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Significant events in 2018

Issue of new green bond in Europe for €1,250 million

On January 9, 2018, Enel Finance International successfully placed its second green bond on the European market. It is reserved for institutional investors and is backed by a guarantee issued by Enel.

The issue amounts to a total of €1,250 million and provides for repayment in a single instalment at maturity on September 16, 2026 and the payment of a fixed-rate coupon equal to 1.125%, payable annually in arrears in the month of September as from September 2018. The issue price was set at 99.184% and the effective yield at maturity is equal to 1.225%.

The transaction has received orders amounting to approximately €3 billion, with the significant participation of Socially Responsible Investors (“SRI”), enabling the Enel Group to continue to diversify its investor base. The net financial resources raised by the issue – carried out under the “€35,000,000,000 Euro Medium-Term Notes Program” – will be used to finance and/or refinance, in whole or in part, the eligible green projects of the Enel Group identified and/or to be identified in accordance with the “Green Bond Principles” published by the International Capital Market Association (ICMA).

Enel confirmed in ECPI sustainability indices

On January 23, 2018, Enel was confirmed for the tenth time in the ECPI Sustainability Index series, which assess companies on the basis of their environmental, social and governance (ESG) performance. Enel’s inclusion in the index was recognition of its clear long-term strategic view, sound operational management practices and positive work in tackling social and environmental needs. Enel’s Spanish subsidiary Endesa has also been included in ECPI indices.

Enel has been included in four of ECPI’s indices:

  • ECPI Global Renewable Energy Equity Index, which selects the 40 highest ESG-rated companies active in the production or trading of energy from renewable sources;
  • ECPI Global Climate Change Equity Index, which offers investors exposure to companies that are best placed to seize the opportunities presented by the challenge of climate change;
  • ECPI Euro ESG Equity Index, which is composed of the 320 companies with the largest market capitalization in the Eurozone market that meet ECPI ESG criteria;
  • ECPI World ESG Equity Index, a broad benchmark representative of developed market companies that meet ECPI ESG criteria.

The ECPI Index series provides an essential tool to analyze companies’ risk and performance regarding their ESG-related activities and to assess the performance of sustainability-driven asset managers. The socially responsible criteria used to select the indices’ constituents enable investors to express their interest in sustainability issues and to move them up the corporate agenda.

Memorandum of understanding with PwC

On January 25, 2018, Enel X and PwC signed a memorandum of understanding for the development of corporate electric mobility with a program of testing and experimental projects. The agreement has a term of about three years and provides for a preliminary phase of studies and analysis, followed by the implementation of pilot projects in the field. The objective is to foster the sustainable development of the transport sector, in particular the business sector, exploiting the potential offered by electric mobility in terms of reducing atmospheric pollution and fleet management costs. The test will be carried out with the PwC fleet with the aim of overturning the idea that electric vehicles Significant events in 2018 94 Annual Report 2018 can only be used by private individuals and in urban areas. PwC will also provide Enel X with its expertise in the field of electric mobility and fleet management for the development of innovative solutions in managing corporate fleets. In fact, e-cars could easily become part of the corporate world, given that almost half of company vehicles travel less than 100 kilometers a day, well below the average range of electric models on the market. The agreement between Enel X and PwC will therefore enable them to share their respective know-how and spread the culture of electric cars in corporate fleets among the companies in the PwC network in Italy

Agreement to supply ower in Nevada

On January 25, 2018, Enel Green Power North America (“EGPNA”) signed a Power Purchase Agreement (PPA) with Wynn Las Vegas whereby the resort, located on the world-famous Las Vegas Strip, will buy the energy produced by EGPNA’s new 27 MW Wynn Solar Facility at Stillwater.

The investment in the construction of the new, 160-acre solar PV facility amounts to approximately $40 million, in line with the investment outlined in Enel’s current Strategic Plan. The total output that will be produced by the photovoltaic plant and sold under the PPA with the Las Vegas resort is expected to amount to over 43,900 MWh annually.

Agreement for acquisition of Parques Eólicos Gestinver

On February 2, 2018, Enel Green Power España (“EGPE”) signed an agreement to purchase 100% of Parques Eólicos Gestinver, a company that owns five wind plants in Galicia and Catalonia with a total capacity of about 132 MW, from the Spanish companies Elawan Energy and Genera Avante for a total price of €178 million.

Following the acquisition of Parques Eólicos Gestinver, the installed capacity of EGPE in Spain will exceed 1,806 MW, of which 1,749 MW of wind power (about 8% of total installed wind capacity in Spain), 43 MW of mini-hydro and 14 MW from other renewable resources.

Partnership agreement in Canada

On February 7, 2018, Enel Green Power North America (“EGPNA”) signed a partnership agreement with Alberta Investment Management Corporation under which the Group will sell 49% of the shares in the 115 MW Riverview Wind and the 30.6 MW Phase 2 of Castle Rock Ridge wind farms, both to be built in Alberta, Canada. The total price for the transaction, which will be paid upon closing of the deal, will be determined at commercial operation of the wind farms, which is expected by the end of 2019. Following the closing of the transaction, EGPNA will manage, operate and maintain both wind farms while retaining a 51% majority ownership of the interest in the projects.

Riverview Wind and Phase 2 of Castle Rock Ridge, which is an expansion of EGPNA’s existing 76.2 MW Castle Rock Ridge wind farm, are both located in Pincher Creek, Alberta. The overall investment in the construction of the two wind farms, which are due to enter into service by the end of 2019, amounts to about $170 million. Once operational, the two facilities are expected to generate around 555 GWh per year, more than doubling the Group’s capacity in Canada, which currently stands at more than 103 MW.

