47.1 Derivatives designated as hedging instruments

Derivatives are initially recognized at fair value, on the trade date of the contract and are subsequently re-measured at their fair value. The method of recognizing the resulting gain or loss depends on whether the derivative is designated as a hedging instrument, and if so, the nature of the item being hedged.
Hedge accounting is applied to derivatives entered into in order to reduce risks such as interest rate risk, currency risk, commodity price risk and net investments in foreign operations when all the criteria provided by IFRS 9 are met.
At the inception of the transaction, the Group documents the relationship between hedging instruments and hedged items, as well as its risk management objectives and strategy. The Group also documents its assessment, both at hedge inception and on an ongoing basis, of whether hedging instruments are highly effective in offsetting changes in fair values or cash flows of hedged items.
For cash flow hedges of forecast transactions designated as hedged items, the Group assesses and documents that they are highly probable and present an exposure to changes in cash flows that affect profit or loss.
Depending on the nature of the risk exposure, the Group designates derivatives as either:

  • fair value hedges;
  • cash flow hedges.

For more details about the nature and the extent of risks arising from financial instruments to which the Group is exposed, please see note 45 “Risk management”.
To be effective a hedging relationship shall meet all of the following criteria:

  • existence of an economic relationship between hedging instrument and hedged item;
  • the effect of credit risk does not dominate the value changes resulting from the economic relationship;
  • the hedge ratio defined at initial designation shall be equal to the one used for risk management purposes (i.e. same quantity of the hedged item that the entity actually hedges and the quantity of the hedging instrument that the entity actually uses to hedge the quantity of the hedged item).

Based on the IFRS 9 requirements, the existence of an economic relationship is evaluated by the Group through a qualitative assessment or a quantitative computation, depending on the following circumstances:

  • if the underlying risk of the hedging instrument and the hedged item is the same, the existence of an economic relationship will be provided through a qualitative analysis;
  • on the other hand, if the underling risk of the hedging instrument and the hedged item is not the same, the existence of the economic relationship will be demonstrated through a quantitative method in addition to a qualitative analysis of the nature of the economic relationship (i.e. linear regression).

In order to demonstrate that the behavior of the hedging instrument is in line with those of the hedged item, different scenarios will be analyzed.
For hedging of commodity price risk, the existence of an economic relationship is deduced from a ranking matrix that defines, for each possible risk component a set of all standard derivatives available in the market whose ranking is based on their effectiveness in hedging the considered risk.
In order to evaluate the credit risk effects, the Group considers the existence of risk mitigating measures (collateral, mutual break-up clauses, netting agreements, etc.).

The Group has established a hedge ratio of 1:1 for all the hedging relationships (including commodity price risk hedging) as the underlying risk of the hedging derivative is identical to the hedged risk, in order to minimize hedging ineffectiveness.

The hedge ineffectiveness will be evaluated through a qualitative assessment or a quantitative computation, depending on the following circumstances:

  • if the critical terms of the hedged item and hedging instrument match and there are no other sources of ineffectiveness included the credit risk adjustment on the hedging derivative, the hedge relationship will be considered fully effective on the basis of a qualitative assessment;
  • if the critical terms of the hedged item and hedging instrument do not match or there is at least one source of ineffectiveness, the hedge ineffectiveness will be quantified applying the dollar offset cumulative method with hypothetical derivative. This method compares changes in fair value of the hedging instrument and the hypothetical derivative between the reporting date and the inception date.

The main causes of hedge ineffectiveness can be the following:

  • basis differences (i.e. the fair value or cash flows of the hedged item depend on a variable that is different from the variable that causes the fair value or cash flows of the hedging instrument to change);
  • timing differences (i.e. the hedged item and hedging instrument occur or are settled at different dates);
  • quantity or notional amount differences (i.e. the hedged item and hedging instrument are based on different quantities or notional amounts);
  • other risks (i.e. changes in the fair value or cash flows of a derivative hedging instrument or hedged item relate to risks other than the specific risk being hedged);
  • credit risk (i.e. the counterparty credit risk differently impact the changes in the fair value of the hedging instruments and hedged items).

Fair value hedges

Fair value hedges are used to protect the Group against exposures to changes in the fair value of assets, liabilities or firm commitment attributable to a particular risk that could affect profit or loss.
Changes in fair value of derivatives that qualify and are designated as hedging instruments are recognized in the income statement, together with changes in the fair value of the hedged item that are attributable to the hedged risk.
If the hedge no longer meets the criteria for hedge accounting, the adjustment to the carrying amount of a hedged item for which the effective interest rate method is used is amortized to profit or loss over the period to maturity.

