - Enel North America Inc. Andover US 50.00 USD USD USD Line-by-line EGP Geronimo Holding Company Inc. 100.00% 100.00% Line-by-line Enel Green Power North America Inc. 100.00% 100.00% Line-by-line Enel SpA 100.00% 100.00% Enel Operations Canada Ltd Alberta CA 1,000.00 CAD Line-by-line Enel Green Power Canada Inc. 100.00% 100.00% Enel Perú SAC San Miguel PE 5,361,789,105.00 PEN Line-by-line Enel Américas SA 100.00% 82.27% Enel Produzione SpA Rome IT 1,800,000,000.00 EUR Line-by-line Enel Italia SpA 100.00% 100.00% Enel Rinnovabile SA de Cv Enel Roadrunner Solar Project Holdings II LLC Enel Roadrunner Solar Project Holdings LLC Mexico City MX 100.00 MXN Line-by-line Andover US - USD Line-by-line Dover US 100.00 USD Line-by-line Enel Green Power Global Investment BV Hidroelectricidad del Pacífico S de RL de Cv Enel Green Power Roadrunner Solar Project Holdings II LLC Enel Green Power Roadrunner Solar Project Holdings LLC 99.00% 1.00% 100.00% 100.00% 100.00% 100.00% 100.00% Enel Romania SA Buftea RO 200,000.00 RON Line-by-line Enel SpA 100.00% 100.00% Enel Rus Finance LLC Konakovo RU 10,000.00 RUB Line-by-line Enel Russia PJSC 100.00% 56.43% Enel Rus Wind Azov LLC Moscow RU 200,000,000.00 RUB Line-by-line Enel Russia PJSC 100.00% 56.43% Enel Rus Wind Kola LLC Murmansk City RU 10,000.00 RUB Line-by-line Enel Russia PJSC 100.00% 56.43% Enel Rus Wind Stavropolye LLC Region of Stavropol RU 350,000.00 RUB Line-by-line Enel Russia PJSC 100.00% 56.43% Enel Russia PJSC Yekaterinburg RU 35,371,898,370.00 RUB Line-by-line Enel SpA 56.43% 56.43% Enel Salt Wells LLC Fallon US - USD Line-by-line Al Khobar SA 1,000,000.00 SAR Line-by-line Enel Saudi Arabia Limited Enel Servicii Comune SA Enel Geothermal LLC 100.00% 100.00% e-distribuzione SpA 60.00% 60.00% E-Distribuţie Banat SA 50.00% Bucharest RO 33,000,000.00 RON Line-by-line 51.00% E-Distribuţie Dobrogea SA 50.00% Attachments 499 499 Company name Headquarters Country Share capital Currency Segment Consolidation method Held by % holding Enel Solar Srl Panama City PA 10,100.00 USD Line-by-line Enel Green Power Panamá Srl 99.01% ESSA2 SpA 0.99% Group % holding 82.27% Enel Sole Srl Rome IT 4,600,000.00 EUR Line-by-line Enel Italia SpA 100.00% 100.00% Enel Soluções Energéticas Ltda Rio de Janeiro BR 42,863,000.00 BRL Line-by-line Enel Brasil SA 100.00% Enel Green Power Desenvolvimento Ltda 0.00% 82.27% Enel Soluções Energéticas Ltda 0.00% Enel Stillwater LLC Wilmington US - Enel Surprise Valley LLC Wilmington US - Enel Texkan Inc. Wilmington US 100.00 USD USD USD Line-by-line Enel Geothermal LLC 100.00% 100.00% Line-by-line Enel Green Power North America Inc. 100.00% 100.00% Line-by-line Chi Power Inc. 100.00% 100.00% Enel Trade Energy Srl Bucharest RO 2,437,050.00 RON Line-by-line Enel Romania SA 100.00% 100.00% Enel Trade Serbia doo Belgrade RS 300,000.00 EUR Line-by-line Enel Global Trading SpA 100.00% 100.00% Enel Américas SA 55.00% Enel Trading Argentina Srl Buenos Aires AR 14,011,100.00 ARS Line-by-line 82.26% Enel Argentina SA 45.00% Enel Trading Brasil SA Rio de Janeiro BR 5,280,312.00 BRL Line-by-line Enel Brasil SA 100.00% 82.27% Enel Trading North America LLC Wilmington US 10,000,000.00 USD Line-by-line Enel North America Inc. 100.00% 100.00% Enel Transmisión Chile SA Santiago de Chile CL 52,569,315,875.00 CLP Line-by-line Enel Chile SA 99.09% 64.34% Enel Uruguay SA Montevideo UY 20,000.00 UYU Line-by-line Enel Brasil SA 100.00% 82.27% Enel Vayu (Project 2) Private Limited Gurugram Enel Wind Project (Amberi) Private Limited New Delhi IN IN 45,000,000.00 INR Line-by-line 5,000,000.00 INR Line-by-line Enel Green Power India Private Limited Enel Green Power India Private Limited 100.00% 100.00% 100.00% 100.00% Enel X AMPCI Ebus Chile SpA Santiago de Chile CL 18,000,000.00 USD Equity Enel X Chile SpA 20.00% 12.99% Enel X AMPCI L1 Holdings SpA Santiago de Chile CL 18,000,000.00 USD Enel X AMPCI L1 SpA Santiago de Chile CL 18,000,000.00 USD Equity Equity Enel X AMPCI Ebus Chile SpA 100.00% 12.99% Enel X AMPCI L1 Holdings SpA 100.00% 12.99% Enel X Arecibo LLC Boston US - USD Line-by-line Enel X Argentina SAU Buenos Aires AR 127,800,000.00 ARS Line-by-line Enel X Pr Holdings LLC 100.00% 100.00% Enel X International Srl 100.00% 100.00% 500 500 Integrated Annual Report 2021 Company name Headquarters Country Share capital Currency Segment Consolidation method Held by % holding Group % holding Enel X Asputeck Ave. Project LLC Enel X Australia Holding (Pty) Ltd Enel X Australia (Pty) Ltd Enel X Battery Storage Limited Partnership Enel X Brasil Gerenciamento de Energia Ltda Boston US - USD Line-by-line Melbourne AU 21,224,578.00 AUD Line-by-line Melbourne AU 9,880.00 AUD Line-by-line Enel X Finance Partner LLC Enel X International Srl 100.00% 100.00% 100.00% 100.00% Energy Response Holdings (Pty) Ltd 100.00% 100.00% Enel X Canada Holding Inc. 0.01% Oakville CA 10,000.00 CAD Line-by-line 100.00% Sorocaba BR 5,538,403.00 BRL Line-by-line 100.00% EnerNOC UK II Limited 100.00% Enel X Canada Ltd 99.99% Enel X Ireland Limited 0.00% Enel X Brasil SA Niterói BR 324,725,892.00 BRL Line-by-line Enel Brasil SA 100.00% 82.27% Enel X Canada Holding Inc. Oakville CA 1,000.00 Enel X Canada Ltd Mississauga CA 1,000.00 CAD CAD Line-by-line Enel X Canada Ltd 100.00% 100.00% Line-by-line Enel North America Inc. 100.00% 100.00% Enel X Chile SpA Santiago de Chile CL 3,800,000,000.00 CLP Line-by-line Enel Chile SA 100.00% 64.93% Enel X College Ave. Project LLC Boston US - USD Line-by-line Enel X MA Holdings LLC 100.00% 100.00% Enel X Colombia SAS Bogotá CO 5,186,737,000.00 COP Line-by-line Codensa SA ESP 100.00% 39.74% Enel X Energy (Shanghai) Co. Ltd Shanghai CN 3,500,000.00 USD Line-by-line Enel X International Srl 100.00% 100.00% Enel X Federal LLC Boston US 5,000.00 Enel X Finance Partner LLC Boston US 100.00 USD USD Line-by-line Line-by-line Enel X North America Inc. Enel X North America Inc. 100.00% 100.00% 100.00% 100.00% Enel X Financial Services Srl Rome IT 1,000,000.00 EUR AFS Enel X Srl 100.00% 100.00% Enel X France SAS Paris FR 2,901,000.00 EUR Line-by-line Enel X Germany GmbH Berlin DE 25,000.00 EUR Line-by-line Enel X Hayden Rowe St. Project LLC Boston US 100.00 USD Line-by-line Enel X International Srl Enel X International Srl Enel X MA Holdings LLC 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% Enel X International Srl Rome Enel X Ireland Limited Dublin Enel X Italia Srl Rome Enel X Japan KK Tokyo IT IE IT JP 100,000.00 EUR Line-by-line Enel X Srl 100.00% 100.00% 10,841.00 EUR Line-by-line Enel X International Srl 100.00% 100.00% 200,000.00 EUR Line-by-line Enel Italia SpA 100.00% 100.00% 655,000,000.00 JPY Line-by-line Enel X International Srl 100.00% 100.00% Enel X KOMIPO Solar Limited Seoul KR 8,472,600,000.00 KRW Line-by-line Enel X Korea Limited 80.00% 80.00% Attachments 501 501 Company name Headquarters Country Share capital Currency Segment Consolidation method Held by % holding Group % holding Enel X Korea Limited Seoul KR 11,800,000,000.00 KRW Line-by-line Enel X International Srl 100.00% 100.00% Enel X Las Piedras LLC Boston US - Enel X MA Holdings LLC Boston US 100.00 Enel X MA PV Portfolio 1 LLC Enel X MA PV Portfolio 2 LLC Enel X MA PV Portfolio 3 LLC Boston US - Boston US - Boston US - USD USD USD USD USD Line-by-line Enel X Pr Holdings LLC 100.00% 100.00% Line-by-line Enel X Finance Partner LLC 100.00% 100.00% Line-by-line Enel X MA Holdings LLC 100.00% 100.00% Line-by-line Enel X North America Inc. 100.00% 100.00% Line-by-line Enel X Finance Partner LLC 100.00% 100.00% Enel X Mobility HPC Srl Rome IT 1,000,000.00 EUR Equity Enel X Srl 50.00% 50.00% Enel X Mobility Romania Srl Bucharest RO 6,937,800.00 RON Line-by-line 100.00% Enel X Srl 0.14% Enel X International Srl 99.86% Enel X Mobility Srl Rome IT 100,000.00 EUR Line-by-line Enel Italia SpA 100.00% 100.00% Enel X Morrissey Blvd. Project LLC Enel X New Zealand Limited Enel X North America Inc. Boston US 100.00 USD Line-by-line Wellington NZ 313,606.00 AUD Line-by-line Boston US 1,000.00 USD Line-by-line Enel X Norway AS Porsgrunn NO 1,000,000.00 NOK Line-by-line Enel X MA Holdings LLC 100.00% 100.00% Energy Response Holdings (Pty) Ltd 100.00% 100.00% Enel North America Inc. Enel X International Srl 100.00% 100.00% 100.00% 100.00% Enel X Perú SAC San Miguel PE 12,005,000.00 PEN Line-by-line Enel Perú SAC 100.00% 82.27% Enel X Polska Sp. zo.o. Warsaw PL 12,275,150.00 PLN Enel X Pr Holdings LLC Boston US - Enel X Project MP Holdings LLC Enel X Project MP Sponsor LLC Boston US - Boston US - USD USD USD Line-by-line Enel X Ireland Limited 100.00% 100.00% Line-by-line Enel X Finance Partner LLC 100.00% 100.00% Line-by-line Enel X Project MP Sponsor LLC 100.00% 100.00% Line-by-line Enel X North America Inc. 100.00% 100.00% Enel X International Srl 99.97% Enel X Romania Srl Bucharest RO 7,044,450.00 RON Line-by-line 100.00% Enel X Rus LLC Moscow RU 8,000,000.00 RUB Line-by-line Enel X Srl 0.03% Enel X International Srl 99.00% 99.00% Enel X Srl Rome IT 1,050,000.00 EUR Line-by-line Enel SpA 100.00% 100.00% Enel X Services India Private Limited Mumbai City IN 45,000.00 INR Line-by-line 100.00% Enel X International Srl 100.00% Enel X North America Inc. 0.00% 502 502 Integrated Annual Report 2021 Company name Headquarters Country Share capital Currency Segment Consolidation method Held by % holding Group % holding Enel X Singapore Pte Ltd Singapore SG 1,212,000.00 SGD Line-by-line Enel X International Srl 100.00% 100.00% Enel X Sweden AB Stockholm SE 50,000.00 SEK Line-by-line Enel X International Srl 100.00% 100.00% Enel X Taiwan Co. Ltd Taipei City TW 70,000,000.00 TWD Line-by-line Enel X UK Limited London GB 32,626.00 GBP Line-by-line Enel X Wood St. Project LLC Boston US - USD Line-by-line Enelco SA Maroussi GR 60,108.80 EUR Line-by-line Enel X Ireland Limited Enel X International Srl Enel X Finance Partner LLC Enel Investment Holding BV 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 75.00% 75.00% Enelpower Contractor and Development Saudi Arabia Ltd Enelpower do Brasil Ltda Riyadh SA 5,000,000.00 SAR Line-by-line Enelpower SpA 51.00% 51.00% Rio de Janeiro BR 5,689,000.00 BRL Line-by-line Enel Brasil SA 100.00% Energía y Servicios South America SpA 0.00% 82.27% Enelpower SpA Milan IT 2,000,000.00 EUR Line-by-line Enel SpA 100.00% 100.00% Energética Monzón SAC Energía Base Natural SLU Energía Ceuta XXI Comercializadora de Referencia SA Energía Eólica Ábrego SLU Energía Eólica Galerna SLU Energía Eólica Gregal SLU Energia Eolica Srl - EN.EO. Srl Energía Global de México (Enermex) SA de Cv Energía Global Operaciones Srl Energía Limpia de Amistad SA de Cv Energía Limpia de Palo Alto SA de Cv San Miguel PE 6,463,000.00 PEN Line-by-line Valencia ES 3,000.00 EUR Line-by-line Ceuta ES 65,000.00 EUR Line-by-line Enel Green Power Perú SAC 