The two wind farms will supply their power and renewable energy credits to the Alberta Electric System Operator (“AESO”) under two 20-year Renewable Energy Support Agreements that were awarded to Enel in December 2017 in the first tender under the province’s Renewable Electricity Program.

Contract to supply demand response services in Japan

On February 8, 2018, Enel X, acting through its US demand response services company EnerNOC, was awarded the delivery of 165 MW of demand response resources in Japan following the completion of a tender for balancing reserves launched by a group of Japanese utilities.

As a result of this award, which confirms Enel as the largest independent demand response aggregator in Japan, the Group will nearly triple its virtual power plant in the Japanese market, reaching approximately 165 MW from the current 60 MW, equivalent to a market share of 17%, as from July 2018.

Memorandum of understanding for sustainable mobility in the tourist industry in Italy

On February 15, 2018, Enel and the Ministry for Cultural Heritage signed a memorandum of understanding for the promotion and development of the use of electricity for sustainable mobility in the tourism sector.

The memorandum is a strategic lever for increasing public awareness of the benefits of electric mobility. It will also permit the creation of an institutional framework for subsequent commercial agreements with trade associations for the installation of electric charging infrastructure at tourist facilities and the launch of projects in the main tourist cities. Enel, through Enel X, the Group company dedicated to the development of innovative products and services, will collaborate with trade associations and tourism industry bodies to install electric charging stations at tourist accommodations using tailored commercial solutions and on research and design for replicable solutions to be extended to other areas of the Italian peninsula.

Enel will also experiment with electric mobility systems in metropolitan areas and in the main tourist cities, including arrangements in partnership with other operators in the industry.

Construction of new wind farm in the United States

Enel, acting through its US renewable energy company Enel Green Power North America, has started construction of Diamond Vista wind farm, which will have an installed capacity of around 300 MW and will be located in Marion and Dickinson Counties, in Kansas. Once completed, Diamond Vista will further secure Enel’s position as the largest wind operator in the state with some 1,400 MW of operational wind capacity. The planned investment in the construction of Diamond Vista amounts to about $400 million and is part of the investment outlined in the Enel Group’s current Strategic Plan. The plant is being financed with the Group’s own resources and will be able to generate around 1,300 GWh annually.

e-distribuzione wins tender of Ministry for Economic Development for the construction of smart grids

e-distribuzione has won a national call for tenders for electricity infrastructure for the construction of smart grids for the distribution of electricity in the less developed regions, for which the Ministry for Economic Development has allocated €80 million to the National Operational Program (NOP) on “Enterprises and Competitiveness” 2014-2020.

The tender calls for the construction, upgrading, efficiency enhancement and strengthening of electricity distribution infrastructure, or smart grids, in order to directly increase the share of electricity demand met by distributed generation from renewables. To reach this goal, edistribuzione was awarded all of the resources currently allocated by the Ministry for Economic Development to finance the initiative, with 21 projects admitted for funding (grants for 100% of costs) totaling €80 million, with two projects worth €7 million in Basilicata, seven projects worth €29 million in Campania and 12 projects worth €44 million in Sicily.

Entry into service of largest photovoltaic plant in Peru

On March 21, 2018, Enel, acting through the Peruvian renewable energy subsidiary Enel Green Power Peru, began operations at the 180 MW Rubí photovoltaic plant, Peru’s largest solar plant and Enel’s first solar facility in the country.

Enel invested about $170 million in the construction of Rubí, as part of the investments outlined in the company’s current Strategic Plan. The project, which is located in Peru’s Mariscal Nieto province, was financed in part through Enel Group’s own resources and in part by the European Investment Bank. The power will be sold under a 20-year Power Purchase Agreement signed with Peru’s Ministry of Energy and Mines. Once fully operational, Rubí will be able to generate around 440 GWh per year, which will be delivered to the Peru’s National Interconnected Electricity System (SEIN).

Enel: successful outcome of corporate reorganization in Chile

On March 26, 2018, Enel successfully completed the public tender offer (the “Offer”) launched by Enel Chile for all of the shares of the subsidiary Enel Generación Chile held by the non-controlling shareholders of the latter. The effectiveness of the Offer was subject to the acquisition of a total number of shares that would enable Enel Chile to increase its holding in Enel Generación Chile to more than 75% of share capital from the previous 60%. The Offer was accepted by holders of shares equal to about 33.6% of the share capital of Enel Generación Chile, thereby enabling Enel Chile to increase its interest in Enel Generación Chile to 93.55% of the share capital.

The operation was part of the simplification of the Group, one of the five key pillars of the Strategic Plan. Enel intends to continue reducing the number of operating companies in South America, with the goal of reaching fewer than 30 operating companies in the region by 2020, compared with the 53 present in the area at the end of 2017.

On March 25, 2018, the date of publication of the notice of the outcome of the Offer (aviso de resultado), the acceptance of the Offer of Enel Chile by the non-controlling shareholders of Enel Generación Chile who participated took effect. Following the reorganization described above, Enel’s direct and indirect interest in Enel Chile is equal to about 62% of the share capital of the latter, compared with 60.6% previously held.

Merger of Enel Green Power Latin America SA in Enel Chile

On April 2, 2018, the merger of the renewable company Enel Green Power Latin America SA into Enel Chile and the capital increase of the latter serving the merger took effect. On the same date, the shareholders of Enel Chile who had exercised their right of withdrawal in response to the merger were paid the value of their shares.

