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Analysis of the Group’s financial position

Milions of Euro
al 31.12.2018al 31.12.20172018-2017
Net non-current assets:
- property. plant and equipment and intangible assets95,78091,7384,0424.4%
- goodwill14,27313,7465273.8%
- equity investments accounted for using the equity method2,0991,59850131.4%
- other net non-current assets/(liabilities)(5,696)(1,677)(4,019)-
Total net non-current assets106,456105,4051,0511.0%
Net current assets:
- trade receivables13,58714,529(942)-6.5%
- inventories2,8182,722963.5%
- net receivables due from institutional market operators(3,200)(3,912)71218.2%
- other net current assets/(liabilities)(7,589)(6,311)(1,278)-20.3%
- trade payables(13,387)(12,671)(716)-5.7%
Total net current assets(7,771)(5,643)(2,128)-37.7%
Gross capital employed98,68599,762(1,077)-1.1%
Sundry provisions:
- employee benefits(3,187)(2,407)(780)-32.4%
- provisions for risks and charges and net deferred taxes(6,838)(8,025)1,18714.8%
Total sundry provisions(10,025)(10,432)4073.9%
Net assets held for sale2812414016.6%
Net capital employed88,94189,571(630)-0.7%
Total shareholders’ equity47,85252,161(4,309)-8.3%
Net financial debt41,08937,4103,6799.8%

Property, plant and equipment and intangible assets amounted to €95,780 million as at December 31, 2018 (including investment property), an increase of €4,042 million. This increase originated essentially from capital expenditure for the period (€7,881 million), the change in the scope of consolidation (€2,603 million), mainly attributable to the acquisition of the Brazilian distribution company Enel Distribuição São Paulo, of Parques Eólicos Gestinver, a company operating in the production of wind energy, and of Empresa de Alumbrado Eléctrico de Ceuta, a company operating in the distribution and sale of electricity in the autonomous city of Ceuta, in North Africa. These effects were partially offset by unfavorable developments in exchange rates, mainly in South America, by the depreciation, amortization and impairment losses recognized during the year in the amount of €5,344 million, by the reclassification to assets held for sale following the application of IFRS 5, in the amount of €505 million, mainly reflecting the carrying amount of three solar plants in Brazil, as well as to the sales, on December 14, 2018, of Enel Green Power Uruguay and the related special purpose vehicle, Estrellada.

Other changes, totaling €1,465 million, mainly include the effects of applying IAS 29 to the opening balance of property and machinery at January 1, 2018, and the cumulative effects of hyperinflation as at December 31, 2018, which were not present in 2017.

Goodwill amounted to €14,273 million, an increase of €527 million from December 31, 2017. This change was mainly due to the change in the scope of consolidation (a positive €489 million) connected with the acquisition of the Brazilian distribution company Enel Distribuição São Paulo, as well as the acquisition of Empresa de Alumbrado Eléctrico de Ceuta. These effects were partially offset by the reclassification to assets held for the sale of goodwill relating to three solar plants in Brazil, which, following the decisions made by management, meet the requirements of IFRS 5 for classification as such (€23 million).

  • Equity investments accounted for using the equity method amounted to €2,099 million, an increase of €501 million from December 31, 2017. This increase was mainly the result of:
  • the share of net income attributable to shareholders of the Parent Company, net of dividends paid and the adjustment of the investment in Slovak Power Holding following the adjustment of the pricing formula defined in the sale agreement with EPH;
  • changes in the scope of consolidation related to:
    - the acquisition of Ufinet International (€150 million); and
    - the partial sale, with loss of control, of the Mexican renewables companies (the “Project Kino” companies), which resulted in the valuation at equity of the remaining interests held by the Group. 

This increase was partially offset by the sale of the joint venture EF Solare Italia on December 27, 2018.

