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Group performance

Millions of euro
20162015Change
Total revenue70,59275,658(5,066)-6.7%
Total costs55,18360,529(5,346)-8.8%
Net income/(expense) from commodity contracts measured at fair value(133)168(301)-
Gross operating margin15,276 15,297 (21) -0.1%
Depreciation, amortization and impairment losses6,3557,612(1,257)-16.5%
Operating income8,921 7,685 1,236 16.1%
Financial income4,1734,0181553.9%
Financial expense7,1606,47468610.6%
Total financial income/(expense)(2,987)(2,456)(531)-21.6%
Share of income/(losses) of equity investments accounted for using the equity method (154) 52 (206) -
Income before taxes5,780 5,281 499 9.4%
Income taxes1,9931,909844.4%
Net income from continuing operations3,787 3,372 415 12%
Net income from discontinued operations----
Net income (Group and non-controlling interests)3,787 3,372 415 12%
Net income attributable to shareholders of Parent Company2,5702,19637417%
Net income attributable to non-controlling interests1,2171,176413%

Revenue

Millions of euro    
 20162015Change
Revenue from the sale of electricity42,33746,638(4,301)-9.2%
Revenue from the transport of electricity9,5879,911(324)-3.3%
Fees from network operators557826(269)-32.6%
Transfers from institutional market operators1,4621,15231026.9%
Revenue from the sale of gas3.8764,045(169)-4.2%
Revenue from the transport of gas5635095410.6%
Gains on disposal and negative goodwill on acquisitions of subsidiaries, associates,joint ventures, joint operations and non-current assets held for sale3993138627.5%
Remeasurement at fair value after changes in control99801923.8%
Gains on the disposal of property, plant and equipment and intangible assets65521325.0%
Other sales, services and revenue11,64712,132(485)-4.0%
Total70,59275,658(5,066)-6.7%

In 2016 revenue from the sale of electricity amounted to €42,337 million, a decrease of €4,301 million compared with the previous year (-9.2%). The decline mainly reflected the following factors:

  • a reduction of €2,346 million in wholesale electricity sales, mainly due to a decline in revenue from transactions on electricity exchanges (€1,121 million), essentially reflecting a decrease in quantities sold at declining average prices, a reduction in sales under bilateral contracts (€684 million), and the impact of the deconsolidation as from July 2016 of Slovenské elektrárne (€577 million);
  • a decrease of €893 million in revenue from electricity sales to end users, essentially reflecting the contraction in sales on the mature markets of Italy and Spain, mainly due to the fall in average unit prices. More specifically:
    • revenue on the market of users eligible for the “Tarifa de Último Recurso” fall by €472 million compared with 2015;
    • the deconsolidation of Slovenské elektrárne had a negative impact of €293 million;
    • revenue from sales on the free market fell by €136 million, essentially attributable to Italy;
  • a decrease of €1,062 million in revenue from electricity trading, reflecting the combined impact of a reduction in volumes handled and in average prices.

Revenue from the transport of electricity amounted to €9,587 million in 2016, a decrease of €324 million, mainly in Italy, where the effects of an increase in volumes were more than offset by the reduction in distribution rates (Authority for Electricity, Gas and the Water System - the “Authority“ Resolution 654/2015 - “Rates for electricity transmission, distribution and metering services for the 2016-2023 regulatory period”). The change also reflects the further negative impact of the recognition of additional revenue in 2015 following the changes to the regulatory lag introduced with Authority Resolution 654/2015. - “Regolazione tariffaria dei servizi di trasmissione, distribuzione e misura dell’energia elettrica, per il periodo di regolazione 2016-2023”). Inoltre, tale variazione risente anche dell’ulteriore effetto negativo derivante dall’iscrizione di maggiori ricavi di competenza nel 2015 derivanti dalla modifica del lag regolatorio normato con la delibera AEEGSI n. 654/2015.