Cash flow hedges

Cash flow hedges are applied in order to hedge the Group exposure to changes in future cash flows that are attributable to a particular risk associated with a recognized asset or liability or a highly probable transaction that could affect profit or loss.
The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is recognized in other comprehensive income. The gain or loss relating to the ineffective portion is recognized immediately in the income statement.
Amounts accumulated in equity are reclassified to profit or loss in the periods when the hedged item affects profit or loss (for example, when the hedged forecast sale takes place).
If the hedged item results in the recognition of a non-financial asset (i.e. property, plant and equipment or inventories, etc.) or a non-financial liability, or a hedged forecast transaction for a non-financial asset or a non-financial liability becomes a firm commitment for which fair value hedge accounting is applied, the amount accumulated in equity (i.e. hedging reserve) shall be removed and included in the initial amount (cost or other carrying amount) of the asset or the liability hedged (i.e. “basis adjustment”).
When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss existing in equity at that time remains in equity and is recognized when the forecast transaction is ultimately recognized in the income statement. When a forecast transaction is no longer expected to occur, the cumulative gain or loss that was reported in equity is immediately transferred to the income statement.
For hedging relationships using forwards as a hedging instrument, where only the change in the value of the spot element is designated as the hedging instrument, accounting for the forward element (profit or loss vs OCI) is defined case by case. This approach is actually applied by the Group for hedging of currency risk on renewables assets.
Conversely, hedging relationships using cross currency interest rate swaps as hedging instruments, the Group separates foreign currency basis spread, in designating the hedging derivative, and present them in other comprehensive income (OCI) as hedging costs.
With specific regard to cash flow hedges of commodity risk, in order to improve their consistency with the risk management strategy, the Enel Group applies a dynamic hedge accounting approach based on specific liquidity requirements (the so-called liquidity-based approach).
This approach requires the designation of hedges through the use of the most liquid derivatives available on the market and replacing them with others that are more effective in covering the risk in question.
Consistent with the risk management strategy, the liquidity-based approach allows the roll-over of a derivative by replacing it with a new derivative, not only in the event of expiry but also during the hedging relationship, if and only if the new derivative meets both of the following requirements:

  • it represents a best proxy of the old derivative in terms of ranking;
  • it meets specific liquidity requirements.

Satisfaction of these requirements is verified quarterly.
At the roll-over date, the hedging relationship is not discontinued. Accordingly, starting from that date, changes in the effective fair value of the new derivative will be recognized in equity (the hedging reserve), while changes in the fair value of the old derivative are recognized through profit or loss.

Reform of benchmarks for the determination of interest rates and the associated risk

Overview

Interbank Offered Rates (“IBORs”) are benchmark rates at which banks can borrow funds on the interbank market on an unsecured basis for a given period ranging from overnight to 12 months, in a specific currency.
In recent years there have been a number of cases of manipulation of these rates by the banks contributing to their calculation. For this reason, regulators around the world have begun a sweeping reform of the benchmarks for the determination of interest rates that includes the replacement of some benchmark indices with alternative risk-free reference rates (the IBOR reform).
In a context of significant uncertainty regarding the timing and transition procedures in the various countries, the Group is finalizing an assessment of the impact of the reform on contracts after having delineated their global scope in terms of their number and nominal value through a census based on data collection from Countries and Business Lines. In addition, contractual amendments are beginning to be implemented gradually in a process that will continue in 2021, although this may vary depending on developments in the reform of benchmarks for determining interest rates and alternative risk-free reference rates associated with market liquidity.

Derivatives

For risk management purposes, the Group holds interest rate swaps and cross currency interest rate swaps that are mostly designated as cash flow hedging relationships, with only a minority portion designated as fair value hedges.
Interest rate swaps and cross currency interest rate swaps are essentially indexed to either Euribor or LIBOR in dollars or pounds. The Group’s derivative instruments are managed through contracts that are mainly based on framework agreements defined by the International Swaps and Derivatives Association (ISDA).
The ISDA has revised its standardized contracts in light of the benchmark reform and plans to amend the 2006 ISDA definitions relating to floating rates to include replacement clauses (fallbacks) that would apply upon the permanent discontinuation of certain key IBORs. The ISDA has published a supplement to amend the ISDA 2006 definitions (the ISDA Fallback Supplement) and a protocol to facilitate multilateral amendments to include the amended floating-rate options in derivative transactions entered into prior to the entry into force of the supplement (ISDA Fallback Protocol). The Group is evaluating whether or not to adopt to this protocol, monitoring whether other counterparties are doing so. In the event of a change in the plan or if certain counterparties do not adopt the protocol, the Group would negotiate bilaterally with them about the inclusion of new fallback clauses.