100.00% Energía y Servicios South America SpA 0.00% 82.27% Enel Green Power España SLU Empresa de Alumbrado Eléctrico de Ceuta SA 100.00% 70.11% 100.00% 67.59% Valencia ES 3,576.00 Madrid ES 3,413.00 Madrid ES 3,250.00 EUR EUR EUR Line-by-line Enel Green Power España SLU 100.00% 70.11% Line-by-line Enel Green Power España SLU 100.00% 70.11% Line-by-line Enel Green Power España SLU 100.00% 70.11% Rome IT 4,840,000.00 EUR Line-by-line Mexico City MX 50,000.00 MXN Line-by-line San José CR 10,000.00 CRC Line-by-line Mexico City MX 33,452,769.00 MXN Equity Mexico City MX 673,583,489.00 MXN Equity Enel Green Power Italia Srl 100.00% 100.00% Enel Green Power SpA 99.00% 99.00% Enel Green Power Costa Rica SA Tenedora de Energía Renovable Sol y Viento SAPI de Cv Tenedora de Energía Renovable Sol y Viento SAPI de Cv 100.00% 82.27% 60.80% 20.00% 60.80% 20.00% Attachments 503 503 Company name Headquarters Country Share capital Currency Segment Consolidation method Held by % holding Energía Limpia de Puerto Libertad S de RL de Cv Mexico City MX 2,953,980.00 MXN Line-by-line Energía Marina SpA Santiago de Chile Energía Neta Sa Caseta Llucmajor SL (Sociedad Unipersonal) Palma de Mallorca CL 2,404,240,000.00 CLP Equity ES 9,000.00 EUR Line-by-line Energía Nueva de Iguu S de RL de Cv Mexico City MX 51,879,307.00 MXN Line-by-line Energía Nueva Energía Limpia México S de RL de Cv Energía XXI Comercializadora de Referencia SL Energía y Naturaleza SLU Mexico City MX 5,339,650.00 MXN Line-by-line 99.99% Enel Green Power SpA 99.96% Madrid ES 2,000,000.00 EUR Line-by-line Endesa Energía SA 100.00% 70.11% Valencia ES 3,000.00 EUR Line-by-line Enel Green Power España SLU 100.00% 70.11% Energía y Servicios South America SpA Santiago de Chile Energías Alternativas del Sur SL Las Palmas de Gran Canaria CL 12,120,575.70 USD Line-by-line Enel Américas SA 100.00% 82.27% ES 546,919.10 EUR Line-by-line Energías de Aragón I SL Zaragoza ES 3,200,000.00 EUR Line-by-line Energías de Graus SL Barcelona ES 1,298,160.00 EUR Line-by-line Energías Especiales de Careón SA Santiago de Compostela ES 270,450.00 EUR Line-by-line Energías Especiales de Peña Armada SA Energías Especiales del Alto Ulla SA Energías Especiales del Bierzo SA Energías Renovables La Mata SA de Cv Energie Electrique de Tahaddart SA Madrid ES 963,300.00 EUR Line-by-line Madrid ES 19,594,860.00 EUR Line-by-line Torre del Bierzo ES 1,635,000.00 EUR Equity Mexico City MX 656,615,400.00 MXN Line-by-line Tanger MA 510,270,000.00 MAD Equity Energo Sonne Srl Bucharest RO 31,520.00 RON Line-by-line Energotel AS Bratislava SK 2,191,200.00 EUR Equity 504 504 Integrated Annual Report 2021 Group % holding 100.00% Enel Green Power México S de RL de Cv 0.01% Enel Rinnovabile SA de Cv 99.99% Enel Green Power Chile SA 25.00% 16.23% Enel Green Power España SLU 100.00% 70.11% Enel Green Power México S de RL de Cv 99.90% Energía Nueva Energía Limpia México S de RL de Cv 0.01% Enel Green Power Guatemala SA 0.04% 99.91% Enel Green Power España SLU 54.95% 38.52% Endesa Red SA (Sociedad Unipersonal) 100.00% 70.11% Enel Green Power España SLU 66.67% 46.74% Enel Green Power España SLU 77.00% 53.99% Enel Green Power España SLU 80.00% 56.09% Enel Green Power España SLU 100.00% 70.11% Enel Green Power España SLU Enel Green Power México S de RL de Cv 50.00% 35.06% 99.00% 100.00% Energía Nueva de Iguu S de RL de Cv 1.00% Endesa Generación SA 32.00% 22.44% Enel Green Power Romania Srl 100.00% 100.00% Slovenské elektrárne AS 20.00% 6.60% Company name Headquarters Country Share capital Currency Segment Consolidation method Held by % holding Group % holding Energy Hydro Piave Srl in liquidation Energy Response Holdings (Pty) Ltd Belluno IT 800,000.00 EUR Line-by-line Melbourne AU 630,451.00 AUD Line-by-line Enel Produzione SpA Enel X Australia Holding (Pty) Ltd 100.00% 100.00% 100.00% 100.00% Enerlive Srl Rome IT 6,520,000.00 EUR Line-by-line Maicor Wind Srl 100.00% 100.00% EnerNOC GmbH Munich DE 25,000.00 EnerNOC Ireland Limited Dublin IE 10,535.00 EUR EUR Line-by-line Enel X North America Inc. 100.00% 100.00% Line-by-line Enel X Ireland Limited 100.00% 100.00% EnerNOC UK II Limited London GB 21,000.00 GBP Line-by-line Enel X UK Limited 100.00% 100.00% Entech (China) Information Technology Co. Ltd Entech Utility Service Bureau Inc. Envatios Promoción I SLU Envatios Promoción II SLU Envatios Promoción III SLU Envatios Promoción XX SLU Shenzhen CN 140,000.00 USD Equity Lutherville US 1,500.00 USD Line-by-line EnerNOC UK II Limited Enel X North America Inc. 50.00% 50.00% 100.00% 100.00% Madrid ES 3,000.00 Madrid ES 3,000.00 Madrid ES 3,000.00 Madrid ES 3,000.00 EUR EUR EUR EUR Line-by-line Enel Green Power España SLU 100.00% 70.11% Line-by-line Enel Green Power España SLU 100.00% 70.11% Line-by-line Enel Green Power España SLU 100.00% 70.11% Line-by-line Enel Green Power España SLU 100.00% 70.11% Eólica Valle del Ebro SA Zaragoza ES 3,561,342.50 EUR Line-by-line Eólica Zopiloapan SA de Cv Mexico City MX 1,877,201.54 MXN Line-by-line Eólicas de Agaete SL Las Palmas de Gran Canaria Eólicas de Fuencaliente SA Las Palmas de Gran Canaria ES 240,400.00 EUR Line-by-line ES 216,360.00 EUR Line-by-line Eólicas de Fuerteventura AIE Puerto del Rosario ES - EUR Buenos Aires AR 480,930.00 ARS Eólicas de la Patagonia SA Eólicas de Lanzarote SL Eólicas de Tenerife AIE Eólicas de Tirajana SL Las Palmas de Gran Canaria Santa Cruz de Tenerife Las Palmas de Gran Canaria ES 1,758,000.00 EUR ES 420,708.40 EUR ES 3,000.00 EUR Line-by-line Equity Equity Equity Equity Epresa Energía SA Cadiz ES 2,500,000.00 EUR Equity E-Solar Srl Rome IT 2,500.00 EUR Line-by-line Enel Green Power España SLU Enel Green Power México S de RL de Cv Enel Green Power Partecipazioni Speciali Srl Enel Green Power España SLU 50.50% 35.40% 56.98% 39.50% 96.48% 80.00% 56.09% Enel Green Power España SLU 55.00% 38.56% Enel Green Power España SLU 40.00% 28.04% Enel Green Power España SLU 50.00% 35.06% Enel Green Power España SLU 40.00% 28.04% Enel Green Power España SLU 50.00% 35.06% Enel Green Power España SLU 60.00% 42.07% Endesa Red SA (Sociedad Unipersonal) 50.00% 35.06% Enel Green Power Italia Srl 100.00% 100.00% Attachments 505 505 European Energy Exchange AG Expedition Solar Project LLC Company name Headquarters Country Share capital Currency Segment Consolidation method Held by % holding Group % holding ESSA2 SpA Santiago de Chile CL 701,166,335.30 USD Line-by-line Enel Américas SA 100.00% 82.27% Essaouira Wind Farm Casablanca MA 300,000.00 MAD Equity Leipzig DE 40,050,000.00 EUR - Nareva Enel Green Power Morocco SA Enel Global Trading SpA 70.00% 35.00% 2.38% 2.38% Andover US 1.00 Explorer Wind Project LLC Andover US 1.00 USD USD Line-by-line Enel Kansas LLC 100.00% 100.00% Line-by-line Enel Kansas LLC 100.00% 100.00% Explotaciones Eólicas de Escucha SA Explotaciones Eólicas El Puerto SA Explotaciones Eólicas Santo Domingo de Luna SA Explotaciones Eólicas Saso Plano SA Explotaciones Eólicas Sierra Costera SA Explotaciones Eólicas Sierra La Virgen SA Zaragoza ES 3,505,000.00 EUR Line-by-line Zaragoza ES 3,230,000.00 EUR Line-by-line Zaragoza ES 100,000.00 EUR Line-by-line Zaragoza ES 5,488,500.00 EUR Line-by-line Zaragoza ES 8,046,800.00 EUR Line-by-line Zaragoza ES 4,200,000.00 EUR Line-by-line Fayette Solar I LLC Andover US 1.00 USD Line-by-line Enel Green Power España SLU 70.00% 49.08% Enel Green Power España SLU 73.60% 51.60% Enel Green Power España SLU 51.00% 35.76% Enel Green Power España SLU 65.00% 45.57% Enel Green Power España SLU 90.00% 63.10% Enel Green Power España SLU 90.00% 63.10% Brick Road Solar Holdings LLC 100.00% 100.00% Rio de Janeiro BR 2,362,045.90 BRL Line-by-line Enel Brasil SA 100.00% 82.27% Fazenda Aroeira Empreendimento de Energia Ltda Fence Post Solar Project LLC Andover US - Fenner Wind Holdings LLC Dover US 100.00 Finsec Lab Ltd Tel Aviv Flagpay Srl Milan IL IT 100.00 USD USD ILS Line-by-line Enel Kansas LLC 100.00% 100.00% Line-by-line Enel Kansas LLC 100.00% 100.00% Equity Enel X Srl 30.00% 30.00% 10,000.00 EUR AFS PayTipper SpA 100.00% 55.00% Flat Rock Wind Project LLC Flat Top Solar Project LLC Andover US 1.00 Andover US - Flint Rock Solar Project LLC Andover US - Florence Hills LLC Minneapolis US - Flowing Spring Farms LLC Andover US 1.00 USD USD USD USD USD Line-by-line Tradewind Energy Inc. 100.00% 100.00% Line-by-line Enel Kansas LLC 100.00% 100.00% Line-by-line Enel Kansas LLC 100.00% 100.00% Line-by-line Chi Minnesota Wind LLC 51.00% 51.00% Line-by-line Brick Road Solar Holdings LLC 100.00% 100.00% Fontibon ZE SAS Bogotá CO 392,420,000.00 COP Line-by-line Bogotá ZE SAS 100.00% 39.74% Fótons de Santo Anchieta Energias Renováveis SA Rio de Janeiro BR 577,000.00 BRL Line-by-line Enel Brasil SA 100.00% 82.27% 506 506 Integrated Annual Report 2021 Company name Headquarters Country Share capital Currency Segment Fotovoltaica Yunclillos SLU Fourmile Wind Project LLC Madrid ES 3,000.00 Andover US 1.00 Franklintown Farm LLC Andover US 1.00 Freedom Energy Storage LLC Andover US - Front Marítim del Besòs SL Frontiersman Solar Project LLC Barcelona ES 9,000.00 Andover US 1.00 EUR USD USD USD EUR USD Consolidation method Held by % holding Group % holding Line-by-line Enel Green Power España SLU 100.00% 70.11% Line-by-line Tradewind Energy Inc. 100.00% 100.00% Line-by-line Brick Road Solar Holdings LLC 100.00% 100.00% Line-by-line Enel Energy Storage Holdings LLC (formerly EGP Energy Storage Holdings LLC) 100.00% 100.00% Equity Endesa Generación SA 61.37% 43.03% Line-by-line Enel Kansas LLC 100.00% 100.00% FRV Corchitos I SLU Madrid ES 75,800.00 EUR Line-by-line FRV Corchitos II SOLAR SLU FRV Gibalbín - Jerez SLU Madrid ES 22,000.00 EUR Line-by-line Madrid ES 23,000.00 EUR Line-by-line Enel Green Power España SLU 100.00% 70.11% Enel Green Power España SLU 100.00% 70.11% Enel Green Power España SLU 100.00% 70.11% FRV Tarifa SLU Madrid ES 3,000.00 FRV Villalobillos SLU Madrid ES 3,000.00 FRV Zamora Solar 1 SLU FRV Zamora Solar 3 SLU Madrid ES 3,000.00 Madrid ES 3,000.00 Fundamental Recognized Systems SLU Rivas- Vaciamadrid ES 3,000.00 Furatena Solar 1 SLU Seville ES 3,000.00 Galaxy Wind Project LLC Andover US 1.00 Ganado Solar LLC Andover US - Ganado Storage LLC Andover US 1.00 Garob Wind Farm (RF) (Pty) Ltd Johannesburg ZA 100.00 EUR EUR EUR EUR EUR EUR USD USD USD ZAR Line-by-line Enel Green Power España SLU 100.00% 70.11% Line-by-line Enel Green Power España SLU 100.00% 70.11% Line-by-line Enel Green Power España SLU 100.00% 70.11% Line-by-line Enel Green Power España SLU 100.00% 70.11% Line-by-line Enel Green Power España SLU 100.00% 70.11% Line-by-line Enel Green Power España SLU 100.00% 70.11% Line-by-line Tradewind Energy Inc. 100.00% 100.00% Line-by-line Enel Kansas LLC 100.00% 100.00% Line-by-line Enel Kansas LLC 100.00% 100.00% AFS Enel Green Power RSA 