Renewables tender won in India

On April 6, 2018, Enel, acting through its Indian renewables subsidiary BLP Energy Private Limited, won the first ever renewable energy tender in India, acquiring the right to sign a 25-year energy supply contract for a 285 MW wind farm in the state of Gujarat. The project was awarded under a 2 GW national wind power tender organized by the government company Solar Energy Corporation of India (“SECI”).

Enel will be investing more than $290 million in the construction of this wind farm, which will be supported by a contract for the sale of specified volumes of power over a 25-year period to SECI. The plant, which is scheduled to start operations in the 2nd Half of 2019, will be able to generate more than 1,000 GWh of renewable energy every year, making a significant contribution to both India’s need for new generation capacity and achieving the country’s environmental goals. The current Indian government has set a target of installing 100 GW of solar capacity and 60 GW of wind capacity by 2022, increasing the current capacity by 20 GW of solar and 33 GW of wind.

Public tender offer for Eletropaulo

On April 17, 2018, Enel announced that Enel Brasil Investimentos Sudeste SA (“Enel Sudeste”), a company fully owned by Enel’s Brazilian subsidiary Enel Brasil SA (“Enel Brasil”), had launched a voluntary tender offer (the “Offer”) for the acquisition of the entire share capital of the Brazilian power distribution company Eletropaulo Metropolitana Eletricidade de São Paulo SA (“Eletropaulo”), for a price per share of 28.0 Brazilian reais, subject to the acquisition of a total number of shares representing more than 50% of the company’s share capital.

On May 31, 2018, Enel Sudeste announced that it had improved the terms and conditions of the Offer, increasing the Offer price to 45.22 Brazilian reais per share.

On June 5, 2018, Enel Sudeste received confirmation from the Brazilian authorities of the tendering of 122,799,289 shares, equal to 73.38% of the company’s share capital, the price of which was paid on June 7, 2018.

On July 16, 2018, Enel announced that Enel Sudeste, an Enel subsidiary, had received confirmation that between June 5 and July 4, 2018, as required under Brazilian stock Report on operations 97 exchange regulations, the shareholders of Eletropaulo had sold an additional 33,359,292 shares of the company, equal to 19.9% of the share capital, at the same price of 45.22 Brazilian reais per share provided for in the tender offer launched by Enel Sudeste to acquire the entire share capital of the company. The overall interest held by Enel Sudeste thus increased to 93.31% of Eletropaulo’s share capital from the previous 73.38%. Taking account of treasury shares already held by the company, that stake rises to 95.05% and in September 2018 rose further to 95.88% as a result of Enel Sudeste’s subscription of the Eletropaulo capital increase.

The overall investment of Enel Sudeste to acquire the holding totals about €1,541 million.

Restructuring of hybrid bond portfolio

On May 15, 2018, Enel successfully launched a non-convertible multitranche bond for institutional investors on the European market in the form of subordinated hybrid securities with an average maturity of about seven years, denominated in euros and amounting to €1.250 billion. The operation received orders in excess of €3 billion.

The operation was undertaken in execution of the Enel Board resolution of May 9, 2018, which authorized Enel to issue, by December 31, 2019, one or more non-convertible subordinated hybrid bonds in the maximum amount of €3.5 billion.

The issue was structured in the following tranches:

  • €500 million, maturing on November 24, 2078 with an annual fixed coupon of 2.500% until the first early redemption date of November 24, 2023. As from that date and until maturity, the rate will be equal to the Euro Mid Swap rate plus a spread of 209.6 basis points, increased by an additional spread of 25 basis points as from November 24, 2028, and a further 75 basis points as from November 24, 2043. The fixed coupon is payable each year in arrears in the month of November as from November 24, 2018. The issue price has been set at 99.375% and the effective yield at the first early redemption date is equal to 2.625%;
  • €750 million, maturing on November 24, 2081 with an annual fixed coupon of 3.375%, until the first early redemption date of November 24, 2026. As from that date and until maturity, the rate will be equal to the Euro Mid Swap rate plus a spread of 258 basis points, increased by an additional spread of 25 basis points as from November 24, 2031, and a further 75 basis points as from November 24, 2046. The fixed coupon is payable each year in arrears in the month of November, as from November 24, 2018. The issue price has been set at 99.108% and the effective yield at the first early redemption date is equal to 3.500%.

The transaction was completed on May 24, 2018. In addition, other transactions were carried out in May 2018:

  • a non-binding voluntary exchange offer was launched from May 14, 2018 to May 18, 2018, with which Enel acquired €250.019 million of the hybrid bond of €1,000 million issued by Enel in January 2014 and maturing January 15, 2075. The consideration for the purchase consisted of:
    • an increase of €250.019 million in the value of the tranche described above maturing on November 24, 2078, which increases from €500 million to €750.019 million;
    • a cash payment totaling €20,909,088.97;
  • a non-binding voluntary tender offer launched from May 14, 2018 to May 18, 2018, with which Enel acquired, in cash, €731.744 million of the hybrid bond of €1,250 million issued by Enel in September 2013 and maturing on January 10, 2074. 

The above transactions are consistent with the Group finance strategy outlined in the 2018-2020 Strategic Plan.

Enel closes acquisition of 21% of Ufinet International

On July 3, 2018, Enel, acting through Enel X International, wholly owned by Enel X, the Enel Group’s advanced energy solutions company, finalized the acquisition from a holding company controlled by Sixth Cinven Fund (which is operated by the international private equity firm Cinven), for €150 million, of about 21% of the share capital of a vehicle company (“NewCo”) to which 100% of Ufinet International was transferred. The latter is a leading wholesale operator of fiber-optic networks in Latin America. In turn, Sixth Cinven Fund owns around 79% of NewCo’s share capital.