Hedging relationships

The Group has assessed the impact of uncertainty engendered by the IBOR reform on hedging relationships at December 31, 2020 with reference to both hedging instruments and hedged items. Both the hedged items and the Group’s hedging instruments will change their parameterization from interbank market-based benchmarks (IBORs) to alternative risk-free rates (RFRs) as a result of the contractual amendments that will take effect in 2021. More specifically, for hedging instruments indexed to Euribor, the replacement rate will be based on the Euro STR (Euro Short-Term Rate), while those indexed to LIBOR in dollars and pounds will be indexed to SOFR (Secured Overnight Financing Rate) and SONIA (Sterling Overnight Index Average), respectively.
The most significant exposure of the Group is to Euribor, together with significant exposures to LIBOR in pounds and dollars as well. However, it is certainly on the euro side that the uncertainty surrounding the replacement process is greatest.
However, even if the Group expects the benchmark rates based on interbank markets to be discontinued after the end of 2021, there is uncertainty about the timing and procedures for replacing these indices for both hedged items and hedging instruments. The Group is therefore applying the amendments to IFRS 9 issued in September 2019 to hedging relationships directly impacted by the IBOR reform.
The hedging relationships affected by the IBOR reform could become ineffective owing to the expectations of market players regarding the moment in which the transition from the benchmarks for determining interest rates based on interbank markets to alternative rates will take place. This transition could occur at different times for hedged items and hedging instruments and lead to ineffectiveness. In any case, the Group will work to implement the replacements at the same time.

The exposure of the Enel Group to hedging relationships impacted by the IBOR reform, for which the exceptions provided for in the amendments to IFRS 9 issued in September 2019 were applied, amounts to €9,434 million in terms of the notional amount of the hedging instruments at December 31, 2020. The following table provides a breakdown of the notional amounts of the hedging instruments by IBOR rate.

Millions of euro Notional amount
  at Dec. 31, 2020
Hedging instruments  
GBP LIBOR 1,225 
USD LIBOR 1,595 
Euribor 6,614 
Total 9,434 

47.1.1 Hedge relationships by type of risk hedged

Interest rate risk

The following table shows the notional amount and the average interest rate of instruments hedging the interest rate risk on transactions outstanding at December 31, 2020 and December 31, 2019, broken down by maturity.

Millions of euro Maturity
  2021 2022 2023 2024 2025 Beyond
At Dec. 31, 2020            
Interest rate swaps            
Total notional amount 122 461 178 155 591 6,115
Notional amount related to IRS in euro - 135 178 155 591 5,295
Average IRS rate in euro   5.0139 4.1593 4.4380 1.9058 1.8321
Notional amount related to IRS in US dollars 122 326 - - - 639
Average IRS rate in US dollars 2.0350 3.5227       2.4648
             
  2020 2021 2022 2023 2024 Beyond
At Dec. 31, 2019            
Interest rate swaps            
Total notional amount 199 140 499 187 170 7,054
Notional amount related to IRS in euro 47 - 143 187 170 6,042
Average IRS rate in euro 3.1825   4.9699 4.0516 4.1629 1.8298
Notional amount related to IRS in US dollars 134 134 356 - - 665
Average IRS rate in US dollars 1.5740 2.0350 3.5227     2.9665


The following table shows the notional amount and the fair value of the hedging instruments on the interest rate risk of transactions outstanding as at December 31, 2020 and December 31, 2019, broken down by type of hedged item.

Millions of euro   Fair value Notional amount Fair value Notional amount
Hedging instrument Hedged item Assets Liabilities   Assets Liabilities  
    at Dec. 31, 2020 at Dec. 31, 2019
Fair value hedges              
Interest rate swaps Floating-rate non-bank borrowings 15 - 126 - - -
Interest rate swaps Fixed-rate bank borrowings 7 - 12 7 - 12
Cash flow hedges              
Interest rate swaps Floating-rate bonds - (232) 1,190 11 (499) 3,953
Interest rate swaps Floating-rate loan assets 21 - 161 15 - 140
Interest rate swaps Floating-rate non-bank borrowings - (708) 6,133 - (281) 4,144
Total   43 (940) 7,622 33 (780) 8,249


The following table shows the notional amount and the fair value of hedging derivatives on interest rate risk as at December 31, 2020 and December 31, 2019, broken down by type of hedge.

 Millions of euro Notional amount Fair value assets Notional amount Fair value liabilities
Derivatives at Dec. 31, 2020 at Dec. 31, 2019 at Dec. 31, 2020 at Dec. 31, 2019 at Dec. 31, 2020 at Dec. 31, 2019 at Dec. 31, 2020 at Dec. 31, 2019
Fair value hedges                
Interest rate swaps 138 12 22 7 - - - -
Interest rate options - - - - - - - -
Total 138 12 22 7 - - - -
Cash flow hedges                
Interest rate swaps 161 468 21 26 7,323 7,769 (940) (780)
Interest rate options - - - - - - - -
Total 161 468 21 26 7,323 7,769 (940) (780)
TOTAL INTEREST RATE DERIVATIVES 299 480 43 33 7,323 7,769 (940) (780)


The notional amount of derivatives classified as hedging instruments at December 31, 2020, came to €7,622 million, with a corresponding negative fair value of €897 million.

