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Analysis of the Group’s financial position

Millions of euro
at Dec. 31, 2016at Dec. 31, 2015Change
Net non-current assets:
- property, plant and equipment and intangible assets92,31888,6863,6324.1%
- goodwill13,55613,824(268)-1.9%
- equity investments accounted for using the equity method1,558607951-
- other net non-current assets/(liabilities)(802)1,092(1,894)-
Total net non-current assets 106,630 104,209 2,421 2.3%
Net current assets:
- trade receivables13,50612,7977095.5%
- inventories2,5642,904(340)-11.7%
- net receivables due from institutional market operators(3,592)(4,114)522-12.7%
- other net current assets/(liabilities)(5,201)(5,518)317-5.7%
- trade payables(12,688)(11,775)(913)-7.8%
Total net current assets (5,411) (5,706) 295 5.2%
Gross capital employed 101,219 98,503 2,716 2.8%
Sundry provisions:
- employee benefits(2,585)(2,284)(301)-13.2%
- provisions for risks and charges and net deferred taxes(8,517)(8,413)(104)-1.2%
Total provisions (11,102) (10,697) (405) -3.8%
Net assets held for sale 11 1,490 (1,479) -99.3%
Net capital employed 90,128 89,296 832 0.9%
Total shareholders’ equity 52,575 51,751 824 1.6%
Net financial debt 37,553 37,545 8 -

Property, plant and equipment and intangible assets (including investment property) amounted to €92,318 million at December 31, 2016, an increase of €3,632 million. The rise mainly reflects investments in the period (€8,552 million) and the positive impact of translating financial statements denominated in foreign currencies (€2,735 million, with the largest gains coming in respect of the US dollar, the Colombian peso and the Russian ruble). These effects were only partly offset by depreciation, amortization and impairment losses totaling €5,359 million and the change in the scope of consolidation (a negative €2,268 million). The latter essentially regarded disposals carried out in December in the United States following the joint venture agreements with General Electric (Enel Green Power North America Renewable Energy Partners, Cimarron and Lindahl).

Goodwill amounted to €13,556 million, a decrease of €268 million on December 31, 2015. The change essentially reflected the reduction in goodwill (€237 million) recognized on the Romania CGU following the settlement of the arbitration proceeding involving the put option on 13.6% of the shares of Enel Distributie Muntenia and Enel Energie Muntenia and the concomitant cessation of the tag-along right on an additional 10% as well as the impairment loss of €26 million recognized on the goodwill of Nuove Energie.

Equity investments accounted for using the equity method amounted to €1,558 million, an increase of €951 million on December 31, 2015. The rise mainly reflected the changes in the scope of consolidation associated with the residual stakes, following disposals, in OpEn Fiber (remaining after the sale of 50% to Cassa Depositi e Prestiti at the end of December 2016), Enel Green Power North America Renewable Energy Partners (“EGPNA REP”, the vehicle holding the plants operating in the United States for which a partnership agreement was reached with General Electric) and 34 Annual Report 2016 Slovak Power Holding (which holds the 66% stake in Slovenské elektrárne, of which 50% was sold at the end of July 2016).
These effects were partly offset by dividend payments, net of the amount recognized in profit or loss for the share pertaining to the Group.

Other net non-current assets/(liabilities) showed net liabilities of €802 million December 31, 2016, a change of €1,894 million compared with December 31, 2015, when the item showed net assets of €1,092 million. The change is mainly attributable to:

  • the decrease of €1,749 million in net assets in respect of cash flow hedge derivatives (especially those hedging exchange risk);
  • the repayment (€229 million in principal and interest) of the receivable for 2004-2010 for the reimbursement of excess income tax paid as a result of not partially deducting IRAP in determining taxable income for IRES purposes;
  • aan increase of €113 million in other non-current liabilities following the increase in regulatory liabilities in Argentina and Brazil, as well as the reclassification from the provision for early retirement incentives of amounts to be paid to employees who left their positions under the provision of Article 4 of Law 92/2012 (€87 million net of payments made);
  • an increase of €390 million in financial assets in respect of service concession arrangements, partly attributable to exchange rate changes and partly to investments recognized in the year.

Net current assets were a negative €5,411 million at December 31, 2016, a decrease of €295 million on December 31, 2015. The change reflects the following factors:

  • an increase in trade receivables of €709 million, mainly in Italy as a result of the change in payment terms applied to invoices for electricity transport services following the entry into force of Authority Resolution 268/2015 (the “Grid Code”) as from January 1, 2016;
  • a decrease in inventories of €340 million, almost entirely attributable to environmental certificates;
  • an increase of €522 million in net receivables due from institutional market operators, mainly in Italy following the issue of Authority Resolution 268/2015, which changed the method sued for determining the A and UC rate components. This factor was accompanied by a decline in net receivables for service continuity bonuses;
  • a decrease of €317 million in other current assets net of associated liabilities. The change reflects:
    • an increase in net income tax receivables (€469 million), despite income tax payments during the year in the amount of €1,959 million;
    • an increase in net other current liabilities of €1,173 million, mainly regarding an increase in liabilities for dividends to be distributed in the amount of €1,070 million. The change is largely motivated by the reintroduction of an interim dividend payment by Enel SpA in the amount of €0.09 per share, to be paid as from January 25, 2017 in the total amount of €915 million and by an increase in liabilities for penalties to be paid to customers. These factors were partly offset by a decline in liabilities for the purchase of equity investments, reflecting the completion of the arbitration proceeding involving the put option on 13.6% of the shares of Enel Distributie Muntenia and Enel Energie Muntenia and the concomitant cessation of the tag-along right on an additional 10% interest (for a total of €377 million);
    • an increase in net current financial assets of €1,142 million, essentially reflecting the increase in the positive fair value of derivatives, mainly cash flow hedges on exchange rates and commodity prices;
    • an increase in other net tax payables other than income tax of €122 million, essentially in respect of taxes and surtaxes on the consumption of electricity and gas;
  • an increase in trade payables of €913 million, essentially due to exchange rate developments and the impact, in Italy, of the extension granted for the payment of a number of rate components concerning electricity distribution.

Sundry provisions amounted to €11,102 million, an increase of €405 million compared with the previous year. The change essentially reflects the following factors:

  • an increase of €300 million in provisions for employee benefits, mainly due to the reduction of the discount rate and developments in exchange rates;
  • a reduction of €431 million in provisions for risks and charges, mainly reflecting use of the provision for early retirement incentives (largely in Italy and Spain) in the amount of €310 million, as well as the reversal of the provision for litigation associated with the SAPE dispute (€80 million);
  • an increase of €511 million in net deferred tax liabilities, mainly due to exchange differences on the net deferred tax liabilities of companies with a currency other than the Report on operations 35 euro and the adjustment of deferred taxation in Peru following the tax reform, which increased tax rates.

Net assets held for sale amounted to €11 million at December 31, 2016 (€1,490 million at December 31, 2015).
They are accounted for by minor items, while at December 31, 2015 they mainly included the assets and liabilities of Slovenské elektrárne and Hydro Dolomiti Enel.

Net capital employed at December 31, 2016 amounted to €90,128 million and was funded by shareholders’ equity attributable to shareholders of the Parent Company and non-controlling interests in the amount of €52,575 million and net financial debt of €37,553 million. At December 31, 2016, the debt/equity ratio was 0.71 (0.73 at December 31, 2015).