Enel X International and Sixth Civen Fund have joint control of Ufinet International, each exercising 50% of voting rights in the shareholders’ meeting of NewCo. Under the agreements between the parties, with the closing of the transaction, Enel X International has a call option to acquire Sixth Cinven Fund’s stake between December 31, 98 Annual Report 2018 2020 and December 31, 2021 for an additional investment of between €1,320 million and €2,100 million depending upon developments in various performance indicators. Should Enel X International not exercise its call option by December 31, 2021, its joint control over NewCo will lapse.

In this case, Sixth Cinven Fund would then have the right to sell its stake with a “drag along” right over Enel X International’s stake, while the latter would have the right to exercise a “tag along” right if Sixth Cinven Fund reduces its holding in NewCo to below 50%.

On the grounds of its size, business model and geographic footprint, Ufinet International represents a significant opportunity for the Enel Group to accelerate growth in Latin America in the ultra-broadband sector, which is part of the business objectives of Enel X as envisaged in Enel Group’s 2018-2020 Strategic Plan. Through this transaction, the Group has immediately positioned itself in the Latin American value-added services market, accelerating its development through skills and technologies already consolidated by Ufinet International and gaining access to a vast customer base in a region with high growth and urbanization rates.

Merger of Enel Holding Chile and Hydromac Energy into Enel

On July 16, 2018, Enel announced that the plan for the merger into Enel of Enel Holding Chile Srl (“Enel Holding Chile”), a company wholly owned directly by Enel, and Hydromac Energy Srl (“Hydromac Energy”), a company wholly owned by Enel through Enel Holding Chile, which was approved by the administrative bodies of those companies, had been filed with the Company Register of Rome.

The transaction is part of the Group’s effort to simplify its corporate structure, one of the key pillars of Enel’s 2018- 2020 Strategic Plan. Specifically, the transaction will allow for the consolidation into Enel of the Group’s 61.93% interest in Enel Chile SA, of which 43.03% is currently held directly by Enel itself, while 18.88% is indirectly held through Hydromac Energy and 0.02% through Enel Holding Chile.

On September 20, 2018, the Enel Board of Directors approved the merger of the wholly owned subsidiaries Enel Holding Chile Srl and Hydromac Energy Srl into Enel.

Enel Green Power agrees loan of €950 million for 700 MW of new wind plants in South Africa

On August 1, 2018, Enel Green Power RSA (“EGP RSA”), the Enel Group’s South African renewables subsidiary, signed with senior lenders Nedbank Limited and Absa all project financing agreements for up to €950 million, namely up to 80% of the overall investment of around €1.2 billion in a portfolio of five new wind projects with a total of about 700 MW of capacity. The five facilities - Nxuba, Oyster Bay, Garob, Karusa and Soetwater - have a capacity of around 140 MW each. The Enel Group is contributing around €230 million of capital for the construction of the five wind farms. Following the signing of the agreements, termed the “financial close”, construction of the first project, Nxuba, is expected to start by the end of 2018. Following the start of construction of Nxuba, construction of Oyster Bay and Garob is expected to start by the 1st Half of 2019 and construction of Soetwater as well as Karusa is expected to start in the 2nd Half of the same year. Nxuba is expected to begin operations in the 2nd Half of 2020, Oyster Bay in the 1st Half of 2021 and Garob, Soetwater and Karusa in the 2nd Half of 2021. All five new wind farms are due to enter service by 2021.

Enel starts construction of Ngonye solar plant, its first facility in Zambia

On August 22, 2018, the Enel Group’s global renewable energy Business Line Enel Green Power (“EGP”) started construction on the 34 MW Ngonye photovoltaic plant. This facility is part of the World Bank Group’s Scaling Solar program carried out by Zambia’s Industrial Development Corporation (IDC), which in June 2016 awarded Enel the right to develop, finance, construct, own and operate the plant.

Enel will be investing around $40 million in the construction of Ngonye, which is expected to be completed in the 1st Quarter of 2019. The Ngonye solar plant, which will be owned by a special purpose vehicle 80% held by Report on operations 99 EGP and 20% by IDC, is supported by a 25-year Power Purchase Agreement signed with Zambia’s state owned utility ZESCO. Once fully up and running, the facility is expected to produce around 70 GWh per year, avoiding the annual emission of over 45 thousand metric tons of CO2 into the atmosphere.

Updating of contract terms for disposal of investment in Slovenské elektrárne

On September 4, 2018, Enel Produzione SpA, a wholly owned subsidiary of Enel SpA, and the Czech company Energetický a Pr˚umyslový Holding AS (“EPH”) signed an agreement that modifies certain terms and conditions of the contract (the “Contract”) signed on December 18, 2015 regarding the sale of the stake held by Enel Produzione in Slovenské elektrárne a.s. (“Slovenské elektrárne”), in line with the Term Sheet signed by the parties in May 2017. The agreement came into force once the conditions envisaged in the terms of the subordinated loan described below were met. As a result of the amendments agreed between Enel Produzione and EPH in the above agreement, the Contract also governs relations between the parties with regard to the financial support they have to provide to Slovenské elektrárne for the completion of units 3 and 4 of the Mochovce nuclear power plant.

Specifically, the Term Sheet provides for Enel Produzione to grant, directly or through another company of the Enel Group, a subordinated loan to the HoldCo, which is in turn expected to make it available to Slovenské elektrárne, for a total of up to €700 million falling due in January 2027. Moreover, the Contract – which provides for the sale by Enel Produzione to EP Slovakia of its remaining 50% stake in the HoldCo through the exercise of put or call options by the respective parties – has been updated to include also the advance repayment of the Loan (or its final maturity date) as an additional condition for the exercise of the respective options. This update means that the exercise date of the options can take place at the earlier of a) 12 months after obtaining the Trial Operation Permit for unit 4 of the Mochovce nuclear power plant; or b) upon reaching the Long Stop Date,5 and, in either case, only once the additional condition above is satisfied.