Compared with December 31, 2019, the notional amount decreased by €627 million, mainly reflecting:

  • the expiry of interest rate swaps amounting to €180 million;
  • a reduction of €127 million in interest rate swaps due to a change in the consolidation method used for available-for-sale entities in the Africa, Asia and Oceania area;
  • new interest rate swaps amounting to €40 million. The amount also reflects the reduction of €360 million in the notional amount of amortizing interest rate swaps.

The deterioration in the fair value of €150 million mainly reflects developments in the yield curve.

Fair value hedge derivatives

The following table reports net gains and losses recognized through profit or loss deriving from changes in the fair value of fair value hedge derivatives and the changes in the fair value of the hedged item that are attributable to interest rate risk both in 2020 and the previous year.

Millions of euro 2020 2019
  Net gain/(loss) Net gain/(loss)
Interest rate hedging instruments 15 -
Hedged item (14) -
Ineffective portion 1 -


The following table shows the impact of fair value hedges of interest rate risk in the statement of financial position at December 31, 2020 and December 31, 2019.

Millions of euro 2020 2019
  Notional amount Carrying amount Fair value used to measure ineffectiveness in the year Notional amount Carrying amount Fair value used to measure ineffectiveness in the year
Interest rate swaps 138 22 22 12 7 7


The following table shows the impact of the hedged item of fair value hedges in the balance sheet at December 31, 2020 and December 31, 2019.

Millions of euro 2020 2019
  Carrying amount Cumulative adjustment of fair value of hedged item Fair value used to measure ineffectiveness in the year Carrying amount Cumulative adjustment of fair value of hedged item Fair value used to measure ineffectiveness in the year
Fixed-rate borrowings 20 7 (7) 20 7 (7)
Floating-rate borrowings 146 15 (15) - - -
Total 166 22 (22) 20 7 (7)

 

Cash flow hedge derivatives

The following table shows the cash flows expected in coming years from cash flow hedge derivatives on interest rate risk.

 Millions of euro Fair value Distribution of expected cash flows
  at Dec. 31, 2020 2021 2022 2023 2024 2025 Beyond
Cash flow hedge derivatives on interest rates              
Positive fair value 21 4 4 4 3 2 5
Negative fair value (940) (149) (141) (141) (125) (104) (306)


The following table shows the impact of cash flow hedges of interest rate risk in the statement of financial position at December 31, 2020 and December 31, 2019.

Millions of euro 2020 2019
  Notional amount Carrying amount Fair value used to measure ineffectiveness in the year Notional amount Carrying amount Fair value used to measure ineffectiveness in the year
Interest rate swaps 7,484 (919) (919) 8,237 (754) (754)
Total 7,484 (919) (919) 8,237 (754) (754)


The following table shows the impact of the hedged item of cash flow hedges in the statement of financial position at December 31, 2020 and December 31, 2019.

Millions of euro 2020 2019
  Fair value used to measure ineffectiveness in the year Fair value at the designation date of CFH derivatives through profit or loss Hedging reserve Hedging costs reserve Ineffective portion of carrying amount of CFH derivatives Fair value used to measure ineffectiveness in the year Fair value at the designation date of CFH derivatives through profit or loss Hedging reserve Hedging costs reserve Ineffective portion of carrying amount of CFH derivatives
Floating-rate bonds 232 - (232) - - 486 - (486) - (2)
Floating-rate loan assets (21) - 21 - - (15) - 15 - -
Floating-rate non-bank borrowings 653 (44) (653) - (11) 275 (49) (226) - (6)
Total 864 (44) (864) - (11) 746 (49) (697) - (8)


Finally, note that for cash flow hedge derivatives on interest rates, the amount reclassified in 2020 from other comprehensive income to profit or loss generated financial expense of €82 million gross of tax effects, while the previous year the financial expense recognized amounted to €1,315 million.

Currency risk

The following table reports the maturity profile of the notional amount and associated average contractual exchange rate for the instruments hedging currency risk on transactions outstanding at December 31, 2020 and December 31, 2019.

Millions of euro Maturity
  2021 2022 2023 2024 2025 Beyond Total
At Dec. 31, 2020              
Cross currency interest rate swaps (CCIRS)              
Total notional amount of CCIRS 859 1,702 3,120 3,088 1,336 10,882 20,987
               
Notional amount for CCIRS EUR-USD 185 1,630 2,038 1,223 1,223 6,928 13,227
Average exchange rate EUR/USD 1.1348 1.1213  1.2493  1.1039  1.1593  1.2397  
               
Notional amount for CCIRS EUR-GBP 278 - - 946 - 3,443 4,667
Average exchange rate EUR/GBP 0.8248      0.8765    0.7876   
               
Notional amount for CCIRS EUR-CHF - - - 208 - 120 328
Average exchange rate EUR/CHF       1.0642   0.9040  
               