2 (RF) (Pty) Ltd 55.00% 55.00% Gas y Electricidad Generación SAU Palma de Mallorca ES 213,775,700.00 EUR Line-by-line Gauley Hydro LLC Wilmington US - Gauley River Management LLC Willison US 1.00 USD USD Endesa Generación SA GRPP Holdings LLC 100.00% 70.11% 100.00% 50.00% Equity Line-by-line Enel Green Power North America Inc. 100.00% 100.00% Enel Green Power Guatemala SA 1.00% Generadora de Occidente Ltda Guatemala City GT 16,261,697.33 GTQ Line-by-line 82.27% ESSA2 SpA 99.00% Attachments 507 507 Company name Headquarters Country Share capital Currency Segment Consolidation method Held by % holding Generadora Eólica Alto Pacora Srl Panama City PA 10,100.00 USD Line-by-line Group % holding 82.27% Enel Green Power Panamá Srl 99.01% ESSA2 SpA 0.99% Enel Green Power Guatemala SA 0.00% Generadora Montecristo SA Generadora Solar Austral SA Generadora Solar de Occidente SA Generadora Solar El Puerto SA Generadora Solar Tolé Srl Guatemala City GT 3,820,000.00 GTQ Line-by-line 82.27% Chiriquí PA 10,000.00 USD Line-by-line Panama City PA 10,000.00 USD Line-by-line Chiriquí PA 10,000.00 USD Line-by-line ESSA2 SpA 100.00% Enel Green Power Panamá Srl 100.00% 82.27% Enel Green Power Panamá Srl 100.00% 82.27% Enel Green Power Panamá Srl 100.00% 82.27% Enel Green Power Panamá Srl 99.01% Panama City PA 10,100.00 USD Line-by-line 82.27% ESSA2 SpA 0.99% Geotérmica del Norte SA Santiago de Chile CL 326,577,419,702.00 CLP Line-by-line Enel Green Power Chile SA 84.59% 54.92% Johannesburg ZA 1,000.00 ZAR Line-by-line Gibson Bay Wind Farm (RF) (Pty) Ltd Girgarre Solar Farm (Pty) Ltd Girgarre Solar Farm Trust Global Commodities Holdings Limited Sydney AU - Sydney AU 10.00 AUD AUD London GB 4,042,375.00 GBP Globyte SA San José CR 900,000.00 CRC Enel Green Power RSA (Pty) Ltd Enel Green Power Girgarre Holdings (Pty) Ltd 60.00% 60.00% 100.00% 100.00% Line-by-line Line-by-line Enel Green Power Girgarre Trust 100.00% 100.00% - - Enel Global Trading SpA 4.68% 4.68% Enel Green Power Costa Rica SA 10.00% 8.23% Gloucester Solar I LLC Andover US 1.00 USD Line-by-line Gnl Chile SA Santiago de Chile CL 3,026,160.00 USD Goodwell Wind Project LLC Wilmington US - USD Gorona del Viento El Hierro SA Santa Cruz de Tenerife ES 30,936,736.00 EUR Equity Equity Equity Grand Prairie Solar Project LLC Andover US - USD Line-by-line Brick Road Solar Holdings LLC Enel Generación Chile SA Origin Goodwell Holdings LLC Unión Eléctrica de Canarias Generación SAU 100.00% 100.00% 33.33% 20.25% 100.00% 20.00% 23.21% 16.27% Tradewind Energy Inc. 100.00% 100.00% Enel Brasil SA 0.00% Gridspertise Latam SA São Paulo BR 2,010,000.00 BRL Line-by-line 100.00% Gridspertise Srl Rome IT 7,500,000.00 EUR Line-by-line GRPP Holdings LLC Andover US 2.00 USD Equity Gridspertise Srl 100.00% Enel Global Infrastructure and Networks Srl EGPNA REP Holdings LLC 100.00% 100.00% 50.00% 50.00% 508 508 Integrated Annual Report 2021 Company name Headquarters Country Share capital Currency Segment Consolidation method Held by % holding Group % holding Guadarranque Solar 4 SLU Seville ES 3,006.00 EUR Line-by-line Guayepo Solar SAS Bogotá CO 1,000,000.00 COP Line-by-line Andover US 1.00 USD Line-by-line Gusty Hill Wind Project LLC GV Energie Rigenerabili ITAL-RO Srl Bucharest RO 1,145,400.00 RON Line-by-line 100.00% Endesa Generación II SA 100.00% 70.11% Enel Green Power Colombia SAS ESP 100.00% 82.27% Tradewind Energy Inc. 100.00% 100.00% Enel Green Power Romania Srl 100.00% Enel Green Power SpA 0.00% Line-by-line Chi Minnesota Wind LLC 51.00% 51.00% Line-by-line Tradewind Energy Inc. 100.00% 100.00% Line-by-line Enel Kansas LLC 100.00% 100.00% Line-by-line Brick Road Solar Holdings LLC 100.00% 100.00% Line-by-line Enel Kansas LLC 100.00% 100.00% Line-by-line Tradewind Energy Inc. 100.00% 100.00% Line-by-line Aurora Distributed Solar LLC 100.00% 74.13% Hadley Ridge LLC Minneapolis US - Hamilton County Solar Project LLC Andover US 1.00 Hansborough Valley Solar Project LLC Harmony Plains Solar I LLC Harvest Ridge Solar Project LLC Harvest Ridge Wind Project LLC Andover US - Andover US 1.00 Andover US - Andover US 1.00 Hastings Solar LLC Wilmington US - USD USD USD USD USD USD USD Hatch Data Inc. San Francisco US 10,000.00 USD - Enel X North America Inc. 5.00% 5.00% Wilmington US 1.00 USD Line-by-line Enel Kansas LLC 100.00% 100.00% Heartland Farms Wind Project LLC Hidroeléctrica de Catalunya SL Hidroeléctrica de Ourol SL Hidroelectricidad del Pacífico S de RL de Cv Barcelona ES 126,210.00 EUR Line-by-line Lugo ES 1,608,200.00 EUR Equity Colima MX 30,890,736.00 MXN Line-by-line Hidroflamicell SL Barcelona ES 78,120.00 EUR Line-by-line Endesa Red SA (Sociedad Unipersonal) Enel Green Power España SLU Enel Green Power México S de RL de Cv Hidroeléctrica de Catalunya SL 100.00% 70.11% 30.00% 21.03% 99.99% 99.99% 75.00% 52.58% Enel Américas SA 41.94% Hidroinvest SA Buenos Aires AR 55,312,093.00 ARS Line-by-line 79.55% Enel Argentina SA 54.76% HIF H2 SpA Santiago de Chile CL 6,303,000.00 USD Equity Enel Green Power Chile SA 50.00% 32.46% High Chaparral Solar Project LLC Andover US - High Lonesome Storage LLC Andover US 1.00 High Lonesome Wind Holdings LLC Wilmington US 100.00 USD USD USD Line-by-line Enel Kansas LLC 100.00% 100.00% Line-by-line Enel Kansas LLC 100.00% 100.00% Line-by-line Enel Kansas LLC 100.00% 100.00% Attachments 509 509 Company name Headquarters Country Share capital Currency Segment High Lonesome Wind Power LLC Boston US 100.00 High Noon Solar Project LLC High Street Corporation (Pty) Ltd Hilltopper Wind Holdings LLC Andover US - Melbourne AU 2.00 Wilmington US 1,000.00 Hispano Generación de Energía Solar SL Jerez de los Caballeros ES 3,500.00 Honey Stone Solar Project LLC Andover US - Honeybee Solar Project LLC Andover US - Hope Creek LLC Crestview US - Hope Ridge Wind Project LLC Andover US 1.00 Horse Run Solar I LLC Andover US 1.00 USD USD AUD USD EUR USD USD USD USD USD USD Horse Wrangler Solar Project LLC Hubject eRoaming Technology (Shanghai) Co. Ltd Andover US 1.00 Shanghai CN 12,668,015.70 CNY Hubject GmbH Berlin DE 65,943.00 EUR Hubject Inc. Santa Monica US 100,000.00 USD Hydro Energies Corporation Willison US 5,000.00 Idalia Park Solar Project LLC Andover US - USD USD Consolidation method Line-by-line Held by % holding Group % holding High Lonesome Wind Holdings LLC 100.00% 100.00% Line-by-line Enel Kansas LLC 100.00% 100.00% Line-by-line Energy Response Holdings (Pty) Ltd 100.00% 100.00% Line-by-line Enel Kansas LLC 100.00% 100.00% Line-by-line Enel Green Power España SLU 51.00% 35.76% Line-by-line Enel Kansas LLC 100.00% 100.00% Line-by-line Enel Kansas LLC 100.00% 100.00% Line-by-line Chi Minnesota Wind LLC 51.00% 51.00% Line-by-line Tradewind Energy Inc. 100.00% 100.00% Line-by-line Brick Road Solar Holdings LLC 100.00% 100.00% Line-by-line Enel Kansas LLC 100.00% 100.00% - - - Hubject GmbH 100.00% 12.50% Enel X International Srl 12.50% 12.50% Hubject GmbH 100.00% 12.50% AFS Enel Green Power North America Inc. 100.00% 100.00% Line-by-line Enel Kansas LLC 100.00% 100.00% Minority Stock Holding Corp. 0.15% Ifx/eni - Spc IV Inc. 41.20% Servicios de Internet Eni Chile Ltda Ifx Networks Panama SA 58.80% 58.33% 20.60% Idrosicilia SpA Milan IT 22,520,000.00 EUR Equity Enel SpA 1.00% 1.00% Ifx Networks Argentina Srl Buenos Aires AR 2,260,551.00 ARS Equity 20.60% Ifx/eni - Spc V Inc. 99.85% Ifx Networks Chile SA Santiago de Chile CL 6,235,913,725.00 CLP Equity Ifx Networks Colombia SAS Bogotá CO 15,734,959,000.00 COP Equity 20.60% Ifx/eni - Spc III Inc. 41.67% Ifx Networks LLC Wilmington US 80,848,653.00 USD Equity Ufinet Latam SLU 100.00% 20.60% 510 510 Integrated Annual Report 2021 Infraestructuras Puerto Santa María 220 SL Infraestructuras San Serván 220 SL Inkolan Información y Coordinación de obras AIE Company name Headquarters Country Share capital Currency Segment Ifx Networks Ltd Tortola VG 50,001.00 Ifx Networks Panama SA Panama City PA 21,000.00 Ifx/eni - Spc III Inc. Tortola VG 100.00 Ifx/eni - Spc IV Inc. Tortola VG 100.00 Ifx/eni - Spc Panama Inc. Tortola VG 100.00 Ifx/eni - Spc V Inc. Tortola VG 100.00 USD USD USD USD USD USD Consolidation method Held by % holding Group % holding Equity Ifx Networks LLC 100.00% 20.60% Equity Ifx/eni - Spc Panama Inc. 100.00% 20.60% Equity Ifx Networks Ltd 100.00% 20.60% Equity Ifx Networks Ltd 100.00% 20.60% Equity Ifx Networks Ltd 100.00% 20.60% Equity Ifx Networks Ltd 100.00% 20.60% Puerto Santa María Energía I SLU 50.00% Madrid ES 3,000.00 EUR Line-by-line 70.11% Puerto Santa María Energía II SLU 50.00% Castiblanco Solar SL 10.20% Madrid ES 12,000.00 EUR Equity Navalvillar Solar SL 10.30% 21.59% Bilbao ES 84,141.68 EUR International Multimedia University Srl in bankruptcy - IT 24,000.00 EUR Valdecaballero Solar SL 10.30% Edistribución Redes Digitales SL (Sociedad Unipersonal) 14.29% 10.02% Enel Italia SpA 13.04% 13.04% - - Inversora Codensa SAS Bogotá CO 6,500,000.00 COP Line-by-line Codensa SA ESP 100.00% 39.74% Inversora Dock Sud SA Buenos Aires AR 828,941,660.00 ARS Line-by-line Enel Américas SA 57.14% 47.01% Isamu Ikeda Energia SA Niterói BR 45,474,475.77 BRL Line-by-line Enel Brasil SA 100.00% 82.27% Italgest Energy (Pty) Ltd Johannesburg ZA 1,000.00 Jack River LLC Minneapolis US - ZAR USD Line-by-line Enel Green Power RSA (Pty) Ltd 100.00% 100.00% Line-by-line Chi Minnesota Wind LLC 51.00% 51.00% Jade Energia Ltda Rio de Janeiro BR 4,107,097.00 BRL Line-by-line Enel Brasil SA 100.00% 82.27% Jaguito Solar 10 MW SA Panama City PA 10,000.00 USD Line-by-line Jessica Mills LLC Minneapolis US - USD Line-by-line JuiceNet GmbH Berlin DE 25,000.00 EUR Line-by-line Enel Green Power Panamá Srl 100.00% 82.27% Chi Minnesota Wind LLC Enel X International Srl 51.00% 51.00% 100.00% 100.00% JuiceNet Ltd London GB 1.00 Julia Hills LLC Minneapolis US - GBP USD Line-by-line Enel X International Srl 100.00% 100.00% Line-by-line Chi Minnesota Wind LLC 51.00% 51.00% Attachments 511 511 Company name Headquarters Country Share capital Currency Segment Consolidation method Held by % holding Group % holding 36,600,000.00 INR Line-by-line Enel Green Power India Private Limited 100.00% 100.00% Juna Renewable Energy Private Limited Gurugram Junia Insurance Srl Mosciano Sant’Angelo (Teramo) IN IT 100.00 Keeneys Creek Solar I LLC Andover US 1.00 Kelley’s Falls LLC Wilmington US - EUR USD USD Line-by-line Enel X Srl 100.00% 100.00% Line-by-line Brick Road Solar Holdings LLC 100.00% 100.00% AFS Enel Green Power North America Inc. 100.00% 100.00% Ken Renewables India Private Limited Gurugram Khaba Renewable Energy Private Limited Gurugram Khidrat Renewable Energy Private Limited Gurugram IN IN IN 100,000.00 INR Line-by-line 10,100,000.00 INR Line-by-line 38,100,000.00 INR Line-by-line Enel Green Power India Private Limited Enel Green Power India Private Limited Enel Green Power India Private Limited 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% King Branch Solar I LLC Andover US 1.00 Kings River Hydro Company Inc. Wilmington US 100.00 Kingston Energy Storage LLC Wilmington US - USD USD USD Line-by-line Brick Road Solar Holdings LLC 100.00% 100.00% Line-by-line Enel Green Power North America Inc. 100.00% 100.00% Line-by-line Kino Contractor SA de Cv Mexico City MX 100.00 MXN Line-by-line Kino Facilities Manager SA de Cv Mexico City MX 100.00 MXN Line-by-line Kongul Enerjí Sanayí Ve Tícaret Anoním Şírketí Istanbul TR 125,000,000.00 TRY Line-by-line Koporie WPS LLC Region of Leningrad RU 21,000,000.00 RUB Line-by-line Korea Line Corporation Seoul KR 122,132,520,000.00 KRW - Kromschroeder SA Barcelona ES 627,126.00 EUR Equity Enel Energy Storage Holdings LLC (formerly EGP Energy Storage Holdings LLC) Enel Green Power México S de RL de Cv Hidroelectricidad del Pacífico S de RL de Cv Enel Green Power México S de RL de Cv Hidroelectricidad del Pacífico S de RL de Cv Enel Green Power Turkey Enerjí Yatirimlari Anoním Şírketí Enel Green Power Rus Limited Liability Company Enel Global Trading SpA Endesa Medios y Sistemas SL (Sociedad Unipersonal) 100.00% 100.00% 99.00% 1.00% 99.00% 1.