On the basis of the current work program and in line with the amendments to the Contract, the put and call options are expected to become exercisable by the 1st Half of 2021. In addition, the Long Stop Date, initially set as of June 30, 2022, has been postponed by 12 months beyond the original deadline.

Finally, the Contract now provides for the existing mechanism for adjusting the total price of the two phases of the transaction, which will be applied upon the close of the second phase based on various criteria, to be complemented by an additional mechanism that ensures the offsetting of any amount due from Enel Produzione to EP Slovakia with any amount due from EPH or EP Slovakia to Enel Group companies in respect of principal and/or interest of the Loan if EPH or EP Slovakia take it over from Enel Group on the closing date of the second phase.

5 The date as of which Enel Produzione and EP Slovakia can exercise their put and call options respectively, regardless the completion of units 3 and 4 of Mochovce nuclear power plant

Enel Green Power wins contract for 34 MW of new solar capacity in renewables tender in Australia

On September 11, 2018, the Enel Group, acting through its renewable energy subsidiary Enel Green Power Australia (Pty) Ltd (“Enel Green Power Australia”), was awarded a 15-year agreement with the Australian state of Victoria for the production of electricity and green certificates by the 34 MW Cohuna Solar Farm. The agreement was awarded through a renewable energy reverse auction launched last year by the state of Victoria. Enel is expected to invest around $42 million in the solar facility, whose construction is set to begin in the 1st Half of 2019. The plant is due to enter commercial operation by the end of 2019 and will be backed by a 15-year support agreement with the state of Victoria. The tender held by the state of Victoria was launched in November 2017 for 650 MW of renewable capacity, of which 100 MW was earmarked for solar. The tender is part of Victoria’s Renewable Energy Target (VRET) to source 25% of its electricity production from renewables by 2020 and 40% by 2025.

Enel Finance International issues $4 billion bond on US market

On September 12, 2018, Enel Finance International NV (“EFI”), an Enel SpA (“Enel”) finance subsidiary serving the Enel Group, placed a multi-tranche bond for institutional investors on the US and international markets totaling $4 billion, the equivalent of about €3.5 billion. The issue, which is guaranteed by Enel, was oversubscribed by about 3 times, with total orders of some $11 billion. The bond issue is part of the Enel Group’s strategy to raise financing and refinance its maturing consolidated debt. The strong investor demand for Enel’s third Yankee Bond issued since 2017 once again confirms the financial markets’ appreciation for Enel’s solid fundamentals, performance and financial structure. The transaction is structured in the following tranches:

  • > $1,250 million at 4.250% fixed rate maturing in 2023;
  • > $1,500 million at 4.625% fixed rate maturing in 2025;
  • > $1,250 million at 4.875% fixed rate maturing in 2029. In view of their characteristics, the above tranches have been assigned a provisional rating of BBB+ by Standard & Poor’s, Baa2 by Moody’s and BBB+ by Fitch. 

Enel’s rating is BBB+ (stable) for Standard & Poor’s, Baa2 (stable) for Moody’s and BBB+ (stable) for Fitch.

Seizure of Brindisi plant

On September 28, 2017, Enel Produzione was notified of the decision issued by the investigating magistrate of Lecce ordering the seizure of the thermoelectric power plant of Brindisi-Cerano. The measure is part of a criminal investigation initiated by the Public Prosecutor’s Office of the Court of Lecce concerning the use of fly ash, i.e. that produced by the combustion of coal and captured by the smoke abatement systems of the plant, in the cement industry.

The investigation also involves Cementir, a cement company to which the ash was sent for cement production, and ILVA, which provided Cementir with other residues for cement production.

Within the scope of the enquiry, a number of executives/ employees of the company are being investigated for illegal waste disposal and unauthorized blending of waste. In order to enable plant operations to continue, the seizure order authorized the Brindisi power station to continue generation for 60 days (subsequently extended until February 24, 2018), subject to certain technical requirements intended, according to the accusations, to remove the alleged ash management deficiencies. Enel Produzione has been charged under the provisions of Legislative Decree 231/2001 with the same offenses of which the company’s executives/employees are accused. Following the charges, as provided for by law, the investigating magistrate of Lecce also ordered the seizure of approximately €523 million, equivalent to the profit that the Lecce Public Prosecutor conducting the investigation alleges was generated through the illegal handling of the ash.

The seizure order appointed two custodians in order to monitor compliance with the technical measures mentioned earlier.

Enel Produzione has informed the investigating magistrate that the plant is operated in accordance with industry regulations and the highest international technology standards, as well as with a cycle for the production and reuse of residues that is identical to that adopted in the most efficient power plants in Europe and the world, in compliance with the most modern environmental requirements intended to promote a circular economy. Analyses of the ash prior to seizure and those conducted afterwards have consistently confirmed the non-hazardous nature of the material and therefore the legitimacy of the manner in which they have been handled.

Enel Produzione, although not agreeing with the allegations, has nevertheless expressed its full willingness, in agreement with the investigating magistrate and the custodians, to rapidly implement technical solutions for the execution of the requirements imposed with the seizure order that take account of the operational and logistical complexities associated with their implementation and the associated risks to the national electricity system. In this regard, with the request for an extension of the use of the power station on November 15, 2017, Enel Produzione asked for authorization to test a management approach that would separate the ash by operational stage, thereby enabling the implementation of the provisions of the order.Subsequently, following the testing, the company obtained an extension of another 90 days until February 24, 2018.