Notional amount for CCIRS USD-BRL 395 71 64 - - 244 774
Average exchange rate USD/BRL 4.3935 4.1779 5.1967     3.4489  
               
Currency forwards              
Total notional amount of forwards 3,684 1,871 12 - - - 5,567
               
Notional amount - currency forward EUR/USD 2,671 1,786 12 - - - 4,469
Average currency forward rate - EUR/USD 1.1473 1.1535 1.1976        
               
Notional amount - currency forward USD/BRL 379 37 - - - - 416
Average currency forward rate - USD/BRL 5.2226 5.4405          
               
Notional amount - currency forward USD/COP 187 - - - - - 187
Average currency forward rate - USD/COP 3,782            
               
Notional amount - currency forward EUR/CLP 121 - - - - - 121
Average currency forward rate - EUR/CLP 716.8847            
               
Notional amount - currency forward EUR/RUB 100 - - - - - 100
Average currency forward rate - EUR/RUB 91.8464            
     
     

 

Millions of euro Maturity
  2020 2021 2022 2023 2024 Beyond Total
At Dec. 31, 2019              
Cross currency interest rate swaps (CCIRS)              
Total notional amount of CCIRS 831 1,115 1,781 3,339 3,146 12,511 22,723
               
Notional amount for CCIRS EUR-USD - 202 1,781 3,339 1,336 8,904 15,562
Average exchange rate EUR/USD   1.1348 1.1213 1.2184 1.1039 1.2067  
               
Notional amount for CCIRS EUR-GBP 470 587 - - 999 3,041 5,097
Average exchange rate EUR/GBP 0.8466 0.8245     0.8765 0.8062  
               
Notional amount for CCIRS EUR-CHF 92 - - - 207 120 419
Average exchange rate EUR/CHF 1.2169       1.0642 1.21  
               
Notional amount for CCIRS USD-BRL 269 326 - - - 288 883
Average exchange rate USD/BRL 3.9273 3.4742       3.5655  
               
Currency forwards              
Total notional amount of forwards 4,459 1,015 18 - - - 5,492
               
Notional amount - currency forward EUR/USD 2,899 958 18 - - - 3,875
Average currency forward rate - EUR/USD 1.1774 1.1803 1.1609        
               
Notional amount - currency forward USD/CLP 527 44 - - - - 571
Average currency forward rate - USD/CLP 678.0443 680          
               
Notional amount - currency forward USD/BRL 313 14 - - - - 327
Average currency forward rate - USD/BRL 4.1274 4.1330          
               
Notional amount - currency forward EUR/ZAR 221 - - - - - 221
Average currency forward rate - EUR/ZAR 17.7856            
               
Notional amount - currency forward EUR/RUB 181 - - - - - 181
Average currency forward rate - EUR/RUB 74.1277            


The following table shows the notional amount and the fair value of the hedging instruments on the currency risk of transactions outstanding as at December 31, 2020 and December 31, 2019, broken down by type of hedged item.

Millions of euro   Fair value Notional amount Fair value Notional amount
Hedging instrument Hedged item Assets Liabilities   Assets Liabilities  
    at Dec. 31, 2020 at Dec. 31, 2019
Fair value hedges              
Cross currency interest rate swaps (CCIRS) Fixed-rate borrowings/bonds in foreign currencies 28 - 639 25 (1) 171
Cross currency interest rate swaps (CCIRS) Floating-rate borrowings in foreign currencies 28 - 79 - - -
Cash flow hedges              
Cross currency interest rate swaps (CCIRS) Floating-rate borrowings in foreign currencies 67 (15) 579 55 (5) 999
Cross currency interest rate swaps (CCIRS) Fixed-rate borrowings in foreign currencies 50 - 484 - (4) 72
Cross currency interest rate swaps (CCIRS) Floating-rate bonds in foreign currencies 12 - 356 6 (1) 302
Cross currency interest rate swaps (CCIRS) Fixed-rate bonds in foreign currencies 588 (2,374) 18,499 1,022 (1,535) 20,877
Cross currency interest rate swaps (CCIRS) Future cash flows denominated in foreign currencies 7 (4) 351 - (17) 302
Currency forwards Future cash flows denominated in foreign currencies 3 (12) 574 3 (63) 811
Currency forwards Future commodity purchases denominated in foreign currencies 5 (309) 4,167 124 (7) 3,462
Currency forwards Purchases of investment goods and other in foreign currency 4 (40) 825 3 (43) 1,219
Total   792 (2,754) 26,553 1,238 (1,676) 28,215


Cash flow hedges and fair value hedges include:

  • CCIRSs with a notional amount of €19,622 million used to hedge the currency risk on fixed-rate debt denominated in currencies other than the euro, with a negative fair value of €1,708 million;
  • CCIRSs with a notional amount of €1,365 million used to hedge the currency risk on floating-rate debt denominated in currencies other than the euro, with a positive fair value of €95 million;
  • currency forwards with a notional amount of €4,741 million used to hedge the currency risk associated with purchases of natural gas, purchases of fuel and expected cash flows in currencies other than the euro, with a negative fair value of €313 million;
  • currency forwards with a notional amount of €825 million and a negative fair value of €36 million in respect of OTC transactions to mitigate the currency risk on expected cash flows in currencies other than the presentation currency connected with the purchase of investment goods in the renewables and infrastructure and networks sectors (new generation digital meters), on operating costs for the supply of cloud services and on revenue from the sale of renewable energy.