Revenue from transfers from institutional market operators totaled €1,462 million in 2016, up €310 million compared with the previous year. More specifically, the increase in transfers mainly reflected an increase in incentives received in the form of feed-in premiums (formerly green certificates) by the renewables generation companies in Italy following the replacement of the green certificate incentive system with the Ministerial Decree of July 6, 2012.

Revenue from the sale of gas in 2016 amounted to €3,876 million, a decrease of €169 million (-4.2%) compared with the previous year. The changes essentially reflected the decline in revenue in Iberia as a result of lower average unit prices than in 2015.

Revenue from the transport of gas in 2016 amounted to €563 million, an increase of €54 million (+10.6%), largely as a result of the increase in quantities transported in Italy.

The item gains on disposal and negative goodwill amounted to €399 million in 2016, an increase of €86 million (+27.5%) compared with 2015. The figure for 2016 includes the following main transactions:

  • the gain from the disposal of GNL Quintero (an associate in which the Group had held 20%) of €173 million;
  • the gain of €124 million from the sale of Hydro Dolomiti Enel;
  • the gain of €35 million recognized by Enel Green Power Kansas from the disposal of its subsidiaries Cimarron and Lindahl;
  • the recognition of a price adjustment on the Portuguese assets sold in 2015 in the amount of €30 million.

In 2015, the item mainly consisted of:

  • the gain of about €141 million from the sale of SE Hydropower;
  • the gain of about €15 million from the sale of SF Energy;
  • the negative goodwill of €76 million from the acquisition of control of 3Sun.

Gains from remeasurement at fair value after changes in control in 2016 came to €99 million (€80 million in 2015).
More specifically, the gains for 2016 include €95 million in respect of the adjustment to fair value of the assets and liabilities of the Group following the changes in governance arrangements and the consequent loss of control of Enel Green Power North America Renewable Energy Partners (“EGPNA REP“), which prompted a remeasurement to fair value of its interest in the company sold. Gains in 2015 included the adjustment to fair value of the assets and liabilities pertaining to the Group already held by Enel prior to the acquisition of full control of 3Sun (€40 million) and ENEOP (€29 million).

Gains on the disposal of property, plant and equipment and intangible assets in 2016 amounted to €65 million (€52 million in 2015) and mainly regard ordinary disposals during the period.

Revenue under other sales, services and revenue amounted to €11,647 million in 2016, a decrease of €485 million compared with 2015 (€12,132 million or -4.0%).
The decline is mainly attributable to:

  • the effect of the recognition in 2015 of a number of regulatory items (€354 million) in Argentina following the introduction of Resolución 32/2015 concerning the recognition of revenue on the basis of a theoretical framework and the Mecanismo de Monitoreo de Costos;
  • a reduction in revenue from environmental certificates (from transfers received and revenue from the sale of the certificates) amounting to €121 million as a result of the changes in the applicable regulations and developments in quantities handled.

Costs

Millions of euro    
20162015Change
Electricity purchases18,51422,218(3,704)-16.7%
Consumption of fuel for electricity generation4,7385,570(832)-14.9%
Fuel for trading and gas for sale to end users9,06110,087(1,026)-10.2%
Materials1,7081,07863058,4%
Personnel4,6375,313(676)-12.7%
Services, leases and rentals15,41115,1482631.7%
Other operating expenses2,7832,6541294.9%
Capitalized costs(1,669)(1,539)(130)-8.4%
Total55,18360,529(5,346)-8.8%

Costs for electricity purchases in 2016 fell by €3,704 million compared with 2015, representing a contraction of 16.7%. The decrease reflected the reduction in average provisioning prices as well as a decline in volumes purchased.
More specifically, 2016 saw a decline in purchases through bilateral contracts on national and international markets, especially in Italy and Spain (-€756 million compared with 2015) and a reduction in costs for purchases of electricity on electricity exchanges (-€416 million) and a decline in other types of purchases, mainly on the national market, in the amount of about €2,353 million, as well as a decrease of €313 million associated with the deconsolidation of Slovenské elektrárne.

