|Milions of Euro|
|Net income/(expense) from commodity contracts measured at fair value||483||578||(95)||-16.4%|
|Gross operating margin||16,351||15,653||698||4.5%|
|Depreciation. amortization and impairment losses||6,451||5,861||590||10.1%|
|Total net financial income/(expense)||(2,048)||(2,692)||644||23.9%|
|Share of income/(losses) of equity investments accounted for using the equity method||349||111||238||-|
|Income before taxes||8,201||7,211||990||13.7%|
|Income from continuing operations||6,350||5,329||1,021||19.2%|
|Income from discontinued operations||-||-||-||-|
|Net income (attributable to the Group and minority interests)||6,350||5,329||1,021||19.2%|
|Interest held by the Group||4,789||3,779||1,010||26.7%|
|Milions of Euro|
|Sale of electricity||43,110||43,433||(323)||-0.7%|
|Transport of electricity||10,101||9,973||128||1.3%|
|Fees from network operators||1,012||900||112||12.4%|
|Transfers from institutional market operators||1,711||1,635||76||4.6%|
|Sale of gas||4,401||3,964||437||11.0%|
|Transport of gas||576||570||6||1.1%|
|Sale of fue||8,556||8,340||216||2.6%|
|Connection fees to electricity and gas networks||714||800||(86)||-10.8%|
|Gains on the disposal of subsidiaries. associates. joint ventures. joint operations and non-current assets held for sale||287||159||128||80.5%|
|Gains on the disposal of property. plant and equipment and intangible assets||61||43||18||41.9%|
|Other revenue and income||4,408||4,148||260||6.3%|
In 2018, revenue from the sale of electricity amounted to €43,110 million, a decrease of €323 million compared with the previous year (-0.7%).
The decrease can principally be attributed to the following factors:
- a €1,078 million increase in revenue from end-user markets, mainly due to the change in the scope of consolidation following the addition of Enel Distribuição São Paulo in June 2018;
- a reduction of €543 million in revenue from wholesale electricity sales, mainly due to the reduction in volumes traded in Italy;
- a decrease of €858 million in revenue from electricity trading due to the reduction in volumes traded on the Italian market.
Revenue from the transport of electricity came to €10,101 million in 2018, an increase of €128 million compared with 2017. This increase was mainly concentrated in Brazil due to the acquisition of Enel Distribuição São Paulo (€143 million).
Fees from network operators amounted to €1,012 million in 2018, up €112 million compared with the previous year. This change reflects the increase in revenue in Italy, mainly related to dispatching services and to unit margins essential to system security.
Revenue from transfers from institutional market operators in 2018 amounted to €1,711 million and increased by €76 million. This increase in transfers was mainly due to the greater costs of liquid fuels seen in the Spanish extra-peninsular area for which the Group is entitled to reimbursement.
Revenue from the sale of gas for 2018, which totaled €4,401 million, increased by €437 million (+11.0%) over the previous year. This change was essentially due to the increase in revenue recognized in Iberia, in Chile and in Italy, mainly determined by rising average prices compared with the previous year.
Revenue from the sale of fuel, amounting to €8,556 million, increased by €216 million, mainly as a result of the increase in natural gas sales within Enel Global Trading.
Revenue from connection fees to electricity and gas networks in 2018 amounted to €714 million, a decrease of €86 million due to a decline in the number of connections and the application of IFRS 15, which led to the deferred recognition over time of connection fees that had previously been recognized entirely through profit or loss at the time of activation of the user.
Revenue from construction contracts in 2018 amounted to €735 million, an increase of €61 million due mainly to the change in the scope of consolidation with the acquisition of Enel Distribuição São Paulo, which was partially offset by the reduction of work carried out by the other distribution companies in Brazil.
The item relating to gains on the disposal of entities came to €287 million in 2018, an increase of €128 million (+80.5%) compared with 2017, and mainly includes:
- the gain on the sale of eight companies involved in “Project Kino” in Mexico at the end of September 2018 and the re-measurement at fair value of the Group’s remaining 20% stake in the companies (€190 million);
- the gain on the sale of EF Solare Italia (€65 million);
- the gain on the sale of a number of companies in the Enel Green Power Business Line in Uruguay (€18 million).
In 2017, on the other hand, this item mainly included the gain of €143 million from the sale of the investment in the Chilean company Electrogas.
Gains on the disposal of property, plant and equipment and intangible assets in 2018 amounted to €61 million (€43 million in 2017) and refer to ordinary disposals for the period.
Other revenue and income came to €4,408 million in 2018 (€4,148 million for the previous year), an increase of €260 million (+6.3%) compared with 2017.