The following table reports the notional amount and fair value of foreign exchange derivatives at December 31, 2020 and December 31, 2019, broken down by type of hedge.

 Millions of euro Notional amount Fair value assets Notional amount Fair value liabilities
Derivatives at Dec. 31, 2020 at Dec. 31, 2019 at Dec. 31, 2020 at Dec. 31, 2019 at Dec. 31, 2020 at Dec. 31, 2019 at Dec. 31, 2020 at Dec. 31, 2019
Fair value hedges                
CCIRS 718 166 56 25 - 5 - (1)
Total 718 166 56 25 - 5 - (1)
Cash flow hedges                
Currency forwards 476 3,253 12 130 5,090 2,238 (361) (113)
CCIRS 5,582 11,169 724 1,083 14,687 11,384 (2,393) (1,562)
Total 6,058 14,422 736 1,213 19,777 13,622 (2,754) (1,675)
TOTAL EXCHANGE RATE DERIVATIVES 6,776 14,588 792 1,238 19,777 13,627 (2,754) (1,676)


The notional amount of CCIRSs at December 31, 2020 amounted to €20,987 million (€22,724 million at December 31, 2019), a decrease of €1,737 million. Cross currency interest rate swaps with a total amount of €831 million expired, while new derivatives amounted to €1,108 million, of which €557 million in respect of bond issues denominated in pounds sterling in October 2020. In addition, cross currency interest rate swaps of €294 million were terminated early. The amount also reflects developments in the exchange rate of the euro against the main other currencies and the effect of amortization, which caused their notional amount to decrease by €1,720 million.
The notional amount of currency forwards at December 31, 2020 amounted to €5,566 million (€5,491 million at December 31, 2019), an increase of €75 million. The exposure to currency risk, especially that associated with the US dollar, is mainly due to purchases of natural gas, purchases of fuel and cash flows in respect of investments. Changes in the notional amount are connected with normal developments in operations.

Fair value hedge derivatives

The following table reports net gains and losses recognized through profit or loss, reflecting changes in the fair value of fair value hedge derivatives and the changes in the fair value of the hedged item that are attributable to currency risk for 2020 and the previous year.

Millions of euro 2020 2019
  Net gain/(loss) Net gain/(loss)
Interest rate hedging instruments 44 1
Hedged item (51) (4)
Ineffective portion (7) (3)


The following table shows the impact of fair value hedges of currency risk in the statement of financial position at December 31, 2020 and December 31, 2019.

 Millions of euro at Dec. 31, 2020 at Dec. 31, 2019
  Notional amount Carrying amount Fair value used to measure ineffectiveness in the year Notional amount Carrying amount Fair value used to measure ineffectiveness in the year
Cross currency interest rate swaps (CCIRS) 718 56 56 171 24 24


The following table shows the impact of the hedged item of fair value hedges in the statement of financial position at December 31, 2020 and December 31, 2019.

 Millions of euro at Dec. 31, 2020 at Dec. 31, 2019
  Carrying amount Cumulative adjustment of fair value of hedged item Fair value used to measure ineffectiveness in the year Carrying amount Cumulative adjustment of fair value of hedged item Fair value used to measure ineffectiveness in the year
Fixed-rate borrowings in foreign currency 637 34 (34) 81 11 (11)
Floating-rate borrowings in foreign currency 79 28 (28) 90 15 (15)
Total 716 62 (62) 171 26 (26)


Cash flow hedge derivatives

The following table shows the cash flows expected in coming years from cash flow hedge derivatives on currency risk.

 Millions of euro Fair value Distribution of expected cash flows
  at Dec. 31, 2020 2021 2022 2023 2024 2025 Beyond
Cash flow hedge derivatives on exchange rates              
Positive fair value 736 140 105 178 87 13 53
Negative fair value (2,754) (139) (180) (18) (96) 27 (98)


The following table shows the impact of cash flow hedges of currency risk in the statement of financial position at December 31, 2020 and December 31, 2019.