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 0.25% 0.25% 29.26% 20.51% Lake Emily Solar LLC Wilmington US - Lake Pulaski Solar LLC Wilmington US - Land Run Wind Project LLC Dover US 100.00 Lantern Trail Solar Project LLC Andover US 1.00 USD USD USD USD Line-by-line Aurora Distributed Solar LLC 100.00% 74.13% Line-by-line Aurora Distributed Solar LLC 100.00% 74.13% Line-by-line Sundance Wind Project LLC 100.00% 100.00% Line-by-line Enel Kansas LLC 100.00% 100.00% 512 512 Integrated Annual Report 2021 Company name Headquarters Country Share capital Currency Segment Consolidation method Held by % holding Group % holding Latamsolar Fotovoltaica Fundación SAS Bogotá CO 8,000,000.00 COP Line-by-line Enel Green Power Colombia SAS ESP 100.00% 82.27% Lathrop Solar I LLC Andover US 1.00 Lava Solar Project LLC Andover US 1.00 Lawrence Creek Solar LLC Minneapolis US - Lebanon Solar I LLC Andover US 1.00 Lemonade Solar Project LLC Andover US - Liberty Energy Storage LLC Andover US - USD USD USD USD USD USD Line-by-line Brick Road Solar Holdings LLC 100.00% 100.00% Line-by-line Enel Kansas LLC 100.00% 100.00% Line-by-line Aurora Distributed Solar LLC 100.00% 74.13% Line-by-line Brick Road Solar Holdings LLC 100.00% 100.00% Line-by-line Tradewind Energy Inc. 100.00% 100.00% Line-by-line Enel Energy Storage Holdings LLC (formerly EGP Energy Storage Holdings LLC) 100.00% 100.00% Libyan Italian Joint Company - Azienda Libico-Italiana (A.L.I) Tripoli LY 1,350,000.00 EUR - Enelpower SpA 0.33% 0.33% Lily Solar Holdings LLC Andover US 1.00 Lily Solar LLC Andover US - Lindahl Wind Holdings LLC Wilmington US - Lindahl Wind Project LLC Wilmington US - Little Elk Wind Holdings LLC Wilmington US - Little Elk Wind Project LLC Little Salt Solar Project LLC Littleville Power Company Inc. Wilmington US - Andover US - Boston US 100.00 Litus Energy Storage LLC Andover US - USD USD USD USD USD USD USD USD USD Line-by-line Line-by-line Line-by-line Enel Green Power Lily Solar Holdings LLC Enel Kansas Development Holdings LLC EGPNA Preferred Wind Holdings LLC 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% Line-by-line Lindahl Wind Holdings LLC 100.00% 100.00% Line-by-line Enel Kansas LLC 100.00% 100.00% Line-by-line Little Elk Wind Holdings LLC 100.00% 100.00% Line-by-line Enel Kansas LLC 100.00% 100.00% AFS Line-by-line Enel Green Power North America Inc. Enel Energy Storage Holdings LLC (formerly EGP Energy Storage Holdings LLC) 100.00% 100.00% 100.00% 100.00% Livister Latam SLU 99.99% Livister Guatemala SA Guatemala City GT 742,000.00 GTQ Equity 20.60% Ufinet Guatema SA 0.01% Livister Latam SLU Madrid ES 2,442,066.00 EUR Equity Ufinet Latam SLU 100.00% 20.60% Llano Sánchez Solar Power One Srl Panama City PA 10,020.00 USD Line-by-line 82.27% Enel Green Power Panamá Srl 99.80% Lone Pine Wind Inc. Alberta CA - CAD - ESSA2 SpA 0.20% Enel Green Power Canada Inc. 10.00% 10.00% Attachments 513 513 Company name Headquarters Country Share capital Currency Segment Lone Pine Wind Project LP Alberta CA - Lower Valley LLC Wilmington US - CAD USD Consolidation method Held by % holding Group % holding Equity Enel Green Power Canada Inc. 10.00% 10.00% Line-by-line Enel Green Power North America Inc. 100.00% 100.00% Lucas Sostenible SL Madrid ES 1,099,775.00 EUR Equity Enel Green Power España SLU 35.29% 24.74% Luminary Highlands Solar Project LLC Luz de Angra Energia SA Luz de Macapá Energia SA Andover US - USD Line-by-line Enel Kansas LLC 100.00% 100.00% Rio de Janeiro BR 4,062,085.00 BRL Line-by-line Enel X Brasil SA 51.00% 41.96% Rio de Janeiro BR 1,000.00 BRL Equity Enel X Brasil SA 51.00% 41.96% Maicor Wind Srl Rome Malaspina Energy Scarl in liquidation Bergamo IT IT 20,850,000.00 EUR Line-by-line Enel Green Power Italia Srl 100.00% 100.00% 100,000.00 EUR Line-by-line Enel X Italia Srl 100.00% 100.00% Maple Canada Solutions Holdings Ltd Maple Energy Solutions LP - - CA - CA - Marengo Solar LLC Wilmington US 1.00 CAD CAD USD Equity Enel X Canada Ltd 20.00% 20.00% Equity Enel X Canada Holding Inc. 20.00% 20.00% Line-by-line Enel Kansas LLC 100.00% 100.00% Marte Srl Rome Marudhar Wind Energy Private Limited Gurugram IT IN 6,100,000.00 EUR Line-by-line 100,000.00 INR Line-by-line Más Energía S de RL de Cv Mexico City MX 61,872,926.00 MXN Line-by-line Enel Green Power Italia Srl Enel Green Power India Private Limited Enel Green Power México S de RL de Cv Hidroelectricidad del Pacífico S de RL de Cv 100.00% 100.00% 100.00% 100.00% 99.99% 0.01% 100.00% Mason Mountain Wind Project LLC Wilmington US - Matrigenix (Pty) Ltd Johannesburg ZA 1,000.00 USD ZAR Line-by-line Padoma Wind Power LLC 100.00% 100.00% Line-by-line Enel Green Power RSA (Pty) Ltd 100.00% 100.00% Maty Energia Srl Rome IT 10,000.00 EUR Line-by-line Enel Green Power Italia Srl 100.00% 100.00% MC Solar I LLC Andover US - Wilmington US 1.00 McBride Wind Project LLC Medidas Ambientales SL USD USD Line-by-line Enel Kansas LLC 100.00% 100.00% Line-by-line Enel Kansas LLC 100.00% 100.00% Burgos ES 60,100.00 EUR Equity Tecnatom SA 50.00% 15.78% Merit Wind Project LLC Andover US 1.00 Metro Wind LLC Minneapolis US - USD USD Line-by-line Tradewind Energy Inc. 100.00% 100.00% Line-by-line Chi Minnesota Wind LLC 51.00% 51.00% Mexicana de Hidroelectricidad Mexhidro S de RL de Cv Mexico City MX 181,728,901.00 MXN Line-by-line Enel Green Power México S de RL de Cv 99.99% 99.99% 514 514 Integrated Annual Report 2021 Company name Headquarters Country Share capital Currency Segment Consolidation method Held by % holding Group % holding Mibgas SA Madrid ES 3,000,000.00 EUR - Endesa SA 1.35% 0.95% Midelt Wind Farm SA Casablanca MA 145,000,000.00 MAD Equity Nareva Enel Green Power Morocco SA 70.00% 35.00% Energía Base Natural SLU Energía Eólica Ábrego SLU 4.79% 7.98% Minglanilla Renovables 400 kV AIE Valencia ES - EUR Proportional Energía Eólica Galerna SLU 9.31% 25.35% Energía Eólica Gregal SLU Energía y Naturaleza SLU 9.31% 4.79% Enel Green Power España SLU 5.39% 3.78% Enel Green Power España SLU 15.00% 10.52% Enel Green Power España SLU 36.50% 25.59% Minicentrales Acequia Cinco Villas AIE Ejea de los Caballeros ES 3,346,993.04 EUR Zaragoza ES 1,202,000.00 EUR - - Zaragoza ES 1,820,000.00 EUR Equity Tortola VG 100.00 Mira Energy (Pty) Ltd Johannesburg ZA 100.00 USD ZAR Equity Ifx Networks Ltd 100.00% 20.60% Line-by-line Enel Green Power RSA (Pty) Ltd 100.00% 100.00% Burgos ES 1,800,000.00 EUR - Nuclenor SA 0.22% 0.08% Minicentrales del Canal de las Bárdenas AIE Minicentrales del Canal Imperial-Gallur SL Minority Stock Holding Corp. Miranda Plataforma Logística SA Moebius Tecnologia em Informática SA Monte Reina Renovables SL Rio de Janeiro BR 150,000.00 BRL Madrid ES 4,000.00 Montrose Solar LLC Wilmington US - Moonbeam Solar Project LLC Morgan Branch Solar I LLC Andover US 1.00 Andover US 1.00 Mountrail Wind Project LLC Andover US 1.00 MPG Solar I LLC Andover US 1.00 Mucho Viento Wind Project LLC Muskegon County Solar Project LLC Andover US 1.00 Andover US 1.00 Muskegon Green Wind Project LLC Andover US 1.00 Mustang Run Wind Project LLC Andover US 1.00 EUR USD USD USD USD USD USD USD USD USD Equity Equity Ufinet Brasil Telecomunicação Ltda FRV Zamora Solar 1 SLU 70.00% 35.00% 20.58% 14.43% Line-by-line Aurora Distributed Solar LLC 100.00% 74.13% Line-by-line Enel Kansas LLC 100.00% 100.00% Line-by-line Brick Road Solar Holdings LLC 100.00% 100.00% Line-by-line Tradewind Energy Inc. 100.00% 100.00% Line-by-line Brick Road Solar Holdings LLC 100.00% 100.00% Line-by-line Tradewind Energy Inc. 100.00% 100.00% Line-by-line Tradewind Energy Inc. 100.00% 100.00% Line-by-line Tradewind Energy Inc. 100.00% 100.00% Line-by-line Tradewind Energy Inc. 100.00% 100.00% Attachments 515 515 Negocios y Telefonía Nedetel SA Net Botanic Internet Inteligente SA Nevkan Renewables LLC New York Distributed Storage Projects LLC Newbury Hydro Company LLC Ngonye Power Company Limited Nojoli Wind Farm (RF) (Pty) Ltd North English Wind Project LLC Company name Headquarters Country Share capital Currency Segment Nabb Solar I LLC Andover US 1.00 Napolean Wind Project LLC Andover US 1.00 USD USD Consolidation method Held by % holding Group % holding Line-by-line Brick Road Solar Holdings LLC 100.00% 100.00% Line-by-line Tradewind Energy Inc. 100.00% 100.00% Nareva Enel Green Power Morocco SA Casablanca MA 98,750,000.00 MAD Equity Navalvillar Solar SL Madrid ES 3,000.00 EUR Line-by-line Enel Green Power Morocco SARLAU 50.00% 50.00% Enel Green Power España SLU 100.00% 70.11% Guayaquil EC 4,773,525.00 USD - Livister Latam SLU 70.00% 14.42% Rio de Janeiro BR 450,000.00 BRL Equity Ufinet Brasil Telecomunicação Ltda 70.00% 35.00% Wilmington US - Boston US - Andover US - USD USD USD Lusaka ZM 10.00 ZMW Line-by-line Enel Nevkan Inc. 100.00% 100.00% Line-by-line Enel X North America Inc. 100.00% 100.00% AFS AFS Enel Green Power North America Inc. 100.00% 100.00% Enel Green Power Solar Ngonye SpA (formerly Enel Green Power Africa Srl) Enel Green Power RSA (Pty) Ltd 80.00% 80.00% 60.00% 60.00% Johannesburg ZA 10,000,000.00 ZAR Line-by-line Andover US 1.00 North Rock Wind LLC Andover US 1.00 Northland Wind Project LLC Andover US 1.00 Northstar Wind Project LLC Andover US - Northumberland Solar Project I LLC Andover US - Northwest Hydro LLC Wilmington US - Notch Butte Hydro Company Inc. Wilmington US 100.00 USD USD USD USD USD USD USD Line-by-line Tradewind Energy Inc. 100.00% 100.00% Line-by-line Tradewind Energy Inc. 100.00% 100.00% Line-by-line Tradewind Energy Inc. 100.00% 100.00% Line-by-line Tradewind Energy Inc. 100.00% 100.00% Line-by-line Enel