Costs for the consumption of fuel for electricity generation amounted to €4,738 million in 2016, down €832 million (-14.9%) on the previous year. The decrease reflects the reduction in the average unit prices of fuels and a fall in onventional electricity generation compared with 2015.

Costs for the purchase of fuel for trading and gas for sale to end users came to €9,061 million in 2016, a decrease of €1,026 million compared with 2015. The change reflects the decline in the average prices of commodities, the decrease in purchases of gas for end users as well as the beneficial impact of completed price reviews (€333 million). These factors were only partly offset by an increase in purchases of gas associated with trading operations.

Costs for materials in 2016 amounted to €1,708 million, an increase of €630 million compared with the previous year.
The rise was mainly attributable to an increase in provisioning of CO2 allowances and environmental certificates in general on the market, whereas in 2015 internal Group purchases had predominated.

Personnel costs in 2016 totaled €4,637 million, a decrease of €676 million (-12.7%) compared with 2015. The decline essentially reflects:

  • a decrease in costs for early retirement incentives of €1,373 million, mainly in respect of agreements signed in 2015 for early termination in accordance with Article 4 of Law 92/2012 (€1,128 million), partly offset by the increase in costs (€159 million) due to the introduction of early retirement incentives in the two years in Spain (Plan de Salida);
  • the effect of the reversal in 2015 (€902 million) of the provision for electricity discounts for former Italian employees as a result of the unilateral revocation of the benefit;
  • a reduction in the average workforces in Italy and Spain, in part attributable to early retirement incentives introduced;
  • a decrease in costs due to the deconsolidation of Slovenské elektrárne (€52 million).

The Enel Group workforce at December 31, 2016 numbered 62,080, of whom 30,124 abroad. The Group workforce fell by 5,834 in 2016, reflecting the negative balance between new hires and terminations (-1,554 employees), attributable to the early retirement incentives noted earlier (44% of terminations took place in Italy) and the changes in the scope of consolidation (-4,280), essentially attributable to the deconsolidation of the Slovakian companies.
The overall change compared with December 31, 2015 breaks down as follows:

Balance at December 31, 201567.914
Hirings3,360
Terminations(4,914)
Change in scope of consolidation(4,280)
Balance at December 31, 201662,080

Costs for services, leases and rentals in 2016 amounted to €15,411 million, an increase of €263 million compared with 2015. The change during the period essentially reflects a rise in wheeling costs (€330 million), only partly offset by a decline in network access costs.

Other operating expenses in 2016 amounted to €2,783 million, an increase of €129 million compared with 2015, essentially reflecting a number of especially large non-recurring items, including:

  • the reversal in 2015 of the nuclear waste disposal provision in Slovakia in the amount of €550 million following an analysis by independent experts, who took account of the regulatory changes introduced in July 2015 by the Slovakian government, which approved a new strategy for handling the “back end” of spent nuclear fuel;
  • the provision recognized in 2015 (€327 million) for compensation to former Italian employees for the unilateral revocation of the electricity discount as from December 31, 2015, which was subsequently reversed in the amount of €56 million to reflect non-participation by the final deadline of December 31, 2016;
  • the losses recognized in 2016 in Latin America following the abandonment of water usage rights for various development projects following an analysis of their profitability and socio-economic impact. The projects involved were the Puelo, Futaleufú, Bardón, Chillán 1 and 2, and Huechún initiatives in Chile (€166 million) and the Curibamba and Marañon projects in Peru (€30 million);
  • the reversal in 2016 (€28 million) of provisions for obligations for the construction and development of the Girabolhos hydroelectric plant in Portugal. The provisions had been recognized in the same amount in 2015;
  • the reversal of litigation provisions recognized in respect of the SAPE dispute in the amount of €80 million following the completion of the arbitration proceeding in 2016.

Excluding these items, other operating expenses fell by €98 million, essentially reflecting:

  • a reduction of €211 million in taxes and duties, essentially attributable to:
    • a reduction of €76 million in taxes on generation in Spain under the provisions of Law 15/2012 in relation to the decline in amounts generated;
    • the elimination as unconstitutional of the tax on nuclear generation in the Spanish region of Catalonia in the amount of €89 million;
    • the reduction in environmental taxes following the reduction in local property taxes, partly reflecting legislative changes in the taxation of industrial plants in Italy (about €60 million);
  • an increase in costs for environmental compliance in the amount of €129 million.

