The following reports the main contingent assets and liabilities at December 31, 2020, which are not recognized in the consolidated financial statements as they do not meet the requirements provided for in IAS 37.
Brindisi Sud thermal generation plant - Criminal proceedings against Enel employees
A criminal proceeding was held before the Court of Brindisi concerning the Brindisi Sud thermal plant in which a number of employees of Enel Produzione – cited as a liable party in civil litigation – have been accused of causing criminal damage and dumping hazardous substances with regard to the alleged contamination of land adjacent to the plant with coal dust as a result of actions between 1999 and 2011. At the end of 2013, the accusations were extended to cover 2012 and 2013. As part of the proceeding, injured parties, including the Province and City of Brindisi, have submitted claims for total damages of about €1.4 billion. In its decision of October 26, 2016, the Court of Brindisi: (i) acquitted nine of the thirteen defendants (all employees of Enel Produzione) for not having committed the offense; (ii) ruled that it did not have to proceed as the offense was time-barred for two of the defendants; and (iii) convicted the remaining two defendants, sentencing them with all the allowances provided for by law to nine months’ imprisonment. With regard to payment of damages, the Court’s ruling also: (i) denied all claims of public parties and associations acting in the criminal proceeding to recover damages; and (ii) granted most of the claims filed by the private parties acting to recover damages, referring the latter to the civil courts for quantification without granting a provisional award. The convicted defendants and the civil defendant, Enel Produzione, as well as by one of the two employees for whom the expiry of the period of limitations had been declared, appealed the conviction. In a ruling issued on February 8, 2019, the Lecce Court of Appeal: (i) confirmed the trial court ruling regarding the criminal convictions of two Enel Produzione executives; (ii) denied the claims for damages of some private appellants; (iii) granted some claims for damages, which had been denied in the trial court, referring the parties, like the others – whose claims had been granted by the trial court – to the civil courts for quantification, without granting a provisional award; (iv) confirmed for the rest the ruling of the Court of Brindisi except for extending litigation costs to the Province of Brindisi, which had not been awarded damages at either the trial court or on appeal.
With a subsequent ruling, the Court of Appeal of Lecce granted the appeal lodged by the Province of Brindisi against the ruling, acknowledging that a material error had been made and therefore recognizing the generic entitlement of the Province to damages. The defendants filed an appeal against ruling with the Court of Cassation on June 22, 2019. The hearing initially scheduled for April 24, 2020 was postponed until October 1, 2020 owing to the COVID-19 health emergency. On that date, the Court of Cassation voided the ruling of the Court of Appeal of Lecce, with referral to another section of the same court for a new proceeding.
Criminal proceedings are also under way before the Courts of Reggio Calabria and Vibo Valentia against a number of employees of Enel Produzione for the offense of illegal waste disposal in connection with alleged violations concerning the disposal of waste from the Brindisi plant. Enel Produzione has not been cited as a liable party for civil damages.
The criminal proceedings before the Court of Reggio Calabria ended with the hearing of June 23, 2016. The court acquitted nearly all of the Enel defendants of the main charges because no crime was committed. Just one case was dismissed under the statute of limitations. Similarly, all of the remaining charges involving minor offenses were dismissed under the statute of limitations. The proceedings before the Court of Vibo Valentia are still pending and are currently in the testimony phase, as the court ruled that the offenses could not be dismissed under the statute of limitations. At a hearing on February 24, 2020, the Prosecution’s expert witness testified. Following the postponement of hearings in all criminal and civil proceedings as part of the measures to counter COVID-19, the hearings in this case resumed on September 7, 2020, when a number of the witnesses of the co-defendants testified. On October 22, 2020, an additional hearing was held to hear witness testimony. Arguments were initially scheduled to continue on November 19, 2020. However, due to the persistence of the health emergency, the hearing was then postponed to January 14, 2021, the date on which the legal counsel of the defendants were heard. The arguments of the public prosecutor and the civil parties were heard on February 4, 2021, while the discussion of the defense being scheduled for March 18 and 25, 2021.