Kansas LLC 100.00% 100.00% Line-by-line Chi West LLC 100.00% 100.00% Line-by-line Enel Green Power North America Inc. 100.00% 100.00% Nuclenor SA Burgos ES 102,000,000.00 EUR Equity Nuove Energie Srl Porto Empedocle IT 5,204,028.73 EUR Line-by-line Endesa Generación SA Enel Global Trading SpA 50.00% 35.06% 100.00% 100.00% Nxuba Wind Farm (RF) (Pty) Ltd Nyc Storage (353 Chester) Spe LLC Johannesburg ZA 1,000.00 Wilmington US 1.00 ZAR USD AFS Enel Green Power RSA 2 (RF) (Pty) Ltd 51.00% 51.00% Line-by-line Enel X North America Inc. 100.00% 100.00% Ochrana A Bezpecnost Se SRO Kalná Nad Hronom SK 33,193.92 EUR Equity Olathe Solar I LLC Andover US 1.00 USD Line-by-line Slovenské elektrárne AS 100.00% 33.00% Brick Road Solar Holdings LLC 100.00% 100.00% 516 516 Integrated Annual Report 2021 Company name Headquarters Country Share capital Currency Segment Consolidation method Held by % holding Group % holding Olivum PV Farm 01 SLU Madrid ES 3,000.00 EUR Line-by-line Enel Green Power España SLU 100.00% 70.11% OMIP - Operador do Mercado Ibérico (Portugal) SGPS SA Open Range Wind Project LLC Operador del Mercado Ibérico de Energía - Polo Español SA Lisbon PT 2,610,000.00 EUR - Endesa SA 5.00% 3.51% Andover US 1.00 USD Line-by-line Tradewind Energy Inc. 100.00% 100.00% Madrid ES 1,999,998.00 EUR - Endesa SA 5.00% 3.51% Oravita Power Park Srl Bucharest RO 2,000.00 RON Line-by-line Enel Green Power Romania Srl 100.00% 100.00% Istanbul TR 11,250,000.00 TRY Line-by-line Orchid Acres Solar Project LLC Origin Goodwell Holdings LLC Origin Wind Energy LLC Andover US - Wilmington US - Wilmington US - Osage Wind Holdings LLC Wilmington US 100.00 Osage Wind LLC Wilmington US - Wilmington US 100.00 Ottauquechee Hydro Company Inc. Ovacik Eolíko Enerjí Elektrík Üretím Ve Tícaret Anoním Şírketí Oxagesa AIE Alcañiz ES 6,010.00 Oyster Bay Wind Farm (RF) (Pty) Ltd Johannesburg ZA 1,000.00 Padoma Wind Power LLC Palo Alto Farms Wind Project LLC Pampinus PV Farm 01 SLU Paradise Creek Wind Project LLC Elida US - Dallas US - Madrid ES 3,000.00 Andover US 1.00 Paravento SL Lugo ES 3,006.00 EUR ZAR USD USD EUR USD EUR USD USD USD USD USD USD Line-by-line Enel Kansas LLC 100.00% 100.00% Equity Equity EGPNA Wind Holdings 1 LLC Origin Goodwell Holdings LLC 100.00% 20.00% 100.00% 20.00% Line-by-line Enel Kansas LLC 50.00% 50.00% Line-by-line Osage Wind Holdings LLC 100.00% 50.00% AFS Enel Green Power North America Inc. 100.00% 100.00% Enel Green Power Turkey Enerjí Yatirimlari Anoním Şírketí Enel Green Power España SLU 100.00% 100.00% 33.33% 23.37% Enel Green Power RSA 2 (RF) (Pty) Ltd 55.00% 55.00% Equity AFS Line-by-line Enel Green Power North America Inc. 100.00% 100.00% Line-by-line Enel Kansas LLC 100.00% 100.00% Line-by-line Enel Green Power España SLU 100.00% 70.11% Line-by-line Tradewind Energy Inc. 100.00% 100.00% Line-by-line Enel Green Power España SLU 90.00% 63.10% Parc Eòlic La Tossa - La Mola d’en Pascual SL Parc Eòlic Los Aligars SL Parco Eolico Monti Sicani Srl Madrid ES 1,183,100.00 EUR Madrid ES 1,313,100.00 EUR Equity Equity Rome IT 10,000.00 EUR Line-by-line Enel Green Power España SLU 30.00% 21.03% Enel Green Power España SLU 30.00% 21.03% Enel Green Power Italia Srl 100.00% 100.00% Attachments 517 517 La Coruña ES 3,606,072.60 EUR Line-by-line 52.58% Company name Headquarters Country Share capital Currency Segment Consolidation method Held by % holding Parque Amistad II SA de Cv Mexico City MX 1,413,533,480.00 MXN Line-by-line Parque Amistad III SA de Cv Mexico City MX 931,692,540.00 MXN Line-by-line Parque Amistad IV SA de Cv Parque Eólico A Capelada SL (Sociedad Unipersonal) Parque Eólico BR-1 SAPI de Cv Mexico City MX 1,489,508,400.00 MXN Line-by-line La Coruña ES 5,857,704.33 EUR Line-by-line Mexico City MX - MXN Line-by-line Parque Eólico Carretera de Arinaga SA Las Palmas de Gran Canaria ES 1,603,000.00 EUR Line-by-line Parque Eólico de Barbanza SA Parque Eólico de Belmonte SA Parque Eólico de San Andrés SA Madrid ES 120,400.00 EUR Line-by-line La Coruña ES 552,920.00 EUR Line-by-line Parque Eólico Finca de Mogán SA Santa Cruz de Tenerife ES 3,810,340.00 EUR Line-by-line Parque Eólico Montes de Las Navas SA Parque Eólico Muniesa SL Parque Eólico Palmas dos Ventos Ltda Parque Eólico Pampa SA Madrid ES 6,540,000.00 EUR Line-by-line Madrid ES 3,006.00 EUR Line-by-line Salvador BR 4,096,626.00 BRL Line-by-line Buenos Aires AR 477,139,364.00 ARS Line-by-line Parque Eólico Punta de Teno SA Santa Cruz de Tenerife ES 528,880.00 EUR Line-by-line Parque Eólico Sierra del Madero SA Madrid ES 7,193,970.00 EUR Line-by-line 518 518 Integrated Annual Report 2021 Group % holding 100.00% 100.00% 100.00% Enel Rinnovabile SA de Cv 99.00% Hidroelectricidad del Pacífico S de RL de Cv 1.00% Enel Rinnovabile SA de Cv 99.00% Hidroelectricidad del Pacífico S de RL de Cv 1.00% Enel Rinnovabile SA de Cv 99.00% Hidroelectricidad del Pacífico S de RL de Cv 1.00% Enel Green Power España SLU 100.00% 70.11% Enel Green Power México S de RL de Cv 0.50% Enel Rinnovabile SA de Cv 25.00% 25.50% Enel Green Power España SLU 80.00% 56.09% Enel Green Power España SLU 75.00% Parque Eólico de Barbanza SA 0.00% Enel Green Power España SLU 50.17% 35.17% Enel Green Power España SLU 82.00% 57.49% Enel Green Power España SLU 65.67% Parque Eólico de Santa Lucía SA 1.00% Enel Green Power España SLU 90.00% 63.10% Enel Green Power España SLU 75.50% 52.93% Enel Green Power España SLU 100.00% 70.11% Enel Brasil SA 100.00% Enel Green Power Desenvolvimento Ltda 0.00% 82.27% Enel Green Power SpA 100.00% 100.00% Enel Green Power España SLU 52.00% 36.46% Enel Green Power España SLU 58.00% 40.66% Parque Eólico de Santa Lucía SA Las Palmas de Gran Canaria ES 901,500.00 EUR Line-by-line 46.51% Company name Headquarters Country Share capital Currency Segment Consolidation method Held by % holding Group % holding Parque Eólico Tico SLU Zaragoza ES 234,900.00 EUR Line-by-line Parque Salitrillos SA de Cv Mexico City MX 100.00 MXN Equity Parque Solar Cauchari IV SA San Salvador de Jujuy AR 500,000.00 ARS Equity Parque Solar Don José SA de Cv Parque Solar Villanueva Tres SA de Cv Mexico City MX 100.00 MXN Equity Mexico City MX 306,024,631.13 MXN Equity Enel Green Power España SLU Tenedora de Energía Renovable Sol y Viento SAPI de Cv 100.00% 70.11% 60.80% 20.00% Enel Green Power Argentina SA 95.00% Energía y Servicios South America SpA 5.00% 82.27% Tenedora de Energía Renovable Sol y Viento SAPI de Cv Tenedora de Energía Renovable Sol y Viento SAPI de Cv 60.80% 20.00% 60.80% 20.00% Enel Green Power Chile SA 60.91% Parque Talinay Oriente SA Santiago de Chile CL 66,092,165,170.93 CLP Line-by-line 78.64% Enel Green Power SpA 39.09% Pastis - Centro Nazionale per la ricerca e lo sviluppo dei materiali SCPA in liquidation Brindisi IT 2,065,000.00 EUR - Enel Italia SpA 1.14% 1.14% Paynesville Solar LLC Wilmington US - USD Line-by-line PayTipper Network Srl Cascina PayTipper SpA Milan PDP Technologies Ltd Israel IT IT IL 40,000.00 EUR 3,000,000.00 EUR 1,129,252.00 ILS AFS AFS - Pegop - Energia Eléctrica SA Pego PT 50,000.00 EUR Equity Aurora Distributed Solar LLC 100.00% 74.13% PayTipper SpA 100.00% 55.00% Enel X Srl 55.00% 55.00% Enel Global Infrastructure and Networks Srl Endesa Generación Portugal SA 5.72% 5.72% 0.02% 35.06% Endesa Generación SA 49.98% Enel Green Power Costa Rica SA 40.31% PH Chucas SA San José CR 100,000.00 CRC Line-by-line 53.48% PH Don Pedro SA San José CR 100,001.00 CRC Line-by-line 32.99% PH Río Volcán SA San José CR 100,001.00 CRC Line-by-line 33.64% Globyte SA 66.54% Enel Green Power Costa Rica SA 34.32% ESSA2 SpA 24.69% Enel Green Power Costa Rica SA 33.44% Pilesgrove Solar I LLC Andover US 1.00 USD Line-by-line Globyte SA 65.66% Brick Road Solar Holdings LLC 100.00% 100.00% Attachments 519 519 Pine Island Distributed Solar LLC Planta Eólica Europea SAU Point Rider Solar Project LLC Pomerado Energy Storage LLC Company name Headquarters Country Share capital Currency Segment Consolidation method Held by % holding Pincher Creek LP Alberta CA - CAD Line-by-line Enel Alberta Wind Inc. 99.00% Enel Green Power Canada Inc. 1.00% Group % holding 100.00% Wilmington US - USD Line-by-line Seville ES 1,198,532.32 EUR Line-by-line Aurora Distributed Solar LLC 100.00% 74.13% Enel Green Power España SLU 100.00% 70.11% Andover US - USD Line-by-line Enel Kansas LLC 100.00% 100.00% Wilmington US 1.00 USD Line-by-line Potoc Power Park Srl Bucharest RO 2,000.00 RON Line-by-line PowerCrop Macchiareddu Srl Bologna PowerCrop Russi Srl Bologna PowerCrop SpA (formerly PowerCrop Srl) Bologna IT IT IT 100,000.00 EUR 100,000.00 EUR 4,000,000.00 EUR Prairie Rose Transmission LLC Minneapolis US - Prairie Rose Wind LLC Albany US - USD USD AFS AFS AFS Equity Equity Enel Energy Storage Holdings LLC (formerly EGP Energy Storage Holdings LLC) Enel Green Power Romania Srl PowerCrop SpA (formerly PowerCrop Srl) PowerCrop SpA (formerly PowerCrop Srl) 100.00% 100.00% 100.00% 100.00% 100.00% 50.00% 100.00% 50.00% Enel Green Power Italia Srl 50.00% 50.00% Prairie Rose Wind LLC 100.00% 20.00% EGPNA REP Wind Holdings LLC 100.00% 20.00% Primavera Energia SA Niterói BR 36,965,444.64 BRL Line-by-line Enel Brasil SA 100.00% 82.27% Productive Solar Systems SLU Rivas- Vaciamadrid ES 3,000.00 Productora de Energías SA Barcelona ES 60,101.22 EUR EUR Line-by-line Enel Green Power España SLU 100.00% 70.11% Equity Enel Green Power España SLU 30.00% 21.03% Productora Eléctrica Urgelense SA Progreso Solar 20 MW SA Promociones Energéticas del Bierzo SL Proveedora de Electricidad de Occidente S de RL de Cv Proyecto Almería Mediterráneo SA Proyectos Universitarios de Energías Renovables SL Lérida ES 8,400,000.00 EUR - Endesa SA 8.43% 5.91% Panama City PA 10,000.00 USD Line-by-line Madrid ES 12,020.00 EUR Line-by-line Mexico City MX 89,708,835.00 MXN Line-by-line Enel Green Power Panamá Srl 100.00% 82.27% Enel Green Power España SLU 100.00% 70.11% Enel Green Power México S de RL de Cv 99.99% 99.99% Madrid ES 601,000.00 EUR Equity Endesa SA 45.00% 31.55% Alicante ES 27,000.00 EUR Equity Enel Green Power España SLU 33.33% 23.37% 520 520 Integrated Annual Report 2021 Company name Headquarters Country Share capital Currency Segment Consolidation method Held by % holding Proyectos y Soluciones Renovables SAC San Miguel PE 1,000.00 PEN Line-by-line Enel Green Power Partecipazioni Speciali Srl 99.90% Energía y Servicios South America SpA 0.10% Group % holding 99.98% PSG Energy Private Limited Hyderabad PT Enel Green Power Optima Way Ratai Jakarta IN ID 100,000.00 INR Line-by-line 10,002,600.00 USD Line-by-line Enel Green Power India Private Limited Enel Green Power SpA 100.00% 100.00% 90.00% 90.00% Puerto Santa María Energía I SLU Puerto Santa María Energía II SLU Pulida Energy (RF) (Pty) Ltd Pumpkin Vine Wind Project LLC Madrid ES 3,000.00 Madrid ES 