The balance of other net non-current assets/(liabilities) as at December 31, 2018 showed a net liability of €5,696 million, up €4,019 million from December 31, 2017 (€1,677 million). This change is due primarily to the following:

  • the recognition of €6,306 million in liabilities deriving from contracts for connection to the electricity grid following the application of IFRS 15;
  • the increase in payables due to tax partnerships recognized by the renewable-energy companies in North America in the amount of €325 million as a result of the start of operations at the Diamond Vista, HillTopper and Rattlesnake plants;
  • the increase in service concession arrangements in the amount of €939 million, mainly due to the acquisition of Enel Distribuição São Paulo (€855 million);
  • the increase in assets deriving from contracts with customers in the amount of €346 million, mainly relating to assets under construction under public-to-private service concession arrangements recognized in accordance with IFRIC 12 in Brazil. It should be noted that the value as at December 31, 2018, includes capital expenditure for the period in the amount of €271 million;
  • an increase of €208 million in other non-current receivables as a result of the consolidation of Enel Distribuição São Paulo, as well as of non-current assets for contingent consideration recognized in North America (€91 million) in relation to projects in progress;
  • a reduction of €445 million in liabilities, mainly attributable to the release to profit or loss of fees received from customers for the amounts related to the period. 

The balance of the net current assets was a net liability of €7,771 million at December 31, 2018, an increase of €2,128 million compared with December 31, 2017. This change is due to the following factors:

  • a decrease in trade receivables, in the amount of €942 million, mainly attributable to a reduction in receivables for the sale and transport of energy and for the sale of gas, as well as an increase in the assignment of receivables; 
  • an increase in inventories, in the amount of €96 million, mainly due to the increase in materials and equipment used for the operation, maintenance and construction of power generation plants and distribution networks, as well as the increase in gas inventories;
  • an increase in net receivables due from institutional market operators in the amount of €712 million, mainly in Italy and related to the rate components of the Italian electrical system to cover system charges, as well as the effects of the consolidation, in South America, of Enel Distribuição São Paulo and the increase in system charges in Argentina, associated with rate increases;
  • a decrease of €1,278 million in other current assets net of associated liabilities. This change is due to the following factors:
    - an increase of €1,446 million in other net current liabilities, mainly due to: the acquisition of Enel Distribuição São Paulo; the increase in payables for dividends to be disbursed in view of the Group’s dividend policy, which calls for the payment of an interim dividend in 2018 greater than that of 2017; and the recognition of payables for the additional increase in the interest (2.43%) in Enel Américas by Enel SpA;
    - a €369 million increase in net income tax receivables, which is essentially attributable to the reduction in taxes payable mainly due to offsetting with payments on account during the previous year;
    - a €282 million decrease in net current financial assets, essentially attributable to the negative change in the fair value of derivative instruments, mainly related to cash flow hedging on exchange rates and commodity prices;
  • an increase in trade payables, in the amount of €716 million, which was particularly concentrated in Italy, South America and North America.

Sundry provisions amounted to €10,025 million, a decrease of €407 million compared with the previous year. This change was primarily due to the following factors:

  • a €780 million increase in employee benefits, mainly due to changes in the scope of consolidation; a €463 million increase in provisions for risks and charges, mainly related to the decommissioning provision and the provision for litigation. The increase in the latter item is mainly due to the change in the scope of consolidation with the acquisition of Enel Distribuição São Paulo and provisions made for disputes with employees, which were partly offset by releases and uses, especially in Iberia and in Italy and South America;
  • a decrease in net deferred tax liabilities in the amount of €1,648 million, mainly relating to the recognition of deferred tax assets on the deferral of connections fees in Italy due to the application of the new IFRS 15 and to the changes in the scope of consolidation due to the acquisition of Enel Distribuição São Paulo.

Net assets held for sale amounted to €281 million at December 31, 2018 (€241 million at December 31, 2017), and mainly refer to the carrying amount of three solar plants in Brazil, which, following decisions taken by management, meet the requirements of IFRS 5 for classification in this aggregate. The change for the period essentially concerns the sale of an 80% stake in eight Mexican project companies (“Project Kino”) classified as held for sale as of December 31, 2017, and now accounted for using the equity method, and the reclassification of the project companies relating to the Kafireas wind farm as they are no longer available for sale as the conditions for the sale were no longer met.

Net capital employed came to €88,941 million as at December 31, 2018, and was funded by €47,852 million in shareholders’ equity attributable to shareholders of the Parent Company and non-controlling interests and €41,089 million in net financial debt. With regard to the latter figure, the debt-to-equity ratio as at December 31, 2018 was 0.86 (compared with 0.72 as at December 31, 2017).