Enel Energia and Servizio Elettrico Nazionale antitrust proceeding
On May 11, 2017, the Competition Authority announced the beginning proceedings for alleged abuse of a dominant position against Enel SpA (Enel), Enel Energia SpA (EE) and Servizio Elettrico Nazionale SpA (SEN), with the concomitant performance of inspections. The proceeding was initiated on the basis of complaints filed by the Italian Association of Energy Wholesalers and Traders (AIGET) and the company Green Network SpA (GN), as well as a number of complaints from individual consumers. According to the charges filed by the Competition Authority, the Enel Group, as an integrated participant in the distribution and sale of power on the regulated market and at a crucial phase of the liberalization of retail markets for residential and non- residential low-voltage customers, engaged in an exclusionary strategy, using a series of non-replicable commercial stratagems capable of hindering its non-integrated competitors to the benefit of the Group company operating on the free market (EE).
On December 20, 2018 the Competition Authority issued its final ruling, subsequently notified to the parties on January 8, 2019, with which it levied a fine on Enel SpA, SEN and EE of €93,084,790.50, for abuse of a dominant position in violation of Article 102 of the Treaty on the Functioning of the European Union (TFEU).
The disputed conduct consisted in the adoption of a strategy to exclude competitors from the free market for retail power supply on the part of the Group’s operating companies, in particular EE, who used the privacy consent given by consumers to channel their offers within the Group in order to contact SEN customers who were still being served on the regulated market.
With regard to other allegations made with the measure to initiate the proceeding, concerning the organization and performance of sales activities at physical locations (Enel Points and Enel Point Partner Shops) and winback policies reported by GN, the Competition Authority reached the conclusion that the preliminary findings did not provide sufficient evidence of any abusive conduct on the part of Enel Group companies.
The companies involved filed an appeal to void the ruling before the Lazio Regional Administrative Court. The decision of that court, filed on October 17, 2019, partially upheld the appeals filed by SEN and EE, declaring that the abusive conduct had been engaged in for a period of 1 year and 9 months, rather than the original period of 5 years and 5 months referred to in the penalty ruling of the Competition Authority and requiring that authority to recalculate the penalty in accordance with the criteria specified in the ruling. At the same time, the Regional Administrative Court denied Enel’s appeal concerning solely the reasons for the alleged joint and several liability of the Parent with SEN and EE, therefore without an autonomous financial impact on the recalculation of the penalty. With a measure November 27, 2019, the Competition Authority set the recalculated penalty at €27,529,786.46.
The rulings of the Regional Administrative Court were challenged on appeal before the Council of State by the three Enel Group companies and a precautionary request was presented to the Council of State asking for the suspension of the measure for recalculating the penalty levied by the Competition Authority. At the pre-trial hearing, held on February 20, 2020, this petition was not discussed in consideration of the supervening action of the Council of State to set a date for the hearing of the arguments in the dispute for May 21, 2020.
With an order of July 20, 2020, the Council of State (accepting a subordinate petition from the counsel defending the three companies), after the joinder of the three judgments, suspended the ruling and ordered that the issue be submitted for a preliminary ruling before the Court of Justice of the European Union (CJEU) pursuant to Article 267 of the TFEU, formulating a number of questions aimed at clarifying the interpretation of the concept of “abuse of a dominant position” to be applied to the present case. On September 11 and 18, 2020, the CJEU notified EE and SEN and Enel, respectively, of the initiation of a proceeding pursuant to Article 267 of the TFEU. The companies then filed briefs and are now waiting for the proceeding to continue.
Pending the opening of the proceedings before the CJEU, Enel, EE and SEN filed an additional precautionary petition to the Council of State asking for the suspension of the enforceability of the contested ruling of the Regional Administrative Court and the measure recalculating the penalty.
Following the precautionary hearing on November 11, 2020, with three separate orders with identical content – published on November 16 – the Council of State granted the request for suspension filed by the Enel companies and, as a guarantee of payment of the penalty in the event of an unfavorable final ruling for Enel, required the issue of a first demand surety in favor of the Competition Authority in an amount equal to that of the penalty suspended with the precautionary orders.
Subsequently, with a separate ruling, the Council of State also set the date of the final trial session of the appeal for November 11, 2021, believing that the suspended proceeding could be resumed by that date. The Company is therefore still awaiting the final decision.
Following an arbitration proceeding initiated by BEG SpA in Italy, Enelpower SpA obtained a ruling in its favor in 2002, which was upheld by the Court of Cassation in 2010, which entirely rejected the claim for damages with regard to alleged breach by Enelpower of an agreement concerning the construction of a hydroelectric power station in Albania. Subsequently, BEG, acting through its subsidiary Albania BEG Ambient Shpk (ABA), an Albanian company, filed suit against Enelpower and Enel SpA concerning the matter, obtaining a ruling from the District Court of Tirana, upheld by the Albanian Court of Cassation, ordering Enelpower and Enel to pay tortious damages of about €25 million for 2004 as well as an unspecified amount of tortious damages for subsequent years. Following the ruling, ABA demanded payment of more than €430 million from Enel.