3,000.00 EUR EUR Line-by-line Enel Green Power España SLU 100.00% 70.11% Line-by-line Enel Green Power España SLU 100.00% 70.11% Johannesburg ZA 10,000,000.00 ZAR Line-by-line Andover US - USD Line-by-line Enel Green Power RSA (Pty) Ltd 52.70% 52.70% Tradewind Energy Inc. 100.00% 100.00% Quatiara Energia SA Niterói BR 13,766,118.96 BRL Line-by-line Enel Brasil SA 100.00% 82.27% Queens Energy Storage LLC Andover US - Raleigh Solar I LLC Andover US 1.00 Ranchland Solar Project LLC Ranchland Wind Holdings LLC Ranchland Wind Project II LLC Ranchland Wind Project LLC Ranchland Wind Storage LLC Rattlesnake Creek Holdings LLC Rausch Creek Wind Project LLC Andover US 1.00 Andover US - Andover US 1.00 Andover US - Andover US - Delaware US 1.00 Andover US 1.00 USD USD USD USD USD USD USD USD USD Line-by-line Enel Energy Storage Holdings LLC (formerly EGP Energy Storage Holdings LLC) 100.00% 100.00% Line-by-line Brick Road Solar Holdings LLC 100.00% 100.00% Line-by-line Tradewind Energy Inc. 100.00% 100.00% Line-by-line Enel Kansas LLC 100.00% 100.00% Line-by-line Ranchland Wind Holdings LLC 100.00% 100.00% Line-by-line Rockhaven Ranchland Holdings LLC 100.00% 100.00% Line-by-line Enel Kansas LLC 100.00% 100.00% Line-by-line Enel Kansas LLC 100.00% 100.00% Line-by-line Tradewind Energy Inc. 100.00% 100.00% RC Wind Srl Milan IT 10,000.00 EUR - RE Arroyo LLC Andover US 1.00 USD Line-by-line Reaktortest SRO Trnava SK 66,389.00 EUR Equity Enel Green Power Italia Srl 0.50% 0.50% Tradewind Energy Inc. 100.00% 100.00% Slovenské elektrárne AS 49.00% 16.17% Red Centroamericana de Telecomunicaciones SA Panama City PA 2,700,000.00 USD - Enel SpA 11.11% 11.11% Red Dirt Wind Holdings I LLC Dover US 100.00 USD Line-by-line Enel Green Power North America Inc. 100.00% 100.00% Attachments 521 521 Company name Headquarters Country Share capital Currency Segment Red Dirt Wind Holdings LLC Wilmington US - Dover US 1.00 Wilmington US 1.00 USD USD USD Consolidation method Held by % holding Group % holding Line-by-line Enel Kansas LLC 100.00% 100.00% Line-by-line Red Dirt Wind Holdings LLC 100.00% 100.00% Line-by-line Enel Kansas LLC 100.00% 100.00% San Pedro Sula HN 82,395,000.00 HNL - Livister Latam SLU 80.00% 16.48% Madrid ES 3,000.00 EUR Line-by-line Enel Green Power España SLU 100.00% 70.11% Enel Green Power Guatemala SA 0.00% Guatemala City GT 1,924,465,600.00 GTQ Line-by-line 82.27% Red Dirt Wind Project LLC Red Fox Wind Project LLC Redes y Telecomunicaciones S de RL de Cv Renovables Andorra SLU Renovables de Guatemala SA Renovables La Pedrera SLU Renovables Manzanares 400 kV SL Renovables Mediavilla SLU Zaragoza ES 3,000.00 Madrid ES 5,000.00 Zaragoza ES 3,000.00 Renovables Teruel SLU Madrid ES 3,000.00 Riverbend Farms Wind Project LLC Andover US 1.00 EUR EUR EUR EUR USD ESSA2 SpA 100.00% Line-by-line Enel Green Power España SLU 100.00% 70.11% Equity Enel Green Power España SLU 27.86% 19.53% Line-by-line Enel Green Power España SLU 100.00% 70.11% Line-by-line Enel Green Power España SLU 100.00% 70.11% Line-by-line Tradewind Energy Inc. 100.00% 100.00% Enel Alberta Wind Inc. 99.00% Riverview LP Alberta CA - CAD Line-by-line 100.00% Riverview Solar I LLC Andover US 1.00 Roadrunner Solar Project LLC Andover US 100.00 Roadrunner Storage LLC Andover US - Rochelle Solar LLC Coral Springs US 1.00 Rock Creek Wind Holdings I LLC Rock Creek Wind Holdings II LLC Rock Creek Wind Holdings LLC Rock Creek Wind Project LLC Dover US 100.00 Dover US 100.00 Wilmington US - Clayton US 1.00 Rockhaven Ranchland Holdings LLC Andover US 1.00 Rockhaven Wind Project LLC Andover US 1.00 522 522 Integrated Annual Report 2021 USD USD USD USD USD USD USD USD USD USD Enel Green Power Canada Inc. 1.00% Line-by-line Brick Road Solar Holdings LLC 100.00% 100.00% Line-by-line Enel Roadrunner Solar Project Holdings LLC 100.00% 100.00% Line-by-line Enel Kansas LLC 100.00% 100.00% Line-by-line Enel Kansas LLC 100.00% 100.00% Line-by-line Enel Green Power North America Inc. 100.00% 100.00% Line-by-line Rock Creek Wind Holdings LLC 100.00% 100.00% Line-by-line EGPNA Preferred Wind Holdings II LLC 100.00% 100.00% Line-by-line Rock Creek Wind Holdings LLC 100.00% 100.00% Line-by-line Enel Kansas LLC 100.00% 100.00% Line-by-line Rockhaven Ranchland Holdings LLC 100.00% 100.00% Consolidation method Held by % holding Group % holding Equity Enel Kansas LLC 20.00% 20.00% Company name Headquarters Country Share capital Currency Segment Rocky Caney Holdings LLC Oklahoma City US 1.00 Rocky Caney Wind LLC Albany US - Rocky Ridge Wind Project LLC Oklahoma City US - USD USD USD Equity Equity Rodnikovskaya WPS Moscow RU 6,010,000.00 RUB Line-by-line Roha Renewables India Private Limited Rolling Farms Wind Project LLC Gurugram IN 100,000.00 INR Line-by-line Andover US 1.00 USD Line-by-line Rocky Caney Holdings LLC 100.00% 20.00% Rocky Caney Wind LLC 100.00% 20.00% Enel Green Power Rus Limited Liability Company Enel Green Power India Private Limited Tradewind Energy Inc. 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% Rusenergosbyt LLC Moscow RU 18,000,000.00 RUB Equity Enel SpA 49.50% 49.50% Rusenergosbyt Siberia LLC Krasnoyarsk City RU 4,600,000.00 RUB Equity Rusenergosbyt LLC 50.00% 24.75% Rustler Wind Project LLC Andover US 1.00 Ruthton Ridge LLC Minneapolis US - USD USD Line-by-line Tradewind Energy Inc. 100.00% 100.00% Line-by-line Chi Minnesota Wind LLC 51.00% 51.00% Saburoy SA Montevideo UY 100,000.00 UYU Equity Ifx Networks LLC 100.00% 20.60% Sacme SA Buenos Aires AR 12,000.00 ARS Equity Empresa Distribuidora Sur SA - Edesur 50.00% 29.66% Saddle House Solar Project LLC Andover US - Salmon Falls Hydro LLC Wilmington US - Salt Springs Wind Project LLC Andover US - USD USD USD Line-by-line Tradewind Energy Inc. 100.00% 100.00% AFS Enel Green Power North America Inc. 100.00% 100.00% Line-by-line Enel Kansas LLC 100.00% 100.00% Salto de San Rafael SL Seville ES 462,185.98 EUR Equity San Francisco de Borja SA San Juan Mesa Wind Project II LLC Sanosari Energy Private Limited Santo Rostro Cogeneración SA Sardhy Green Hydrogen Srl Saugus River Energy Storage LLC Savanna Power Solar 10 SLU Zaragoza ES 60,000.00 EUR Line-by-line Wilmington US - USD Line-by-line Gurugram IN 100,000.00 INR Line-by-line Seville ES 207,340.00 EUR Sarroch IT 10,000.00 EUR Equity Equity Dover US 100.00 USD Line-by-line Madrid ES 3,000.00 EUR Line-by-line Enel Green Power España SLU 50.00% 35.06% Enel Green Power España SLU 66.67% 46.74% Padoma Wind Power LLC Avikiran Energy India Private Limited 100.00% 100.00% 100.00% 100.00% Enel Green Power España SLU 45.00% 31.55% Enel Green Power Italia Srl Enel Energy Storage Holdings LLC (formerly EGP Energy Storage Holdings LLC) Enel Green Power España SLU 50.00% 50.00% 100.00% 100.00% 100.00% 70.11% Attachments 523 523 Company name Headquarters Country Share capital Currency Segment Savanna Power Solar 12 SLU Savanna Power Solar 13 SLU Savanna Power Solar 4 SLU Savanna Power Solar 5 SLU Savanna Power Solar 6 SLU Savanna Power Solar 9 SLU Seville ES 3,000.00 Seville ES 3,000.00 Madrid ES 3,000.00 Madrid ES 3,000.00 Madrid ES 3,000.00 Madrid ES 3,000.00 EUR EUR EUR EUR EUR EUR Consolidation method Held by % holding Group % holding Line-by-line Enel Green Power España SLU 100.00% 70.11% Line-by-line Enel Green Power España SLU 100.00% 70.11% Line-by-line Enel Green Power España SLU 100.00% 70.11% Line-by-line Enel Green Power España SLU 100.00% 70.11% Line-by-line Enel Green Power España SLU 100.00% 70.11% Line-by-line Enel Green Power España SLU 100.00% 70.11% Se Služby Inžinierskych Stavieb SRO Kalná Nad Hronom SK 200,000.00 EUR Equity Seguidores Solares Planta 2 SL (Sociedad Unipersonal) Servicio de Operación y Mantenimiento para Energías Renovables S de RL de Cv Madrid ES 3,010.00 EUR Line-by-line Mexico City MX 3,000.00 MXN Line-by-line Slovenské elektrárne AS 100.00% 33.00% Enel Green Power España SLU 100.00% 70.11% Enel Green Power Guatemala SA 0.01% Energía Nueva Energía Limpia México S de RL de Cv 99.99% 99.99% Ifx Networks Ltd 0.10% Servicios de Internet Eni Chile Ltda Santiago de Chile CL 2,768,688,228.00 CLP Equity 20.60% Ifx/eni - Spc IV Inc. 99.90% Servizio Elettrico Nazionale SpA Rome Setyl Srl Bergamo IT IT 10,000,000.00 EUR Line-by-line Enel Italia SpA 100.00% 100.00% 100,000.00 EUR Equity Enel X Italia Srl 27.50% 27.50% Seven Cowboy Wind Project Holdings LLC Seven Cowboy Wind Project II LLC Seven Cowboy Wind Project LLC Andover US 1.00 Andover US 1.00 Andover US 1.00 Seven Cowboys Solar Project LLC Andover US - Shiawassee Wind Project LLC Wilmington US 1.00 Shield Energy Storage Project LLC Wilmington US - USD USD USD USD USD USD Shikhar Surya (One) Private Limited SIET - Società Informazioni Esperienze Termoidrauliche SpA Gurugram IN 10,100,000.00 INR Line-by-line Piacenza IT 697,820.00 EUR Equity Silt Solar I LLC Andover US 1.00 USD Line-by-line 524 524 Integrated Annual Report 2021 Line-by-line Enel Kansas LLC 100.00% 100.00% Line-by-line Enel Kansas LLC 100.00% 100.00% Line-by-line Seven Cowboy Wind Project Holdings LLC 100.00% 100.00% Line-by-line Enel Kansas LLC 100.00% 100.00% Line-by-line Enel Kansas LLC 100.00% 100.00% Line-by-line Enel Energy Storage Holdings LLC (formerly EGP Energy Storage Holdings LLC) Enel Green Power India Private Limited 100.00% 100.00% 100.00% 100.00% Enel Innovation Hubs Srl 41.55% 41.55% Brick Road Solar Holdings LLC 100.00% 100.00% Company name Headquarters Country Share capital Currency Segment Silver Dollar Solar Project LLC Andover US 1.00 Sinergia GP6 Srl Rome Sinergia GP7 Srl Rome IT IT 10,000.00 10,000.00 USD EUR EUR Consolidation method Held by % holding Group % holding Line-by-line Enel Kansas LLC 100.00% 100.00% Equity Equity Equity Enel Green Power Italia Srl 100.00% 100.00% Enel Green Power Italia Srl 100.00% 100.00% Enel Green Power España SLU 28.13% 19.72% Enel Green Power España SLU 96.00% 67.31% Sistema Eléctrico de Conexión Valcaire SL Sistemas Energéticos Mañón Ortigueira SA Skyview Wind Project LLC Sleep Hollow Solar I LLC Slovak Power Holding BV Slovenské elektrárne - Energetické Služby SRO Slovenské elektrárne AS Slovenské elektrárne Česká Republika SRO Smoky Hill Holdings II LLC Madrid ES 175,200.00 EUR La Coruña ES 2,007,750.00 EUR Line-by-line Andover US 1.00 Andover US 1.00 USD USD Line-by-line Tradewind Energy Inc. 100.00% 100.00% Line-by-line Brick Road Solar Holdings LLC 100.00% 100.00% Amsterdam NL 25,010,000.00 EUR Equity Bratislava SK 4,505,000.00 EUR Equity Bratislava SK 1,269,295,724.66 EUR Moravská Ostrava CZ 295,819.00 CZK Equity Equity Enel Produzione SpA 50.00% 50.00% Slovenské elektrárne AS Slovak Power Holding BV Slovenské elektrárne AS 100.00% 33.00% 66.00% 33.00% 100.00% 33.00% Wilmington US - Smoky Hills Wind Farm LLC Topeka US - Smoky Hills Wind Project II LLC Lenexa US - Snyder Wind Farm LLC