 Millions of euro at Dec. 31, 2020 at Dec. 31, 2019
  Notional amount Carrying amount Fair value used to measure ineffectiveness in the year Notional amount Carrying amount Fair value used to measure ineffectiveness in the year
Cross currency interest rate swaps (CCIRS) 20,269 (1,669) (1,463) 22,552 (479) (345)
Currency forwards 5,566 (349) (342) 5,491 17 52
Total 25,835 (2,018) (1,805) 28,043 (462) (293)


The following table shows the impact of the hedged item of cash flow hedges in the statement of financial position at December 31, 2020 and December 31, 2019.

 Millions of euro at Dec. 31, 2020 at Dec. 31, 2019
  Fair value used to measure ineffectiveness in the year Hedging reserve Hedging costs reserve Ineffective portion of carrying amount of CFH derivatives Fair value used to measure ineffectiveness in the year Hedging reserve Hedging costs reserve Ineffective portion of carrying amount of CFH derivatives
Floating-rate borrowings in foreign currencies (52) 52 - - (49) 49 1 -
Fixed-rate borrowings in foreign currencies (50) 50 - - 3 (3) (1) -
Floating-rate bonds in foreign currencies (12) 12 - - (5) 5 - -
Fixed-rate bonds in foreign currencies 1,580 (1,580) (205) - 378 (378) (135) -
Future cash flows denominated in foreign currencies (3) 3 - - 17 (17) - -
Future cash flows denominated in foreign currencies 7 (7) (3) - 59 (59) (1) -
Future commodity purchases denominated in foreign currencies 305 (305) - 1 (119) 119 - (2)
Purchases of investment goods and other in foreign currency 30 (30) (5) (1) 9 (9) (32) 1
Total 1,805 (1,805) (213) - 293 (293) (168) (1)


Finally, note that for cash flow hedge derivatives on exchange rates, the amount reclassified in 2020 from other comprehensive income to profit or loss generated financial expense of €1,483 million gross of tax effects, while the previous year the financial expense recognized amounted to €770 million.

Commodity price risk

  Maturity  
Millions of euro 2021 2022 2023 2024 2025 Beyond Total
At Dec. 31, 2020              
Commodity swaps              
Notional value on power 78 65 64 65 53 281 606
Average commodity swap price on power (€/MWh) 40.3 37.9 37.7 37.7 37.6 37.7  
Notional value on coal/shipping 32 2 - - - - 34
Average commodity swap price on coal/shipping ($/ton) 51.2 57.9 - - - -  
Notional value on gas - - - - - - -
Average commodity swap price on gas (€/MWh) - - - - - -  
Commodity forwards/futures              
Notional value on power 1,065 244 246 197 191 741 2,684
Average commodity forward/future price on power (€/MWh) 43.2 25.0 19.1 17.9 17.4 15.2  
Notional value on gas 1,521 973 17 20 20 108 2,659
Average commodity forward/future price on gas (€/MWh) 14.3 14.9 15.2 4.9 4.9 2.5  
Notional value on CO2 317 134 37 - - - 488
Average commodity forward/future price on CO2 (€/ton) 24.2 26.6 27.9 - - -  
Notional value on oil 744 413 - - - - 1,157
Average commodity forward/future price on oil ($/bbl) 45.0 44.3 - - - -  
Commodity options              
Notional value on power - 8 9 9 9 45 80
Average commodity option price on power (€/MWh) - 29.7 26.4 26.4 26.4 31.7  
 
  Maturity  
Millions of euro 2020 2021 2022 2023 2024 Beyond Total
At Dec. 31, 2019              
Commodity swaps              
Notional value on power 703 123 121 135 128 712 1,922
Average commodity swap price on power (€/MWh) 47.7 20.5 20.2 20.2 20.2 20.7  
Notional value on coal/shipping 253 - - - - - 253
Average commodity swap price on coal/shipping ($/ton) 62.4 - - - - -  
Notional value on gas 13 13 13 13 41 66 159
Average commodity swap price on gas (€/MWh) 3.0 3.0 3.0 3.0 7.0 7.9  
Commodity forwards/futures              
Notional value on power 726 2 - - - - 728
Average commodity forward/future price on power (€/MWh) 50.5 50.4 - - - -  
Notional value on gas 1,869 662 1 - - - 2,532
Average commodity forward/future price on gas (€/MWh) 15.9 19.1 17.2 - - -  
Notional value on CO2 217 9 - - - - 226
Average commodity forward/future price on CO2 (€/ton) 18.0 25.0 - - - -  
Notional value on oil 988 115 - - - - 1,103
Average commodity forward/future price on oil ($/bbl) 64.8 59.7 - - - -  
Commodity options              
Notional value on power - - - - - - -
Average commodity option price on power (€/MWh) - - - - - -  


The following table reports the notional amount and fair value of instruments hedging commodity price risk on transactions outstanding at December 31, 2020 and December 31, 2019, broken down by type of commodity.

