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Italy

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Operations

Net electricity generation

Millions of kWh
20162015 restatedChange
Thermal37,60943,495(5,886)-13.5%
Hydroelectric16,05217,913(1,861)-10.4%
Geothermal5,8325,809230.4%
Wind1,2981,11818016.1%
Other sources122184(62)-33.7%
Total60,91368,519(7,606)-11.1%

In 2016, net electricity generation totaled 60,913 million kWh, a decline of 11.1%, or 7,606 million kWh, from 2015.
The decrease in demand had a negative impact on generation volumes, particularly in hydroelectric generation (down 1,861 million kWh) due essentially to the deterioration in water availability compared with the previous year, and in thermal power generation (down 5,886 million kWh), which was partly attributable to a number of maintenance activities, with maintenance on Brindisi Sud being particularly significant.

Contribution to gross thermal generation

Millions of kWh20162015
restated
Change
Fuel oil880.2%2740.6%(186)-67.9%
Natural gas9,60123.6%8,12617.3%1,47518.2%
Coal30,28674.7%38,17781.3%(7,891)-20.7%
Other fuels5921.5%3910.8%20151.4%
Total40,567100.0%46,968100.0%(6,401)-13.6%

La produzione termoelettrica lorda del 2016 si attesta a 40.567 milioni di kWh, registrando un decremento di 6.401 milioni di kWh (-13,6%) rispetto al 2015. Relativamente al mix dei combustibili utilizzati, il decremento è dovuto prevalentemente al minor utilizzo degli impianti a carbone, risultato particolarmente competitivo nel corso del 2015 e invece penalizzato nel 2016 dai sopracitati interventi di manutenzione. Si rileva invece un maggior funzionamento degli impianti a ciclo combinato situati nel continente che hanno potuto beneficiare delle condizioni di criticità del mercato francese dell’ultima parte dell’anno.

Net efficient generation capacity

MW
at Dec. 31, 2016at Dec. 31, 2015 restatedChange
Thermal plants (1)13,75216,743(2,991)-17.9%
Hydroelectric plants12,42312,407160.1%
Geothermal plants761761--
Wind farms72872081.1%
Other97841315.5%
Total27,76130,715(2,954)-9.6%

(1) 1,225 MW of which unavailable due to long-term technical issues (2,564 MW at December 31, 2015).

Net efficient capacity in 2016 totaled 27,761 MW, a reduction of 2,954 MW on the previous year following the progressive closure of a portion of the thermal plants for which deactivation requests had been submitted to the Ministries for the Environment and Economic Development in accordance with Law 290 of October 27, 2003. Of particular note was the decrease in capacity in the oil/gas segment due to a reduction in MW related to the plants in Montalto di Castro (1,272 MW), Rossano Calabro (570 MW), Augusta (195 MW), and Portoscuso (264 MW) and for the combined-cycle/gas-turbine segment related to the plants in La Spezia (664 MW) and Assemini (26 MW). It should also be noted that a portion of these plants fall within the scope of the Futur-e project, the program launched to give new life to 23 deactivated thermal power plants, for a total of 13 GW of installed capacity.

Electricity distribution and transport networks

20162015
restated
Change
High-voltage lines at year end (km)1313--
Medium-voltage lines at year end (km)352,607351,4931,1140.3%
Low-voltage lines at year end (km)792,367788,7093,6580.5%
Total electricity distribution network (km) 1,144,9871,140,2154,7720.4%
Electricity transported on Enel’s distribution network (millions of kWh) (1) 223,469227,125(3,657)-1.6%

(1) The figure for 2015 reflects a more accurate measurement of amounts transported.

Electricity transported on the Enel network in Italy for 2016 decreased by 3,657 million kWh (-1.6%), going from 227,125 million kWh in 2015 to 223,469 million kWh in 2016. The change is essentially in line with the decrease in electricity demand in Italy.

Electricity sales

Millions of kWh
20162015 restatedChange
Free market:
- mass-market customers26,54225,9336092.3%
- business customers (1) 19,73910,9048,83581.0%
- safeguard-market customers2,0211,81920211.1%
Total free market48,302 38,6569,64625.0%
Regulated market:
- enhanced-protection-market customers45,83749,369(3,532)-7.2%
TOTAL 94,139 88,0256,1146.9%

(1) Supplies to large customers and energy-intensive users (annual consumption greater than 1 GWh).

Electricity sold in 2016 came to 94,139 million kWh for an overall increase of 6,114 million kWh compared with the prior year. These developments are consistent with those in recent years, with the gradual shift of customers from regulated markets to the free market.