With a ruling of June 16, 2015, the first level of adjudication was completed in the additional suit lodged by Enelpower and Enel with the Court of Rome asking the Court to ascertain the liability of BEG for having evaded compliance with the arbitration ruling issued in Italy in favor of Enelpower through the legal action taken by ABA. With this action, Enelpower and Enel asked the Court to find BEG liable and order it to pay damages in the amount that they could be required to pay to ABA in the event of the enforcement of the ruling issued by the Albanian courts. With the ruling, the Court of Rome found that BEG did not have standing to be sued, or alternatively, that the request was not admissible for lack of an interest for Enel and Enelpower to sue, as the Albanian ruling had not yet been declared enforceable in any court. The Court ordered the setting off of court costs. Enel and Enelpower appealed the ruling before the Rome Court of Appeal, asking that it be overturned in full. The hearing scheduled for February 18, 2021 was postponed until November 11, 2021.
On November 5, 2016, Enel and Enelpower filed a petition with the Albanian Court of Cassation, asking for the ruling issued by the District Court of Tirana on March 24, 2009 to be voided. The proceeding is still pending.
Proceedings undertaken by Albania BEG Ambient Shpk (ABA) to obtain enforcement of the ruling of the District Court of Tirana of March 24, 2009
ABA had initiated two proceedings requesting recognition and enforcement of the Albanian ruling before the courts of the State of New York and Ireland, which both ruled in favor of Enel and Enelpower, respectively, on February 23 and February 26, 2018. Accordingly, there are no lawsuits pending in Ireland or New York State.
In February 2012, ABA filed suit against Enel and Enelpower with the Tribunal de Grande Instance in Paris (TGI) in order to render the ruling of the Albanian court enforceable in France. Enel SpA and Enelpower SpA challenged the suit.
Following the beginning of the case before the TGI, again at the initiative of ABA, between 2012 and 2013 Enel France was served with two “Saise Conservatoire de Créances” (orders for the precautionary attachment of receivables) to conserve any receivables of Enel in respect of Enel France.
On January 29, 2018, the TGI issued a ruling in favor of Enel and Enelpower, denying ABA the recognition and enforcement of the Tirana court’s ruling in France for lack of the requirements under French law for the purposes of granting exequatur. Among other issues, the TGI ruled that: (i) the Albanian ruling conflicted with an existing decision, in this case the arbitration ruling of 2002 and that (ii) the fact that BEG sought to obtain in Albania what it was not able to obtain in the Italian arbitration proceeding, resubmitting the same claim through ABA, represented fraud. ABA appealed the ruling. The hearing before the Paris Court of Appeal was held on February 2, 2021 and a ruling is pending.
At the end of July 2014, ABA filed suit with the Court of Amsterdam to render the ruling of the Albanian court enforceable in the Netherlands. On June 29, 2016, the court filed its judgment, which: (i) ruled that the Albanian ruling meet the requirements for recognition and enforcement in the Netherlands; (ii) ordered Enel and Enelpower to pay €433,091,870.00 to ABA, in addition to costs and ancillary charges of €60,673.78; and (iii) denied ABA’s request to declare the ruling provisionally enforceable.
On June 29, 2016, Enel and Enelpower filed appeals against the first-level ruling of the Court of Amsterdam issued on the same date. On September 27, 2016, ABA also appealed the court’s ruling of June 29, 2016, to request the reversal of its partial loss on the merits. On April 11, 2017, the Amsterdam Court of Appeal granted the request of Enel and Enelpower to join to two pending appeals.
In a ruling of July 17, 2018, the Amsterdam Court of Appeal upheld the appeal advanced by Enel and Enelpower, ruling that the Albanian judgment cannot be recognized and enforced in the Netherlands. The Court of Appeal found that the Albanian decision was arbitrary and manifestly unreasonable and therefore contrary to Dutch public order. For these reasons, the court did not consider it necessary to analyze the additional arguments of Enel and Enelpower.