In the meantime, the Public Prosecutor, in view of the need to proceed with evidence gathering with a technical enquiry into the facts of the case, asked the investigating magistrate to move ahead with this stage. At the hearing of February 2, 2018, the magistrate assigned the engagement to the technical experts, giving them 150 days as from February 13, 2018, to file their report.

In the meantime, following the petition filed by Enel Produzi- Report on operations 101 one on April 19, 2018 and taking account of the need to ensure the continued operation of the plant, the investigating magistrate authorized the company to use the management approach referred to earlier, which separates the ash by operational stage, thereby implementing the requirements of the seizure order.

Following that authorization and pending completion of the evidentiary phase, the investigating magistrate subsequently issued, at the request of Enel Produzione, a new 90-day temporary authorization as from May 24, 2018.

On July 16, 2018, the experts appointed by the investigating magistrate filed their preliminary technical report, the findings of which confirm the validity of Enel Produzione’s classification of the ash as “non-hazardous waste” and its suitability for use in second manufacturing processes, such as the production of cement. On July 19, 2018, Enel Produzione therefore filed a petition with the Court to lift the seizure of the plant and the funds.

On July 23, 2018, Enel Produzione also filed a request for a further extension of 90 days as from August 22, 2018, for the operation of the plant.

On August 1, 2018, the Lecce Public Prosecutor lifted its seizure of the plant, with the termination of the judicial custody/ administration of the facility and the restitution of the €523 million to Enel Produzione. However, the preliminary investigation is continuing against both the accused individuals and the company pursuant to Legislative Decree 231/2001.

On October 10, 2018, the Definitive Technical Report was filed, with supplemental information concerning part of the analytical findings which were not yet available in July when the preliminary report was filed. On December 6, 2018, the investigating magistrate of the Court of Lecce, at the request of the Public Prosecutor, scheduled a hearing for January 22, 2019, to receive testimony from the experts on the report.

The investigating magistrate then postponed the hearing until April 15, 2019.

Enel Green Power España starts construction of its largest solar farm in Spain

Endesa’s renewable company Enel Green Power España (“EGPE”) began construction of the 84.7 MW Totana photovoltaic facility, the company’s largest solar plant in Spain. The overall investment in the construction of the facility amounts to about €59 million.

The Totana facility, located in the region of Murcia, is scheduled to start operation in the 3rd Quarter of 2019. Once fully operational, the photovoltaic facility, composed of 248,000 photovoltaic modules, will be able to generate around 150 GWh per year, avoiding the annual emission of around 105 thousand metric tons of CO2 into the atmosphere.

Totana is the first of the seven solar projects, with a total capacity of 339 MW, that were awarded to Enel Green Power España in the Spanish government’s third renewables tender held in July 2017

Enel closes sale of a majority stake in 1.8 GW of renewables capacity in Mexico while continuing to operate the plants

On September 28, 2018, Enel SpA (“Enel”), acting through its renewables subsidiary Enel Green Power SpA (“EGP”), closed the deal with the Caisse de dépôt et placement du Québec (“CDPQ”), a long-term institutional investor, and the investment vehicle of the leading Mexican pension funds CKD Infraestructura México SA de Cv (“CKD IM”) for the sale of 80% of the share capital of eight special purpose vehicles (“SPVs”), which own eight plants in operation and under construction in Mexico with a total capacity of 1.8 GW. Following the closing of the deal, EGP and CDPQ own a 20% and a 40.8% stake respectively in the SPVs through a newly-formed holding company (“Kino Holding”), while CKD IM owns a 39.2% stake in the same SPVs, through newly-formed sub-holdings (“Mini HoldCos”). EGP will continue to operate the plants owned by the SPVs and will complete those still under construction through two newlyformed subsidiaries. In addition, starting from January 1, 2020, EGP may contribute or transfer additional projects, increasing its indirect interest in the SPVs and becoming majority shareholder.

The enterprise value of 100% of the SPVs is equal to about $2.6 billion, with an equity value of about $0.3 billion, project financing of about $0.8 billion and related-party loans totaling $1.5 billion. As a result of the transaction, CDPQ and CKD IM paid $1.4 billion, of which about $0.2 billion for 102 Annual Report 2018 the majority interest in the SPVs and around $1.2 billion for related-party loans to the SPVs. The price paid is subject to adjustments typical of this type of transaction, primarily based on variations in the net working capital of the SPVs. The transaction was carried out using the Build, Sell and Operate (“BSO”) model, in line with the Group’s Strategic Plan

Fortaleza - Brazil

Petroleo Brasileiro SA - Petrobras, as gas supplier for the Fortaleza plant (Central Geradora Termélectrica Fortaleza “CGTF”) in Brazil, announced its intention to terminate the contract between the parties on the grounds that the agreement was allegedly imbalanced financially in consideration of current market conditions. The contract was signed in 2003 as part of the “Priority Thermal Generation Program” established by the Brazilian government in order to increase thermoelectric generation and the security of supply in the country. The program established that the Brazilian government would act as the guarantor of the supply of gas at regulated prices defined by the Brazil’s Ministry of Finance, Mines and Energy.

In order to guarantee the security of electricity supply in Brazil, CGTF initiated legal action in the ordinary courts against Petrobras with a request for precautionary protection, obtaining, at the end of 2017, a Court injunction suspending the termination of the contract, which was declared still in force.