Hermleigh US - USD USD USD USD Line-by-line Enel Kansas LLC 100.00% 100.00% Line-by-line EGPNA Project HoldCo 1 LLC 100.00% 100.00% Line-by-line EGPNA Project HoldCo 1 LLC 100.00% 100.00% Line-by-line Texkan Wind LLC 100.00% 100.00% Socibe Energia SA Niterói BR 12,969,032.25 BRL Line-by-line Enel Brasil SA 100.00% 82.27% Sociedad Agrícola de Cameros Ltda Santiago de Chile Sociedad de Inversiones K Cuatro SpA Santiago de Chile CL 5,738,046,495.00 CLP Line-by-line Enel Chile SA 57.50% 37.33% CL 316,318,800.00 CLP - Enel X Chile SpA 10.00% 6.49% Sociedad Eólica de Andalucía SA Sociedad Eólica El Puntal SL Sociedad Eólica Los Lances SA Sociedad para el Desarrollo de Sierra Morena Cordobesa SA Sociedad Portuaria Central Cartagena SA Seville ES 4,507,590.78 EUR Line-by-line Seville ES 1,643,000.00 EUR Equity Seville ES 2,404,048.42 EUR Line-by-line Cordoba ES 86,063.20 EUR - Enel Green Power España SLU 64.75% 45.40% Enel Green Power España SLU 50.00% 35.06% Enel Green Power España SLU 60.00% 42.07% Endesa Generación SA 1.82% 1.27% Emgesa SA ESP 94.94% Bogotá CO 89,714,600.00 COP Line-by-line 39.87% Inversora Codensa SAS 5.05% Attachments 525 525 Company name Headquarters Country Share capital Currency Segment Consolidation method Held by % holding Group % holding Trivento IT 100,000.00 EUR Line-by-line Enel Green Power Italia Srl 100.00% 100.00% Società Elettrica Trigno Srl Soetwater Wind Farm (RF) (Pty) Ltd Johannesburg ZA 1,000.00 Solana Renovables SL Madrid ES 5,000.00 ZAR EUR AFS Equity Enel Green Power RSA 2 (RF) (Pty) Ltd 55.00% 55.00% Enel Green Power España SLU 49.84% 34.94% Solas Electricity Srl Bucharest RO 740,000.00 RON Line-by-line Enel Green Power Romania Srl 100.00% 100.00% Soliloquoy Ridge LLC Minneapolis US - Somersworth Hydro Company Inc. Wilmington US 100.00 USD USD Line-by-line Chi Minnesota Wind LLC 51.00% 51.00% AFS Enel Green Power North America Inc. 100.00% 100.00% Sona Enerjí Üretím Anoním Şírketí Sonak Solar Project LLC Istanbul TR 50,000.00 TRY Line-by-line Andover US - USD Line-by-line Enel Green Power Turkey Enerjí Yatirimlari Anoním Şírketí Tradewind Energy Inc. 100.00% 100.00% 100.00% 100.00% Sotavento Galicia SA Santiago de Compostela ES 601,000.00 EUR Rome IT 10,000.00 EUR South Italy Green Hydrogen Srl South Rock Wind Project LLC Andover US 1.00 USD Line-by-line South Wind Energy Srl Bucharest RO 2,000.00 RON Line-by-line Equity Equity Enel Green Power España SLU 36.00% 25.24% Enel Green Power Italia Srl 50.00% 50.00% Tradewind Energy Inc. 100.00% 100.00% Enel Green Power Romania Srl 100.00% 100.00% Southwest Transmission LLC Cedar Bluff US - Spartan Hills LLC Minneapolis US - USD USD Line-by-line Chi Minnesota Wind LLC 100.00% 100.00% Line-by-line Chi Minnesota Wind LLC 51.00% 51.00% Spinazzola SPV Srl Rome IT 10,000.00 EUR Line-by-line Enel Green Power Italia Srl 100.00% 100.00% Spring Wheat Solar Project LLC Stampede Solar Project LLC Sterling and Wilson Enel X e-Mobility Private Limited Stillman Valley Solar LLC Stillwater Woods Hill Holdings LLC Andover US 1.00 Andover US - USD USD Line-by-line Enel Kansas LLC 100.00% 100.00% Line-by-line Enel Kansas LLC 100.00% 100.00% Mumbai IN 90,000,000.00 INR Equity Enel X International Srl 50.00% 50.00% Wilmington US - Wilmington US 1.00 USD USD Line-by-line Enel Kansas LLC 100.00% 100.00% Line-by-line Enel Kansas LLC 100.00% 100.00% Stipa Nayaá SA de Cv Mexico City MX 1,811,016,348.00 MXN Line-by-line Enel Green Power México S de RL de Cv Enel Green Power Partecipazioni Speciali Srl 55.21% 40.16% 95.37% Stockyard Solar Project LLC Andover US - Strinestown Solar I LLC Andover US - USD USD Line-by-line Enel Kansas LLC 100.00% 100.00% Line-by-line Enel Kansas LLC 100.00% 100.00% 526 526 Integrated Annual Report 2021 Company name Headquarters Country Share capital Currency Segment Consolidation method Held by % holding Mexico City MX 1,000.00 MXN Line-by-line Enel Green Power México S de RL de Cv 0.10% Enel Rinnovabile SA de Cv 99.90% Bryanston ZA 13,750,000.00 ZAR Line-by-line Enel Green Power RSA (Pty) Ltd 57.00% 57.00% Andover US 1.00 USD Line-by-line Enel Kansas LLC 100.00% 100.00% Group % holding 100.00% Paço de Arcos PT 50,000.00 EUR Line-by-line Suministradora de buses K Cuatro SpA Santiago de Chile CL 14,840,473,200.00 CLP - Cadiz ES 12,020,240.00 EUR Equity Endesa Generación Portugal SA Sociedad de Inversiones K Cuatro SpA Endesa Red SA (Sociedad Unipersonal) 100.00% 70.11% 99.00% 6.43% 33.50% 23.49% Barcelona ES 2,800,000.00 EUR Line-by-line Hidroeléctrica de Catalunya SL 60.00% 42.07% Suave Energía S de RL de Cv Sublunary Trading (RF) (Pty) Ltd Sugar Pine Solar Project LLC Suggestion Power (Unipessoal) Ltda Suministradora Eléctrica de Cádiz SA Suministro de Luz y Fuerza SL Summit Energy Storage Inc. Wilmington US 1,000.00 Sun River LLC Bend US - Sundance Wind Project LLC Dover US 100.00 Sunflower Prairie Solar Project LLC Andover US - Swather Solar Project LLC Sweet Apple Solar Project LLC Andover US 1.00 Andover US 1.00 USD USD USD USD USD USD Line-by-line Enel Green Power North America Inc. 75.00% 75.00% Line-by-line Chi Minnesota Wind LLC 51.00% 51.00% Line-by-line Enel Kansas LLC 100.00% 100.00% Line-by-line Enel Kansas LLC 100.00% 100.00% Line-by-line Enel Kansas LLC 100.00% 100.00% Line-by-line Enel Kansas LLC 100.00% 100.00% Tae Technologies Inc. Pauling US 53,207,936.00 USD - Tauste Energía Distribuida SL Zaragoza Tecnatom SA Madrid ES ES 60,508.00 EUR Line-by-line 4,025,700.00 EUR Equity Enel Produzione SpA 1.12% Tae Technologies Inc. 0.00% 1.12% Enel Green Power España SLU 51.00% 35.76% Endesa Generación SA 45.00% 31.55% Tecnoguat SA Guatemala City GT 30,948,000.00 GTQ Line-by-line ESSA2 SpA 75.00% 61.70% Tejo Energia - Produção e Distribuição de Energia Eléctrica SA Tenedora de Energía Renovable Sol y Viento SAPI de Cv Lisbon PT 5,025,000.00 EUR Equity Endesa Generación SA 43.75% 30.67% Mexico City MX 2,892,643,576.00 MXN Equity Enel Green Power SpA 32.89% 32.90% Teploprogress JSC Sredneuralsk RU 128,000,000.00 RUB Line-by-line Enel Russia PJSC 60.00% 33.86% Tera Renewables India Private Limited Gurugram IN 100,000.00 INR Line-by-line Enel Green Power India Private Limited 100.00% 100.00% Attachments 527 527 Company name Headquarters Country Share capital Currency Segment Consolidation method Held by % holding Group % holding Termica Colleferro SpA Bologna IT 6,100,000.00 EUR Equity Cogenio Srl 60.00% 12.00% Termoeléctrica José de San Martín SA Buenos Aires AR 7,078,298.00 ARS Termoeléctrica Manuel Belgrano SA Buenos Aires AR 7,078,307.00 ARS - - Termotec Energía AIE in liquidation La Pobla de Vallbona ES 481,000.00 EUR Equity Terrer Renovables SL Madrid ES 5,000.00 EUR Equity Central Dock Sud SA 0.42% Enel Generación Costanera SA 1.68% 4.22% Enel Generación El Chocón SA 5.60% Central Dock Sud SA 0.47% Enel Generación Costanera SA 1.89% 4.71% Enel Generación El Chocón SA 6.23% Enel Green Power España SLU 45.00% 31.55% Baylio Solar SLU 11.66% Dehesa de los Guadalupes Solar SLU Seguidores Solares Planta 2 SL (Sociedad Unipersonal) 8.83% 20.73% 9.08% Testing Stand of Ivanovskaya GRES JSC Komsomolsk RU 118,213,473.45 RUB - Enel Russia PJSC 1.65% 0.93% Texkan Wind LLC Andover US - USD Line-by-line Enel Texkan Inc. 100.00% 100.00% Gurgaon IN 100,000.00 INR Line-by-line Avikiran Surya India Private Limited 100.00% 100.00% Thar Surya 1 Private Limited Thunder Ranch Wind Holdings I LLC Thunder Ranch Wind Holdings LLC Thunder Ranch Wind Project LLC Thunderegg Wind Project LLC Dover US 100.00 Wilmington US - Dover US 1.00 Andover US 1.00 Tico Solar 1 SLU Zaragoza ES 3,000.00 Tico Solar 2 SLU Zaragoza ES 3,000.00 USD USD USD USD EUR EUR Line-by-line Enel Green Power North America Inc. 100.00% 100.00% Line-by-line Enel Kansas LLC 100.00% 100.00% Line-by-line Thunder Ranch Wind Holdings LLC 100.00% 100.00% Line-by-line Enel Kansas LLC 100.00% 100.00% Line-by-line Enel Green Power España SLU 100.00% 70.11% Line-by-line Enel Green Power España SLU 100.00% 70.11% Tobivox (RF) (Pty) Ltd Johannesburg ZA 10,000,000.00 ZAR Line-by-line Toledo PV AIE Madrid ES 26,887.96 EUR Equity Toplet Power Park Srl Bucharest RO 2,000.00 RON Line-by-line Topwind Energy Srl Bucharest RO 2,000.00 RON Line-by-line Enel Green Power RSA (Pty) Ltd 60.00% 60.00% Enel Green Power España SLU 33.33% 23.37% Enel Green Power Romania Srl 100.00% 100.00% Enel Green Power Romania Srl 100.00% 100.00% 528 528 Integrated Annual Report 2021 Company name Headquarters Country Share capital Currency Segment Toro Renovables 400 kV SL Torrepalma Energy 1 SLU Madrid ES 3,000.00 Madrid ES 3,100.00 EUR EUR Consolidation method Held by % holding Group % holding - FRV Zamora Solar 1 SLU 8.28% 5.81% Line-by-line Enel Green Power España SLU 100.00% 70.11% Tradewind Energy Inc. Wilmington US 1,000.00 USD Line-by-line Enel Kansas LLC 100.00% 100.00% Transmisora de Energía Renovable SA Guatemala City GT 233,561,800.00 GTQ Line-by-line ESSA2 SpA 100.00% 82.27% Enel Green Power Guatemala SA 0.00% Buenos Aires AR 2,584,473,416.00 ARS Line-by-line Enel Brasil SA 60.15% 82.27% Generadora Montecristo SA 0.00% Enel Argentina SA 0.00% Transportadora de Energía SA-TESA Transportes y Distribuciones Eléctricas SA in liquidation Girona ES 72,121.45 EUR Line-by-line Trévago Renovables SL Madrid ES 3,000.00 EUR Equity Enel CIEN SA 39.85% Edistribución Redes Digitales SL (Sociedad Unipersonal) 73.33% 51.42% Furatena Solar 1 SLU 17.73% Seguidores Solares Planta 2 SL (Sociedad Unipersonal) Chi Minnesota Wind LLC Enel Green Power Rus Limited Liability Company 24.89% 17.77% 51.00% 51.00% 100.00% 100.00% Tsar Nicholas LLC Minneapolis US - Tula WPS LLC Tula RU - Line-by-line Line-by-line USD RUB USD Tulip Grove Solar Project LLC Tunga Renewable Energy Private Limited TWE Franklin Solar Project LLC Andover US - Line-by-line Enel Kansas LLC 100.00% 100.00% Gurugram IN 19,100,000.00 INR Line-by-line Avikiran Energy India Private Limited 100.00% 100.00% Andover US - TWE ROT DA LLC Andover US 1.00 Twin Lake Hills LLC Minneapolis US - Twin Saranac Holdings LLC Wilmington US - USD USD USD USD Line-by-line Tradewind Energy Inc. 100.00% 100.00% Line-by-line Tradewind Energy Inc. 100.00% 100.00% Line-by-line Chi Minnesota Wind LLC 51.00% 51.00% Line-by-line Enel Green Power North America Inc. 100.00% 100.00% Tyme Srl Bergamo IT 100,000.00 EUR Equity Enel X Italia Srl 50.00% 50.00% Ufinet Argentina SA Buenos Aires AR 9,745,583.00 ARS Equity 20.60% Ufinet Latam SLU 99.95% Ufinet Brasil Participações Ltda Santo André BR 120,784,639.00 BRL Equity Ufinet Panamá SA 0.05% Zacapa Topco II Sàrl 100.00% 50.00% Attachments 529 529 Company name Headquarters Country Share capital Currency Segment Consolidation method Held by % holding Group % holding Ufinet Brasil SA Barueri BR 29,800,000.00 BRL Equity Ufinet Brasil Telecomunicação Ltda 60.00% 