38. Provisions for risks and charges - €6,831 million

 

Millions of euro        
  at Dec. 31, 2020 at Dec. 31, 2019
  Non-current Current Non-current Current
Provision for litigation, risks and other charges:        
- nuclear decommissioning 596 - 640 -
- site retirement, removal and restoration 2,017 99 1,840 102
- litigation 734 86 938 132
- environmental certificates - 42 - 33
- taxes and duties 288 43 312 24
- other 757 343 762 504
Total 4,392 613 4,492 795
Provision for early retirement incentives and other restructuring plans 623 444 832 401
Provision for restructuring programs connected with energy transition 759 - - -
TOTAL 5,774 1,057 5,324 1,196
 
Millions of euro   Accrual Reversal Utilization Discounting Provisions for site retirement and restoration Change in the consolidation scope Exchange differences Other changes Reclassifications of liabilities included in disposal groups held for sale  
  at Dec. 31, 2019                   at Dec. 31, 2020
Provision for litigation, risks and other charges:                      
- nuclear decommissioning 640 1 - - 1 (46) - - - - 596
- retirement, removal and site restoration 1,942 99 (50) (44) 17 187 - (36) 2 (1) 2,116
- litigation 1,070 187 (160) (136) 37 - - (198) 21 (1) 820
- environmental certificates 33 41 (8) (24) - - - - - - 42
- taxes and duties 336 46 (18) (17) 34 - - (46) (4) - 331
- other 1,266 331 (147) (178) 10 - - (51) (131) - 1,100
Total 5,287 705 (383) (399) 99 141 - (331) (112) (2) 5,005
Provision for early retirement incentives and other restructuring plans 1,233 223 (39) (443) 59 - - (2) 36 - 1,067
Provision for restructuring programs connected with energy transition - 759 - - - - - - - - 759
TOTAL 6,520 1,687 (422) (842) 158 141 - (333) (76) (2) 6,831


Nuclear decommissioning provision

At December 31, 2020, the provision reflected solely the costs that will be incurred at the time of decommissioning of nuclear plants by ENRESA, a Spanish public entity responsible for such activities in accordance with Royal Decree 1349/2003 and Law 24/2005. Quantification of the costs is based on the standard contract between ENRESA and the electricity companies approved by the Ministry for the Economy in September 2001, which regulates the retirement and closing of nuclear power plants. The time horizon envisaged, three years, corresponds to the period from the termination of power generation to the transfer of plant management to ENRESA (so-called post-operational costs) and takes account, among the various assumptions used to estimate the amount, of the quantity of unused nuclear fuel expected at the date of closure of each of the Spanish nuclear plants on the basis of the provisions of the concession agreement.

Site retirement, removal and restoration provision

This provision represents the present value of the estimated cost for the retirement and removal of non-nuclear plants where there is a legal or constructive obligation to do so. The provision mainly regards the Endesa Group, Enel Produzione and the companies in Latin America. The change in the provisions during 2020 is mainly linked to the redetermination of the future retirement costs of certain plants in Iberia and an increase in provisions for retirement costs resulting from the Group’s decision to promote the termination of generation from coal-fired power plants in Iberia, Italy and Chile in order to achieve the Group’s strategic objective of decarbonizing generation in order to mitigate the impacts of climate change.

Litigation provision

The litigation provision covers contingent liabilities in respect of pending litigation and other disputes. It includes an estimate of the potential liability relating to disputes that arose during the year, as well as revised estimates of the potential costs associated with disputes initiated in prior years. The balance for litigation mainly regards the companies in Spain (€178 million), Italy (€107 million) and Latin America (€522 million).

The decrease compared with the previous year, equal to €250 million, mainly reflects the change in the provision in Latin America and North America, attributable in particular to adverse exchange rate developments in Brazil and Argentina, as well as the resolution of a number of disputes in the United States.

Provision for environmental certificates

The provision for environmental certificates covers costs in respect of shortfalls in the environmental certificates need for compliance with national or supranational environmental protection requirements and mainly regards Enel Energia, Endesa Energía and Unelco.

Provision for taxes and duties

The provision for taxes and duties covers the estimated liability deriving from tax disputes concerning direct and indirect taxes. The balance of the provision also includes the provision for current and potential disputes concerning local property tax (whether the Imposta Comunale sugli Immobili (“ICI”) or the new Imposta Municipale Unica (“IMU”)) in Italy. The Group has taken due account of the criteria introduced with circular no. 6/2012 of the Public Land Agency (which resolved interpretive issues concerning the valuation methods for movable assets considered relevant for property registry purposes, including certain assets typical to generation plants, such as turbines) in estimating the liability for such taxes, both for the purposes of quantifying the probable risk associated with pending litigation and generating a reasonable valuation of probable future charges on positions that have not yet been assessed by Land Agency offices and municipalities.

The provision was virtually unchanged on December 31, 2019.

Other provisions

Other provisions cover various risks and charges, mainly in connection with regulatory disputes and disputes with local authorities regarding various duties and fees or other charges.

The decrease of €166 million in other provisions is mainly attributable to Enel Energia and the adverse exchange rate effects in Latin America.

Note also the recognition of a provision for risks (equal to €47 million) as a result of the write-down of the sale of 50% of the investment in Slovak Power Holding.

Provision for early retirement incentives and other restructuring plans

The provision for early retirement incentives and other restructuring plans includes the estimated charges related to binding agreements for the voluntary termination of employment contracts in response to organizational needs. The reduction of €166 million for the year mainly reflects uses of provisions for incentives established in Spain and Italy in previous years.

In Italy, the latter is largely associated with the union-company agreements signed in September 2013 and December 2015, implementing, for a number of companies in Italy, the mechanism provided for under Article 4, paragraphs 1-7 ter, of Law 92/2012 (the Fornero Act). The latter agreement envisaged the voluntary termination, in Italy, of about 6,100 employees in 2016-2020.

In Spain, the provisions regard the Acuerdo de Salida Voluntaria.

Provision for restructuring programs connected with the energy transition

Enel, in its role as a leader of the energy transition, has placed decarbonization and growth of renewables around the world at the center of its strategy.

In this context, Enel has begun restructuring the activities associated with the energy transition process, which involves thermal generation plants in all the geographical areas in which the Group operates. The consequent revision of processes and operating models will require changes in the roles and skills of employees, which the Group intends to implement with highly sustainable plans based on redeployment programs, with major upskilling and reskilling plans and voluntary individual early retirement agreements that will involve around 1,300 people worldwide. The energy transition is also based on the progressive and expansive development of digital tools, as digitization is essential to responding to multiple external forces and making informed and well-considered decisions at every level within the Group.

A provision was therefore established for restructuring programs, which at December 31, 2020 amounted to €759 million, which is mainly attributable to Spain and Italy, and represents the estimated costs that the Group has provisioned to accelerate the energy transition process, for all direct and indirect activities related to the review of processes and operating models and the roles and skills of employees.