Average number of customers

20162015 restatedChange
Free market:
- mass-market customers6,608,3886,012,183596,2059.9%
- business customers (1)78,48752,62525,86249.1%
- safeguard-market customers45,69540,7334,96212.2%
Total free market 6,732,570 6,105,541627,02910.3%
Regulated market:
- enhanced-protection-market customers20,044,06520,966,542(922,477)-4.4%
TOTAL 26,776,635 27,072,083(295,448) -1.1%

(1) Supplies to large customers and energy-intensive users (annual consumption greater than 1 GWh).

Natural gas sales

Millions of m3
20162015 restatedChange
Mass-market customers (1)2,8153,394(579)-17.1%
Business customers1,7766771,099-
Total 4,5914,07152012.8%
Average number of customers 3,876,1913,711,422164,7694.4%

(1) Includes residential and microbusinesses.

Gas sales in 2016 totaled 4,591 million cubic meters, an increase of 520 million cubic meters compared with the previous year, essentially attributable to sales to business customers.

Performance

Millions of euro    
  2016   2015 restated   Change   
 Revenue   36,957   40,727   (3,770)   -9.3%  
 Gross operating margin   6,679   6,916   (237)   -3.4%  
 Operating income   4,387   4,588   (201)   -4.4%  
 Capital expenditure   1,883   1,843 (1)   40   2.2%  

(1 )Does not include €1 million regarding units classified as “held for sale”.

The following tables break down performance by type of business in 2016.

Revenue

Millions of euro
20162015 restatedChange
Generation and Trading19,39722,186(2,789)-12.6%
Infrastructure and Networks7,2377,905(668)-8.5%
Renewables1,7552,308(553)-24.0%
End-user markets15,32315,1381851.2%
Services1,2071,191161.3%
Eliminations and adjustments(7,962)(8,001)39-0.5%
Total36,95740,727(3,770)-9.3%

Revenue in 2016 amounted to €36,957 million, a decrease of €3,770 million compared with the same period of 2015 (-9.3%), the result of the following main factors:

  • a €2,789 million decline (-12.6%) in revenue from Generation and Trading compared with 2015. This reduction is mainly attributable to:
    • a €1,074 million decline in revenue from the sale of electricity essentially related to the lower quantities generated. More specifically, the change is mainly attributable to the decrease in revenue from the sale of energy by way of bilateral agreements to other national resellers (€887 million) and the reduction in revenue from sales on the Power Exchange (€372 million), which were only partially offset by increased business on the ancillary services markets (€127 million);
    • a €1,064 million decline in revenue from trading on international energy markets due, essentially, to a reduction in quantities handled (-30.2 TWh) of proprietary trading conducted on the European electricity exchanges (particularly in France and Germany) against a background of falling prices;
    • a decrease of €289 million in revenue from the sale of CO2 emissions allowances and green certificates, owing to lower volumes handled and the replacement of the mechanism of incentives for green certificates established by the Ministerial Decree of July 6, 2012;
    • a reduction of €252 million in transfers from market operators due mainly to the decrease in transfers related to the security of Italy’s electrical system;
    • a €113 million drop in revenue from the sale of fuels on the domestic and international wholesale markets, which is essentially attributable to the decrease in intermediation business (-0.7 Mtoe);
    • a €32 million reduction in gains on extraordinary transactions, which in 2016 included the gain on the sale of the equity investment in Hydro Dolomiti Enel (€124 million), whereas this aggregate in 2015 included the gains on the sales of SF Energy and SE Hydropower (€156 million);
  • a decrease of €668 million (-8.5%) in revenue from Infrastructure and Networks operations, largely reflecting:
    • a decrease of €418 million in revenue related to the regulatory changes introduced with Resolution 654/2015 of the Authority for Electricity, Gas and the Water System (the “Authority"), which in 2015 eliminated the “regulatory lag”;
    • a €331 million reduction in rate revenue mainly due to the decrease in transmission rates;
    • a €62 million decrease in revenue following regula50 Annual Report 2016 tory changes introduced with Authority Resolution 268/2015, which abolished the contribution for irrevocableness risk for distribution companies for the collection of system charges and called for a strengthening of the system of guarantees required for the transport agreement;
    • the increase in contributions from the Energy & Environmental Services Fund (formerly the Electricity Equalization Fund) for white certificates (in the amount of €132 million) due to the increase in volumes purchased and in the unit contribution;
  • a €553 million reduction (-24.0%) in revenue from Renewables generation, which was mainly related to the decrease in revenue from the sale of energy due to the decline in hydroelectric power generation, as well as to the recognition, in 2015, of negative goodwill and the fairvalue remeasurement connected with the 3Sun acquisition (for a total of €120 million) and an indemnity required under the agreements with STM (€12 million);
  • an increase of €185 million (+1.2%) in revenue from End user markets for electricity, essentially reflecting:
  • an increase of €813 million in revenue on the free market for electricity related to the increase in quantities sold (+10.2 TWh), which was only partially offset by price effects;
  • an increase of €90 million in revenue from sales to end users on the natural gas market, primarily reflecting the positive change in corrective payments for past years and an increase in quantities sold.