30.00% Ufinet Brasil Participações Ltda 100.00% Ufinet Brasil Telecomunicação Ltda Santo André BR 120,784,638.00 BRL Equity 50.00% Ufinet Latam SLU 0.00% Ufinet Chile SpA Santiago de Chile CL 233,750,000.00 CLP Equity Ufinet Latam SLU 100.00% 20.60% Ufinet Colombia Participaciones SAS Bogotá CO 10,001,001,000.00 COP Equity Ufinet Latam SLU 100.00% 20.60% Ufinet Guatemala SA 0.00% Ufinet Honduras SA 0.00% Ufinet Colombia SA Bogotá CO 1,180,000,000.00 COP Equity 18.54% Ufinet Latam SLU 90.00% Ufinet Panamá SA 0.00% Ufinet Costa Rica SA San José CR 25,000.00 USD Equity Ufinet Latam SLU 100.00% 20.60% Ufinet Ecuador Ufiec SA Ufinet El Salvador SA de Cv Ufinet FTTH Guatemala Ltda Quito EC 9,865,110.00 USD Equity 20.60% Ufinet Guatemala SA 0.00% San Salvador SV 10,000.00 USD Equity 20.60% Ufinet Latam SLU 99.99% Guatemala City GT 50,000.00 GTQ - Ufinet Latam SLU 51.00% 10.51% Ufinet Latam SLU 100.00% Ufinet Guatemala SA 0.01% Ufinet Guatemala SA Guatemala City GT 3,000,000.00 GTQ Equity 20.60% Ufinet Latam SLU 99.99% Ufinet Panamá SA 0.01% Ufinet Latam SLU 99.99% Ufinet Honduras SA Tegucigalpa HN 194,520.00 HNL Equity 20.60% Ufinet Panamá SA 0.01% Ufinet Latam SLU Madrid ES 15,906,312.00 EUR Equity Zacapa Sàrl 100.00% 20.60% Ufinet México S de RL de Cv Mexico City MX 7,635,430.00 MXN Equity 20.60% Ufinet Guatemala SA 1.31% Ufinet Latam SLU 98.69% Ufinet Guatemala SA 0.50% Ufinet Nicaragua SA Managua NI 2,800,000.00 NIO Equity Ufinet Latam SLU 99.00% 20.60% Ufinet Panamá SA 0.50% 530 530 Integrated Annual Report 2021 Company name Headquarters Country Share capital Currency Segment Consolidation method Held by % holding Group % holding Ufinet Panamá SA Panama City PA 1,275,000.00 USD Equity Ufinet Latam SLU 100.00% 20.60% Ufinet Paraguay SA Asunción PY 79,488,240,000.00 PYG Equity Ufinet Latam SLU 75.00% 15.45% Ufinet Perú SAC Lima PE 2,836,474.00 PEN Equity 20.60% Ufinet Latam SLU 100.00% Ufinet Panamá SA 0.00% Ufinet US LLC Wilmington US 1,000.00 Ukuqala Solar Proprietary Limited Johannesburg ZA 1,000.00 USD ZAR Equity Ufinet Latam SLU 100.00% 20.60% Line-by-line Enel Green Power RSA (Pty) Ltd 100.00% 100.00% Unión Eléctrica de Canarias Generación SAU Las Palmas de Gran Canaria ES 190,171,520.00 EUR Line-by-line Upington Solar (Pty) Ltd Johannesburg ZA 1,000.00 ZAR Line-by-line Endesa Generación SA 100.00% 70.11% Enel Green Power RSA (Pty) Ltd 100.00% 100.00% USME ZE SAS Bogotá CO 104,872,000.00 COP Line-by-line Bogotá ZE SAS 100.00% 39.74% Ustav Jaderného Výzkumu Rez AS Řež CZ 524,139,000.00 CZK Equity Valdecaballero Solar SL Madrid ES 3,000.00 EUR Line-by-line Gurugram IN 30,000,000.00 INR Line-by-line Slovenské elektrárne AS 27.77% 9.17% Enel Green Power España SLU Enel Green Power India Private Limited 100.00% 70.11% 100.00% 100.00% Istanbul TR 3,500,000.00 TRY AFS Enel SpA 100.00% 100.00% Rio de Janeiro BR 7,315,000.00 BRL Line-by-line Enel Brasil SA 100.00% 82.27% Rio de Janeiro BR 4,727,414.00 BRL Line-by-line Enel Brasil SA 100.00% 82.27% Rio de Janeiro BR 1,754,031.00 BRL Line-by-line Enel Brasil SA 100.00% 82.27% Rio de Janeiro BR 10,188,722.00 BRL Line-by-line Enel Brasil SA 100.00% 82.27% Mexico City MX 1,455,854,094.00 MXN Equity Mexico City MX 205,316,027.15 MXN Equity Viruleiros SL Santiago de Compostela ES 160,000.00 EUR Line-by-line Viva Labs AS Oslo NO 104,724.90 NOK Line-by-line Tenedora de Energía Renovable Sol y Viento SAPI de Cv Tenedora de Energía Renovable Sol y Viento SAPI de Cv Enel Green Power España SLU 60.80% 20.00% 60.80% 20.00% 67.00% 46.97% Enel X International Srl 60.00% 60.00% Wapella Bluffs Wind Project LLC Andover US 1.00 Waseca Solar LLC Waseca US - USD USD Line-by-line Tradewind Energy Inc. 100.00% 100.00% Line-by-line Aurora Distributed Solar LLC 100.00% 74.13% Attachments 531 531 Vayu (Project 1) Private Limited Vektör Enerjí Üretím Anoním Şírketí Ventos de Santa Ângela Energias Renováveis SA Ventos de Santa Esperança Energias Renováveis SA Ventos de Santo Orestes Energias Renováveis SA Ventos de São Roque Energias Renováveis SA Vientos del Altiplano SA de Cv Villanueva Solar SA de Cv Company name Headquarters Country Share capital Currency Segment Consolidation method Held by % holding Group % holding Waypost Solar Project LLC Weber Energy Storage Project LLC Andover US 1.00 USD Line-by-line Wilmington US - USD Line-by-line Wespire Inc. Boston US 1,625,000.00 USD - Tradewind Energy Inc. Enel Energy Storage Holdings LLC (formerly EGP Energy Storage Holdings LLC) Enel X North America Inc. 100.00% 100.00% 100.00% 100.00% 11.21% 11.21% West Faribault Solar LLC Wilmington US - West Hopkinton Hydro LLC Wilmington US - West Waconia Solar LLC Western New York Wind Corporation Wharton-El Campo Solar Project LLC White Cloud Wind Holdings LLC White Cloud Wind Project LLC White Peaks Wind Project LLC Whitetail Trails Solar Project LLC Whitney Hill Wind Power Holdings LLC Whitney Hill Wind Power LLC Whittle’s Ferry Solar Project LLC Wilmington US - Albany US 300.00 Andover US 1.00 Andover US - Andover US 1.00 Andover US 1.00 Andover US - Andover US 99.00 Andover US - Andover US 1.00 USD USD USD USD USD USD USD USD USD USD USD USD Line-by-line Aurora Distributed Solar LLC 100.00% 74.13% AFS Enel Green Power North America Inc. 100.00% 100.00% Line-by-line Aurora Distributed Solar LLC 100.00% 74.13% Line-by-line Enel Green Power North America Inc. 100.00% 100.00% Line-by-line Tradewind Energy Inc. 100.00% 100.00% Line-by-line Enel Kansas LLC 100.00% 100.00% Line-by-line White Cloud Wind Holdings LLC 100.00% 100.00% Line-by-line Enel Kansas LLC 100.00% 100.00% Line-by-line Tradewind Energy Inc. 100.00% 100.00% Line-by-line Enel Kansas LLC 100.00% 100.00% Line-by-line Whitney Hill Wind Power Holdings LLC 100.00% 100.00% Line-by-line Enel Kansas LLC 100.00% 100.00% Enel Alberta Wind Inc. 0.10% Wild Run LP Alberta CA 10.00 CAD Line-by-line 100.00% Wildcat Flats Wind Project LLC Wilderness Range Solar Project LLC Andover US 1.00 Andover US - Wind Belt Transco LLC Andover US 1.00 USD USD USD Enel Green Power Canada Inc. 99.90% Line-by-line Tradewind Energy Inc. 100.00% 100.00% Line-by-line Enel Kansas LLC 100.00% 100.00% Line-by-line Tradewind Energy Inc. 100.00% 100.00% Wind Energy Green Park Srl Wind Parks Anatolis - Prinias Single Member SA Bucharest RO 2,000.00 RON Line-by-line Maroussi GR 15,803,388.00 EUR Line-by-line Wind Parks Bolibas SA Maroussi GR 551,500.00 EUR Equity Enel Green Power Romania Srl Enel Green Power Hellas Wind Parks South Evia Single Member SA Enel Green Power Hellas SA 100.00% 100.00% 100.00% 100.00% 30.00% 30.00% 532 532 Integrated Annual Report 2021 Company name Headquarters Country Share capital Currency Segment Consolidation method Held by % holding Group % holding Wind Parks Distomos SA Maroussi GR 556,500.00 EUR Wind Parks Folia SA Maroussi GR 424,000.00 EUR Wind Parks Gagari SA Maroussi GR 389,000.00 EUR Wind Parks Goraki SA Maroussi GR 551,500.00 EUR Wind Parks Gourles SA Maroussi GR 555,000.00 EUR Wind Parks Kafoutsi SA Maroussi GR 551,500.00 EUR Equity Equity Equity Equity Equity Equity Wind Parks Katharas Single Member SA Wind Parks Kerasias Single Member SA Wind Parks Milias Single Member SA Wind Parks Mitikas Single Member SA Maroussi GR 19,932,048.00 EUR Line-by-line Maroussi GR 26,107,790.00 EUR Line-by-line Maroussi GR 19,909,374.00 EUR Line-by-line Maroussi GR 22,268,039.00 EUR Line-by-line Wind Parks Petalo SA Maroussi GR 575,000.00 EUR Equity Wind Parks Platanos Single Member SA Maroussi GR 13,342,867.00 EUR Line-by-line Wind Parks Skoubi SA Maroussi GR 472,000.00 EUR Equity Wind Parks Spilias Single Member SA Wind Parks Strouboulas SA Maroussi GR 28,267,490.00 EUR Line-by-line Maroussi GR 576,500.00 EUR Wind Parks Vitalio SA Maroussi GR 361,000.00 EUR Wind Parks Vourlas SA Maroussi GR 554,000.00 EUR Equity Equity Equity Winter’s Spawn LLC Minneapolis US - USD Line-by-line Wkn Basilicata Development PE1 Srl Rome IT 10,000.00 EUR Line-by-line Enel Green Power Hellas SA 30.00% 30.00% Enel Green Power Hellas SA 30.00% 30.00% Enel Green Power Hellas SA 30.00% 30.00% Enel Green Power Hellas SA 30.00% 30.00% Enel Green Power Hellas SA 30.00% 30.00% Enel Green Power Hellas SA Enel Green Power Hellas Wind Parks South Evia Single Member SA Enel Green Power Hellas Wind Parks South Evia Single Member SA Enel Green Power Hellas Wind Parks South Evia Single Member SA Enel Green Power Hellas Wind Parks South Evia Single Member SA Enel Green Power Hellas SA Enel Green Power Hellas Wind Parks South Evia Single Member SA Enel Green Power Hellas SA Enel Green Power Hellas Wind Parks South Evia Single Member SA Enel Green Power Hellas SA 30.00% 30.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 30.00% 30.00% 100.00% 100.00% 30.00% 30.00% 100.00% 100.00% 30.00% 30.00% Enel Green Power Hellas SA 30.00% 30.00% Enel Green Power Hellas SA 30.00% 30.00% Chi Minnesota Wind LLC 51.00% 51.00% Enel Green Power Italia Srl 100.00% 100.00% Woods Hill Solar LLC Wilmington US - Xaloc Solar SLU Valencia ES 3,000.00 X-bus Italia Srl Milan IT 15,000.00 USD EUR EUR Line-by-line Stillwater Woods Hill Holdings LLC 100.00% 100.00% Line-by-line Enel Green Power España SLU 100.00% 70.11% Equity Enel X Italia Srl 20.00% 20.00% Attachments 533 533 Company name Headquarters Country Share capital Currency Segment Consolidation method Held by % holding Group % holding Yacylec SA Buenos Aires AR 20,000,000.00 ARS Equity Enel Américas SA 33.33% 27.42% Yedesa-Cogeneración SA Almería ES 234,394.72 EUR Equity Enel Green Power España SLU 40.00% 28.04% Zacapa HoldCo Sàrl Luxembourg LU 76,180,812.49 EUR Equity Zacapa Topco Sàrl 100.00% 20.60% Zacapa LLC Wilmington US 100.00 USD Equity Zacapa Topco Sàrl 100.00% 20.60% Zacapa Sàrl Luxembourg LU 82,866,475.04 USD Zacapa Topco II Sàrl Luxembourg LU 12,000.00 EUR Zacapa Topco Sàrl Luxembourg LU 30,000,000.00 EUR Equity Equity Equity Zephir 3 Constanta Srl Bucharest RO 1,031,260.00 RON Line-by-line Zoo Solar Project LLC Andover US - USD Line-by-line Zacapa HoldCo Sàrl Enel X International Srl Enel X International Srl 100.00% 20.60% 50.00% 50.00% 20.60% 20.60% Enel Green Power Romania Srl 100.00% 100.00% Tradewind Energy Inc. 100.00% 100.00% 534 534 Integrated Annual Report 2021 Concept design and realization Gpt Group Copy editing postScriptum di Paola Urbani Publication not for sale Edited by Enel Communications Disclaimer This Report issued in Italian has been translated into English solely for the convenience of international readers Enel Società per azioni Registered Office 00198 Rome - Italy Viale Regina Margherita, 137 Stock Capital Euro 10,166,679,946 fully paid-in Companies Register of Rome and Tax I.D. 00811720580 R.E.A. of Rome 756032 VAT Code 15844561009 © Enel SpA 00198 Rome, Viale Regina Margherita, 137 enel.com 

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