In 2016, capitalized costs amounted to €1,669 million, an increase of €130 million compared with the previous year, reflecting the increase in capital expenditure.

Net income/(expense) from commodity contracts measured at fair value showed net expense of €133 million in 2016 (net income of €168 million the previous year). More specifically, the net income for 2016 was essentially attributable to net unrealized income in the period totaling €74 million (net expense of €304 million in 2015) and net realized charges in the amount of €207 million (net income of €472 million in 2015).

Depreciation, amortization and impairment losses in 2016 amounted to €6,355 million, a decrease of €1,257 million, almost entirely attributable to impairment. More specifically, the impairment losses recognized in 2015 mainly regarded the Enel Russia CGU (€899 million), the Enel Green Power Romania CGU (€155 million), upstream gas exploration assets (€159 million) and Slovenské elektrárne (€574 million), the latter to realign the carrying amount with estimated realizable value. The same item in 2016 includes the writedown of water usage rights in projects involving the Neltume and Choshuenco rivers in Chile for which procedural difficulties have been identified (€273 million), as well as writedowns recognized following impairment testing of the Enel Green Power Romania CGU (€130 million) and the Nuove Energie CGU (€92 million).

Operating income in 2016 amounted to €8,921 million, an increase of €1,236 million.

Net financial expense amounted to €2,987 million in 2016, an increase of €531 million, mainly reflecting:

  • an increase of €1,887 million in net charges from financial derivatives (to hedge interest rates and exchange rates);
  • the adjustment to fair value of the financial receivable arising following the disposal of 50% of Slovak Power Holding (a negative €220 million) in view of the updating of the price adjustment formula in the agreements with EPH and changes in a number of scenario variables that adversely impacted that value;
  • positive regulatory items recognized in Argentina in 2015 under the provisions of Resolutions nos. 476/15 and 1208/15 for a total of €86 million;
  • an increase of €54 million in interest expense in respect of the accretion of provisions for risks (including provisions for early retirement incentives) and employee benefits, essentially due to the accretion of provisions for ENRE fines for service quality in Argentina in the amount of €61 million.

These factors were only partly offset by:

  • an increase of €1,684 million in net exchange gains as a result of exchange rate fluctuations;
  • a decrease of €110 million in net interest expense on borrowings, essentially reflecting the decrease in gross financial debt, associated with a decline in interest rates.

The share of income/(losses) of equity investments accounted for using the equity method in 2016 showed net losses of €154 million, compared with net income of €52 million in 2015. The change of €206 million is essentially attributable to the writedown of the 50% stake in Slovak Power Holding (€219 million) recognized following the changes in a number of reference parameters included in the agreements with EPH.

Income taxes in 2016 amounted to €1,993 million, equal to 34.5% of taxable income, while taxes in 2015 totaled €1,909 million, equal to 36.1% of taxable income. The increase in taxes compared with the previous year amounted to €84 million, reflecting the rise in pre-tax income and, essentially:

  • an increase in taxes following the adjustment of €60 million in deferred taxation as a result of the modification of income tax rates in Peru from a decreasing rate (27% for 2017-2018 and 26% thereafter) to a fixed rate of 29.5%;
  • the effect of the recognition in 2015 of the decrease of €197 million in net deferred tax assets as a result of the provisions of the Stability Act that reduced the rate of corporate income tax (IRES) from 27.5% to 24%;
  • differences in the weight of transactions subject to tax rates other than the theoretical rates (in 2016, the capital gains on Hydro Dolomiti Enel and GNL Quintero, as well as value adjustments of the assets of Slovak Power Holding; in 2015, the capital gain on the disposal of SE Hydropower and the remeasurement at fair value and the negative goodwill of 3Sun).