Gross operating margin

Millions of euro
20162015 restatedChange
Generation and Trading(18)184(202)-
Infrastructure and Networks3,6203,933(313)-8.0%
Renewables1,0401,431(391)-27.3%
End-user markets1,9321,33659644.6%
Services1053273-
Total6,6796,916(237)-3.4%

Gross operating margin amounted to €6,679 million in 2016, a decrease of €237 million (-3.4%) compared with 2015. This change was essentially due to the following factors:

  • a €202 million increase in the margin from Generation and Trading. Net of the difference in gains on divestments in the two periods as described above, there would have been a decline of €175 million due essentially to:
    • da reduction in the margin on generation, reflecting a less favorable generation mix as a result of poor water conditions in an environment of falling wholesale prices;
    • the provisions related to reclamation work at the sites related to the closed generation plants included in the Futur-e project (€160 million);
    • payment of a termination fee related to a number of CO2 provisioning transactions (€163 million) and provisions for logistics costs related to a number of gas supply agreements (€31 million);
    • an increase in the trading margin, which reflects the benefits of signing the price-review agreements related to a number of gas supply agreements (€343 million);
    • the net effect of €112 million, recognized in 2015, from the signing of a new agreement with the trade unions for redundancy incentives pursuant to Article 4 of Law 92/2012 and recognition of a one-off indemnity paid to former employees who had benefitted from the energy discount following its revocation, which also entailed releasing the related provision;
  • a reduction of €313 million in the margin from Infrastructure and Networks operations (-8.0%), largely due to:
    • a decrease of €757 million in the margin on electricity transport, primarily reflecting the aforementioned negative effect on revenue of the regulatory changes of Authority Resolution 655/2014 and for the reduction in rates;
    • a reduction in provisions for risks and charges for the two periods under review due to the effects of the anti-trust resolution that led to the closure of the proceedings initiated by the Italian competition authority and the recognition, in 2015, of a one-off sum paid to former employees who benefitted from the energy discount following its revocation (pursuant to Article 4 of Italian Law 92/2012);
  • a reduction of €391 million in the margin on power geneReport on operations 51 ration using Renewables, which was mainly due to the effects mentioned above in the section on revenue;
  • an increase of €596 million in the margin from End-user markets (+44.6%), mainly attributable to:
    • an increase of €434 million in the margin on the free markets for electricity and gas (€277 million of which attributable to the margin on electricity) due to the increase in quantities sold for both commodities (electricity and gas);
    • an increase of €155 million in the margin on the regulated electricity market due essentially to the reduction in costs for the purchase of electricity as a result of the smaller number of customers served and the decrease in prices.

Operating income

Millions of euro
20162015 restatedChange
Generation and Trading(354)(93)(261)-
Infrastructure and Networks2,5972,914(317)-10.9%
Renewables7611,095(334)-30.5%
End-user markets1,33369064393.2%
Services50(18)68-
Total4,3874,588(201)-4.4%

Operating income came to €4,387 million, a decrease of €201 million (including a decline of €36 million in depreciation, amortization, and impairment losses) compared with the €4,588 million in operating income recognized in 2015.
More specifically, the reduction in net writedowns of trade receivables, which was particularly evident in the sale of electricity on the regulated market, was partially offset by the impairment recognized in 2016 on the goodwill and assets of Nuove Energie due to the change in a number of measurement parameters in the midstream gas business.

Capital expenditure

Millions of euro
20162015 restatedChange
Generation and Trading109178 (1)(69)-38.8%
Infrastructure and Networks1,2781,13414412.7%
Renewables304341(37)-10.9%
End-user markets13312497.3%
Services5966(7)-10.6%
Total1,8831,843402.2%

(1) Does not include €1 million regarding units classified as “held for sale”.

Capital expenditure in 2016 amounted to €1,883 million, up €40 million compared with the previous year. More specifically, the change is attributable to:

  • an increase of €144 million in capital expenditure for Infrastructure and Networks, primarily in work to improve and maintain service-quality standards;
  • a €9 million increase in capital expenditure for End-user markets;
  • a €69 million decrease in capital expenditure for Generation and Trading;
  • a reduction of €37 million in capital expenditure for the Renewables business, attributable mainly to geothermal and biomass plants.