Subsequently, on February 27, 2018, the Court decided to extinguish the action initiated by CGTF before the ordinary courts and, consequently, to revoke the precautionary measure that had permitted the supply of gas. CGTF filed appeals against these latest decisions on both a precautionary and ordinary basis, obtaining a second favorable ruling that enabled the plant to operate for some time but which was subsequently revoked. CGTF has challenged this decision, confident that the courts will recognize Petrobras’ obligation to perform the contract.

At the end of January 2018, CGTF received an arbitration request from Petrobras in relation to the disputes described above and this procedure is in the preliminary stages. Subsequently, a precautionary measure was obtained in favor of CGTF, ordering the suspension of the payment of certain amounts by CGTF to Enel Distribuiçao Ceará (the purchaser of the electricity).

On October 25, 2018, another precautionary measure was obtained in favor of CGTF, ordering the restoration of Petrobras’ obligation to supply gas.

Enel Green Power España begins construction of three wind farms in Spain

On October 9, 2018, Enel Green Power España (“EGPE”) began construction of three wind farms with a total capacity of 128 MW in the municipalities of Muniesa and Alacón, in the region of Aragon’s Teruel province. The three projects are the 46.8 MW Muniesa, the 41.4 MW Farlán and the 39.9 MW San Pedro de Alacón wind farms. The new facilities will involve a total investment of about €130 million. The three facilities are expected to begin operation by the end of 2019. Once fully operational, the wind farms will be able to generate 412 GWh annually, avoiding the emission of over 270 thousand metric tons of CO2 into the atmosphere

Enel prepares to increase its stake in Enel Américas by a maximum of 5%

On October 16, 2018, Enel announced that it had entered into two “Share Swap Transactions” with a financial institution to increase its equity stake in its listed Chilean subsidiary Enel Américas SA (“Enel Américas”). Based on these Share Swap Transactions, Enel may acquire, on dates that are expected to occur no later than the 4th Quarter of 2019: (i) up to 1,895,936,970 shares of Enel Américas’ common stock, and (ii) up to 19,533,894 of Enel Américas’ American Depositary Shares (“ADSs”), each representing 50 shares of Enel Américas’ common stock.

All of the above shares total up to 5.0% of Enel Américas’ entire capital.

The number of shares of Enel Américas’ common stock and Enel Américas’ ADSs actually acquired by Enel pursuant to the Share Swap Transactions will depend on the ability of the financial institution acting as the counterparty to establish its hedge positions as part of the transactions.

The increase in Enel’s interest in Enel Américas is in line with Enel Group’s 2018-2020 Strategic Plan announced to Report on operations 103 the markets, which remains focused on reducing minority shareholders in the Group companies operating in South America. At December 31, 2018, the additional stake of the Group in Enel Américas amounted to 2.43%.

Disposal of Enel Finale Emilia

On October 18, 2018 Enel Green Power finalized the sale of the biomass generation plant at Finale Emilia for a price of €59 million.

The sale is part of an agreement between the Enel Group and F2i SGR for the sale of the entire portfolio of biomass generation plants in Italy with a total net installed capacity of about 108 MW. More specifically, the agreement involves the plants in operation at Mercure and Finale Emilia, located respectively in Calabria and Emilia Romagna, 50% of PowerCrop – the Enel Maccaferri joint venture – which owns the plants under construction of Russi and Macchiareddu, located respectively in Emilia Romagna and Sardinia, and the project for the construction of the plant at Casei Gerola, in Lombardy, which is currently waiting for authorization.

The transaction, which is part of the Group’s strategy for the active management and turnover of assets, provided for a price for the sale of the entire portfolio of plants of about €335 million.

Enel Green Power begins construction of a 475 MW photovoltaic plant in Brazil

On October 22, 2018, Enel Green Power Brasil Participações Ltda (“EGPB”) started construction of the 475 MW São Gonçalo solar park at São Gonçalo do Gurguéia, in Brazil’s northeastern state of Piauí. São Gonçalo, which is expected to start operations in 2020, is the largest photovoltaic facility currently under construction in South America.

The Enel Group will be investing around 1.4 billion Brazilian reais, equivalent to about €390 million, in the construction of the São Gonçalo photovoltaic plant. Once fully up and running, the plant will be able to generate over 1,200 GWh per year while avoiding the emission of over 600 thousand metric tons of CO2 into the atmosphere. Of São Gonçalo’s 475 MW of installed capacity, 388 MW were awarded to the Enel Group in Brazil’s A-4 public tender in December 2017 and are supported by 20- year power supply contracts with a pool of distribution companies operating in the country’s regulated market.

The remaining 87 MW will generate power for the free market.

Enel Green Power España starts construction of 127 MW of new solar capacity in Spain

On October 23, 2018, Enel Green Power España (“EGPE”) started construction of three solar plants with an overall capacity of around 127 MW in the municipality of Logrosán. The three photovoltaic plants of Baylio, Dehesa de los Guadalupes and Furatena will involve a total investment of about €100 million and will each have an installed capacity of over 42 MW. The three solar plants, which will be composed of around 372,000 photovoltaic modules, are slated to enter into service by the end of 2019. Construction will adopt Enel Green Power’s “Sustainable Construction Site” approach.

Enel signs strategic cooperation agreement with Russian railways

On October 24, 2018, Enel SpA, acting through RusEnergoSbyt, the Russian joint venture between Enel and ESN, signed an agreement for strategic cooperation and partnership expansion with the Russian Railways, which also includes an extension of the 2008 electricity supply contract between the two companies.