The change compared with 2017 is mainly due to:
- an increase in revenue from the recognition of the income connected with the agreement of e-distribuzione for the sale of Enel Rete Gas in 2009 (€128 million);
- greater revenue due to the increase in sales volumes of value-added services.
|Milions of Euro|
|Consumption of fuel for electricity generation||4,922||5,342||(420)||-7.9%|
|Fuel for trading and gas for sales to end users||11,463||10,906||557||5.1%|
|Services. leases and rentals (1)||16,254||15,882||372||2.3%|
|Other operating expenses||2,889||2,886||3||0.1%|
1) Of which, costs for fixed water diversion fees in the amount of €167 million in 2018 (€169 million in 2017) and costs for public land usage fees in the amount of €24 million in 2018 (€24 million in 2017)
Costs for electricity purchases decreased by €427 million in 2018 compared with 2017, a reduction of 2.1%. This decrease is attributable to the reduction in purchases made through bilateral agreements (€236 million), mainly relating to the reduction in volumes traded by Enel Global Trading, associated with a reduction in purchases both on other local and foreign markets in the amount of €106 million and on the electricity exchanges in the amount of €85 million, mainly in Iberia. These effects were partially offset by the increase in electricity purchases in South America following the consolidation of Enel Distribuição São Paulo. Costs for the consumption of fuel for electricity generation relating to 2018 amounted to €4,922 million, a decrease of €420 million (7.9%) compared with the previous year. This change was mainly due to lower thermoelectric production, especially in Chile and Italy, and partly due to the weakening of South American currencies against the euro. Costs for the purchase of fuel for trading and gas for sales to end users came to €11,463 million, up €557 million over 2017. This change reflects the greater quantities purchased and traded at increasing average prices, particularly in Italy and Spain.
Costs for materials came to €2,375 million in 2018, an increase of €495 million compared with the previous year, mainly due to the increase in purchases for materials and equipment for infrastructure and networks, mainly in Italy and Spain (€261 million), as well as an increase in costs for environmental certificates (€179 million) for power generation in Italy and the sales companies in Romania.
Personnel costs for 2018 totaled €4,581 million, an increase of €77 million (+1.7%) compared with 2017. This change is essentially the result of:
- higher costs associated with changes in the scope of consolidation, mainly due to the acquisitions of Enel Distribuição São Paulo in 2018 (€151 million) and Enel X North America (formerly EnerNOC) in the 2nd Half of 2017 (€56 million);
- a decrease in costs for Enel Distribuição Goiás in the amount of €63 million following the efficiency measures implemented during the 1st Half of 2017;
- a reduction in costs in Argentina following the devaluation of the local currency due to hyperinflation (€93 million);
- an increase in costs incurred for early-retirement incentives in the amount of €62 million, mainly in Italy and Spain.
At December 31, 2018, the Enel Group’s workforce totaled 69,272 employees, 38,987 of whom employed abroad.
The Group’s workforce increased by 6,372 in 2018. The negative balance between new hires and terminations for the period (1,332), mainly due to the early-retirement incentives noted above (about 35% of terminations were in Italy), was more than offset by changes in the scope of consolidation (7,704) due to acquisitions made in 2018, and in particular of Enel Distribuição São Paulo, Empresa de Alumbrado Eléctrico de Ceuta, and Empresa de Alumbrado Eléctrico de Ceuta Distribución.
The change compared with December 31, 2018 breaks down as follows:
|Balance at December 31, 2017||62,900|
|Change in scope of consolidation||7,704|
|Balance at December 31, 2018||69,272|
Costs for services, leases and rentals totaled €16,254 million in 2018, up €372 million over 2017. The change was essentially due to:
- an increase in costs for services connected with the changes in the scope of consolidation, mainly attributable to the acquisition of Enel Distribuição São Paulo (€389 million);
- greater variable costs for value-added services provided, particularly in the United States (€98 million) due to the consolidation, starting in August 2017, of Enel X North America (formerly EnerNOC);
- an increase in hydroelectric lease fees incurred in Spain following the increased use of hydroelectric production during the year (€52 million);
- an increase in charges for access to the power transmission grid in the amount of €160 million, especially in Spain for the reversal, last year, of the charges set aside in the years 2011-2016 in relation to the payments made by the generation companies for self-consumption;
- a reduction of €220 million in customer acquisition costs, which were capitalized following the application of the new IFRS 15;
- a decrease in costs for maintenance and repairs (€115 million).
Other operating expenses in 2018 came to €2,889 million, an increase of €3 million compared with 2017, which essentially reflects:
- higher charges, mainly for the “bono social” in Spain in the amount of €229 million, after the issue of a favorable ruling in 2017 that led to the reversal of costs incurred in 2015, 2016 and 2017;
- an increase in indemnities paid to customers and suppliers in the amount of €22 million;
- lower environmental compliance costs in the amount of €112 million, mainly in Italy and Spain;
- lower charges for taxes and duties in the amount of €71 million, essentially related to lower taxes on thermal generation in Spain (€109 million), due in part to the greater use of hydroelectric generation, which was only partially offset by the increase in taxes on real estate in the amount of €25 million, particularly in Italy;
- a decrease of €89 million in costs related to the improvement of service quality, which decreased especially sharply in Argentina, only partially offset by an increase in fines recognized in relation to distribution in Italy;
- a decrease of costs in South America, reflecting the effect of the recognition in 2017 of capital losses of €45 million following the abandonment of hydroelectric projects in Chile and Colombia.