Millions of euro Notional amount Fair value assets Notional amount Fair value liabilities
  at Dec. 31, 2020 at Dec. 31, 2019 at Dec. 31, 2020 at Dec. 31, 2019 at Dec. 31, 2020 at Dec. 31, 2019 at Dec. 31, 2020 at Dec. 31, 2019
Derivatives                
Cash flow hedges                
Derivatives on power:                
- swaps 369 1,301 70 234 236 621 (56) (107)
- forwards/futures 2,066 280 361 34 571 448 (16) (44)
- options 70 - - - - - - -
Total derivatives on power 2,505 1,581 431 268 807 1,069 (72) (151)
Derivatives on coal/shipping:                
- swaps 34 - 11 7 - 253 - (54)
- forwards/futures - - - - - - - -
- options - - - - - - - -
Total derivatives on coal/shipping 34 - 11 7 - 253 - (54)
Derivatives on gas and oil:                
- swaps - 79 - 9 - 80 - (1)
- forwards/futures 1,674 2,823 456 694 2,189 812 (455) (298)
- options 11 - 18 - - - - -
Total derivatives on gas and oil 1,685 2,902 474 703 2,189 892 (455) (299)
Derivatives on CO2:                
- swaps - - - - - - - -
- forwards/futures 482 226 139 84 5 - - -
- options - - - - - - - -
Total derivatives on CO2 482 226 139 84 5 - - -
TOTAL COMMODITY DERIVATIVES 4,706 4,709 1,055 1,062 3,001 2,214 (527) (504)


The table reports the notional amount and fair value of derivatives hedging commodity price risk on at December 31, 2020 and at December 31, 2019, broken down by type of hedge.
The positive fair value of cash flow hedge derivatives on commodities regards derivatives on gas and oil commodities in the amount of €474 million, derivatives on CO2 (€139 million), derivatives on power (€431 million) and, to a lesser extent, hedges of coal purchases requested by the generation companies in the amount of €11 million.
The first category primarily regards hedges of fluctuations in the price of natural gas, for both purchases and sales, carried out for oil commodities and gas products.
The CO2 category mainly includes hedging transactions undertaken for Enel Group compliance purposes.
The power category mainly includes medium/long-term hedging transactions, especially in North America.
Cash flow hedge derivatives on commodities included in liabilities regard derivatives on gas and oil commodities in the amount of €455 million (mainly for derivatives hedging sales) and derivatives on power in the amount of €72 million.
The Group’s main hedge accounting transactions have not currently been affected by any particular adverse negative effects (e.g. discontinuation, ineffectiveness) associated with the COVID-19 emergency either globally or at the local economy level.

Cash flow hedge derivatives

The following table shows the cash flows expected in coming years from cash flow hedge derivatives on commodity price risk.

 Millions of euro Fair value Distribution of expected cash flows
  at Dec. 31, 2020 2021 2022 2023 2024 2025 Beyond
Cash flow hedge derivatives on commodities              
Positive fair value 1,055 626 131 34 18 19 227
Negative fair value (527) (392) (99) (23) (6) (6) (1)


The following table shows the impact of cash flow hedges of commodity price risk in the statement of financial position at December 31, 2020 and December 31, 2019.

 Millions of euro at Dec. 31, 2020 at Dec. 31, 2019
  Notional amount Carrying amount Fair value used to measure ineffectiveness in the year Notional amount Carrying amount Fair value used to measure ineffectiveness in the year
Power swaps 605 23 23 1,922 127 127
Coal/shipping swaps 34 11 11 253 (47) (47)
Gas and oil swaps - - - 159 8 8
             
Power forwards/futures 2,717 375 356 728 (10) (10)
Coal/shipping forwards/futures - - - - - -
Gas and oil forwards/futures 3,794 (20) (20) 3,635 396 396
CO2 forwards/futures 487 139 139 226 84 84
             
Power options 70 - -      
Total 7,707 528 509 6,923 558 558


The following table shows the impact of the hedged item of cash flow hedges in the statement of financial position at December 31, 2020 and December 31, 2019:

Millions of euro at Dec. 31, 2020 at Dec. 31, 2019
  Fair value used to measure ineffectiveness in the year Hedging reserve Hedging costs reserve Ineffective portion of carrying amount of CFH derivatives Fair value used to measure ineffectiveness in the year Hedging reserve Hedging costs reserve Ineffective portion of carrying amount of CFH derivatives
Future transactions in power (316) 374 - 24 (110) 110 - 7
Future transactions in coal/shipping (11) 11 - - 47 (47) - -
Future transactions in gas and oil 20 (20) - - (404) 404 - -
Future transactions in CO2 (139) 139 - - (84) 84 - -
Total (446) 504 - 24 (551) 551 - 7


Finally, note that for cash flow hedge derivatives on commodity prices, the amount reclassified in 2020 from other comprehensive income to profit or loss generated financial expense of €293 million gross of tax effects, while the previous year the financial income recognized amounted to €20 million.