Enel Green Power and Nareva sign loan agreements to start construction of the 180 MW Midelt wind farm in Morocco

On November 5, 2018, the Moroccan utility ONEE (Office National de l’Electricité et de l’Eau Potable), the Moroccan Agency for Sustainable Energy (MASEN) and Midelt Wind Farm SA, a vehicle company owned by ONEE and a consortium formed by Enel Green Power (“EGP”) and Nareva, the leading Moroccan independent power producer, signed the financial close to start construction of the first of the wind farms included in the 850 MW Projet Eolien Intégré, which will be built in Midelt. The new wind farm, with a capacity of 180 MW, is expected to be completed in 24 months. The 850 MW Projet Eolien Intégré was awarded to the consortium formed by EGP and Nareva, following an international tender. The total investment in the Midelt wind farm amounts to 2.5 billion Moroccan dirhams, equivalent to about €230 million, and is financed through equity investments from shareholders and debt financing from ONEE.

Enel and Sapienza join forces for “Smart Solar House”, the smart sustainable house for the future

On November 15, 2018, the Smart Solar House, a prototype house of the future, developed by the Enel Group in collaboration with a team of about 50 students and PhD students from Rome’s Sapienza University, was presented in Dubai, for the “Solar Decathlon Middle East 2018” international architecture competition. This smart and sustainable house design, powered only by solar energy, uses the most advanced technological systems, including the Internet of Things (IoT), home automation and Enel’s infrastructure for charging electric vehicles, and is made entirely of wood and other materials with low environmental impact.

Enel Green Power España starts construction of three new photovoltaic plants in the Estremadura region in Spain

On November 28, 2018, Enel Green Power España (“EGPE”), Endesa’s renewable energy division, began construction of three solar plants with an overall capacity of around 127 MW in the municipalities of Casas de Don Pedro and Talarrubias, representing the company’s first solar parks in the province of Badajoz, in the Spanish region of Extremadura. The three photovoltaic facilities of Navalvillar, Valdecaballero and Castilblanco will have an installed capacity of more than 42 MW each and will involve an overall investment of about €100 million. The three solar parks are slated to enter service by the end of 2019. Once fully operational, these solar facilities, which are composed of more than 372,000 photovoltaic modules, will be able to generate approximately 250 GWh a year, avoiding the emission of over 165 thousand metric tons of CO2 into the atmosphere. The building phase of the three projects will adopt Enel Green Power’s “Sustainable Construction Site” approach, including the use of renewable energy to meet the energy needs of construction works through a 20 kW photovoltaic system powering the three sites, in addition to initiatives aimed at involving the local population in this phase.

Enel Green Power starts construction of a new 244 MW wind farm in Mexico

On December 11, 2018, the Enel Group, through its renewable subsidiary Enel Green Power México (“EGPM”), began construction of the 244 MW Dolores wind farm in the municipality of China, its first project in the state of Nuevo León. The overall investment in the construction of the facility amounts to about $280 million, as part of the investment outlined in Enel’s Strategic Plan. The Dolores wind farm is scheduled to start operation in the 1st Half of 2020.

Enel Green Power starts operations at HillTopper, its first wind farm in Illinois, USA

On December 12, 2018, Enel, through its US renewables company Enel Green Power North America Inc. (“EGPNA”), began operations at the 185 MW HillTopper wind farm, its first wind facility in the US state of Illinois. The construction of HillTopper required an investment of about $325 million.

Enel Green Power exits Uruguay with the sale of 50 MW of wind capacity for $120 million

On December 14, 2018, Enel Green Power SpA closed the sale to the power company Atlantica Yield of its wholly owned subsidiary Enel Green Power Uruguay SA (“EGP Uruguay”), which through its project company Estrellada SA owns the 50 MW Melowind wind farm located at Cerro Largo, around 320 km from Montevideo. Enel Green Power has sold its Uruguay subsidiary for around $120 million, equal to the company’s enterprise value.

Enel Green Power sells F2i 50% of the EF Solare Italia joint venture

On December 21, 2018, Enel SpA, acting through its subsidiary Enel Green Power SpA (“EGP”) sold its 50% stake in the joint venture EF Solare Italia SpA (“EFSI”), held through EGP’s fully-owned company Marte Srl, for €214 million to its existing partner in the venture, F2i SGR SpA (“F2i”). In line with the sale agreement, EFSI, which manages and acquires operating solar plants in Italy, has an enterprise value of about €1.3 billion, of which around €430 million of equity and some €900 million of thirdparty debt.

Endesa industrial relations

After a series of meetings of the Comisión Negociadora del V Convenio Colectivo de Endesa (Comisión Negociadora) which began in October 2017 and continued throughout 2018, in view of the impossibility of reaching an agreement, Endesa notified the workers and their union representatives that, with effect from January 1, 2019, the 4th Collective Bargaining Agreement must be considered terminated in the same way as the “framework guarantee contract” and the “agreement on the voluntary suspension or resolution of employment contracts in the period 2013-2018”, applying from that date the provisions of general labor law, as well as the legal criteria established in the matter.

Despite the resumption of negotiations within the Comisión Negociadora in February 2019, the interpretative 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 personnel led to the initiation of a suit by the unions having representation in the company. At December 31, 2018, the case was still pending in the Court of first instance

Funac

With Law 20416 of February 5, 2019, the state of Goiás reduced from April 25, 2015 to April 24, 2012 the period of validity of the tax relief that allowed Enel Distribuição Goiás to offset ICMS (VAT) against the tax credit for Enel Distribuição Goiás investments to develop and maintain its grid.

On February 25, 2019, Enel Distribuição Goiás appealed against the provisions of the law on a precautionary basis (writ of mandamus) before the Court of the state of Goiás, which denied the appeal on February 26, 2019. Enel Distribuição Goiás will appeal this ruling.