In 2018, capitalized costs amounted to €2,264 million, an increase of €417 million compared with the previous year, in correspondence with the increase in investments made in particular in distribution and generation in Italy, as well as in the construction of renewable energy plants in Mexico.
Net income/(expense) from commodity contracts measured at fair value showed net income of €483 million in 2018 (€578 million for the previous year). In particular, net income for 2018 is attributable to net income from the management of cash flow hedge derivatives, in the amount of €25 million (net income of €246 million in 2017), and of derivatives at fair value through profit or loss, in the amount of €458 million (net income of €332 million in 2017).
Depreciation, amortization and impairment losses in 2018 amounted to €6,451 million, an increase of €590 million. This increase was mainly due to the following:
- a €270 million increase in amortization due to the acquisition of Enel Distribuição São Paulo (€93 million) and the application, starting in 2018, of IFRS 15, which entailed the capitalization of customer acquisition costs (€166 million);
- greater impairment of property, plant and equipment and intangible assets (€194 million), in particular as a result of the impairment of biomass and solar assets in Italy (€91 million), of the assets of Nuove Energie (€24 million), of the Augusta and Bastardo power plants (€23 million), and of the Alcúdia power plant in Spain (€82 million). These increases were partially offset by the partial reversal of the impairment of the EGP Hellas CGU (€117 million) and the impairment of geothermal assets, recognized in 2017, on Erdwärme (€42 million);
- an increase in the impairment of trade and other assets net of reversals (€186 million), especially in Italy.
Operating income amounted to €9,900 million in 2018, an increase of €108 million.
Net financial expense amounted to €2,048 million, down €644 million in 2018, mainly due to:
- a €320 million increase in financial income related to the adjustment in the value of the financial receivable arising as a result of the sale of the 50% stake in Slovak Power Holding as a result of updating the pricing formula included in the agreements with Energetický a Pr˚umyslový Holding (“EPH”);
- the recognition of net financial income of €168 million for the Argentine companies following the application of IAS 29 related to accounting for hyperinflationary economies (see note 2 of the consolidated financial statements for the year ended December 31, 2018, for more information);
- greater net gains on financial derivative instruments (hedging both interest rates and exchange rates) in the amount of €1,616 million, which was almost entirely offset by an increase in net exchange rate losses as a result of fluctuations in exchange rates in the amount of €1,500 million;
- a decrease in the financial expense recognized by Enel Finance International of €108 million due to the early redemption of bonds in 2019 under the “make-whole call option” allowed for under the original financing agreement;
- a reduction in charges related to medium and long-term revolving credit lines in the amount of €52 million, above all for Enel SpA and Enel Finance International; > the recognition by Enel SpA of financial income in the amount of €54 million related to rebates of direct taxes.
These effects were only partially offset by:
- a €89 million decrease in capitalized interest, mainly for Enel Green Power Brazil and Enel Green Power Chile;
- a €62 million increase in charges for the assignment of receivables, mainly attributable to Enel Energia (€23 million), the Enel Américas Group (€21 million), and Servizio Elettrico Nazionale (€14 million);
- a decrease in income from equity investments due to the effect of the recognition in 2017 of the gain on the sale of the investment in Bayan Resources (€52 million).
The share of income/(losses) of equity investments accounted for using the equity method for 2018 showed net income of €349 million, while in 2017 net income was €111 million. The change of €238 million was essentially due to the writeback of the value of the 50% stake in Slovak Power Holding (€362 million), which had been written down multiple times in previous years. The writeback was due to changes in the reference parameters used to determine the pricing formula included in the agreements with EPH. This writeback was only partially offset by the pro-rated performance of associates and joint ventures, the impairment of certain assets related to the Greek project companies involved in the development of wind farms in the Cyclades (€49 million) and biomass development projects in Italy (€12 million).
Income taxes in 2018 amounted to €1,851 million, for a tax rate of 22.6%, while income taxes for 2017 came to €1,882 million with a tax rate of 26.1%. The reduction in income taxes was mainly attributable to the following factors:
- the recognition of deferred tax assets on prior-year losses by Enel Distribuição Goiás (€274 million) and by Enel Green Power SpA (€85 million in respect of 3Sun, which was merged into Enel Green Power in 2018);
- the reduction in deferred tax liabilities (€61 million) following the tax reform in Colombia, which led to a reduction in progressive tax rates from 33% to 30%