The proceeding before the Court of Appeal continued with regard to the subordinate question raised by ABA in the appeal proceedings, with which it is asking the court to rule on the merits of the dispute in Albania and in particular the alleged non-contractual liability of Enel and Enelpower in the failure to build the plant in Albania. On December 3, 2019, the Amsterdam Court of Appeal issued a ruling in which it quashed the trial court judgment of June 29, 2016, rejecting any claim made by ABA. The Court came to this conclusion after affirming its jurisdiction over ABA’s subordinate claim and re-analyzing the merits of the case under Albanian law. Enel and Enelpower are therefore not liable to pay any amount to ABA, which was in fact ordered by the Court of Appeal to reimburse the appellant companies for the losses incurred in illegitimate conservative seizures, to be quantified as part of a specific procedure, and the costs of the trial and appeal proceedings. On March 3, 2020, ABA filed an appeal with the Supreme Court of the Netherlands against the ruling of the Court of Appeal. On April 3, 2020, Enel and Enelpower appeared before the Supreme Court. Following the exchange of briefs between the parties, on July 17, 2020 the Supreme Court ordered the Advocate General to issue an opinion on the case. On February 5, 2021, the Advocate General issued an opinion favorable to Enel and Enelpower, calling for the denial the appeal filed by ABA. On February 19, 2021, ABA submitted a response to the opinion of the Advocate General. The issuance of the decision is pending.
In Luxembourg, again at the initiative of ABA, J.P. Morgan Bank Luxembourg SA was also served with an order for the precautionary attachment of any receivables of Enel SpA.
In parallel ABA filed a claim to obtain enforcement of the ruling of the Court of Tirana in that country. The proceeding is still under way and briefs are being exchanged between the parties. No ruling has been issued.
Environmental incentives - Spain
Following the Decision of the European Commission of November 27, 2017 on the issue of environmental incentives for thermal power plants, the European Commission’s Directorate-General for Competition opened an investigation pursuant to Article 108, paragraph 2, of the Treaty on the Functioning of the European Union (TFEU) in order to assess whether the environmental incentive for coal power plants provided for in Order ITC/3860/2007 represents State aid compatible with the internal market. According to a literal interpretation of that Decision, the Commission reached the preliminary conclusion that the incentive in question would constitute State aid pursuant to Article 107, paragraph 1, of the TFEU, expressing doubts about the compatibility of the incentive with the internal market while recognizing that the incentives are in line with the European Union’s environmental policy. On April 13, 2018, Endesa Generación SA, acting as an interested third party, submitted comments contesting this interpretation, while on July 30, 2018, it was learned that Gas Natural had appealed the decision of the Commission.
Bono Social - Spain
With the rulings of October 24 and 25, 2016 and November 2, 2016, the Spanish Supreme Court declared Article 45.4 of the Electricity Industry Law no. 24 of December 26, 2013 void for incompatibility with Directive 2009/72/EC of the European Parliament and of the Council of July 13, 2009, granting the appeals filed by Endesa against the obligation to finance the “Bono Social” (Social Bonus) mechanism. The Supreme Court recognized Endesa’s right to receive all amounts that had been paid to users, in addition to legal interest (equal to about €214 million), under the “Bono Social” system, provided for in the law declared void by the Supreme Court. The government challenged these rulings of the Supreme Court, requesting that they be overturned, but the related appeals were denied. Subsequently, the government initiated two proceedings before the Constitutional Court requesting the reopening of the Supreme Court proceedings so that the latter may ask for a preliminary ruling from the European Court of Justice (CJEU). The Constitutional Court granted the appeals and a preliminary ruling on the petition before the CJEU is pending. The government has not requested the repayment of any sum so far.
The CJEU had initially set the date for oral arguments of the preliminary question as October 8, 2020. Following the adoption of COVID-19 containment measures, the CJEU canceled this hearing, replacing it with the submission of written arguments. All parties, including Endesa, presented their respective written arguments by the deadline of November 13, 2020.
“Endesa I” industrial relations dispute - Spain
After a series of meetings of the Comisión Negociadora of the 5th Endesa Collective Bargaining Agreement (Comisión Negociadora) which began in October 2017 and continued throughout 2018, in view of the impossibility of reaching an agreement between the social partners, Endesa notified the workers and their union representatives that, with effect from January 1, 2019, the 4th Collective Bargaining Agreement must be considered terminated under the terms of the “framework guarantee contract” and the “agreement on the voluntary suspension or resolution of employment contracts in the period 2013-2018”, applying from that date the provisions of general labor law, as well as the applicable legal criteria established in the matter.
Despite the resumption of negotiations within the Comisión Negociadora in February 2019, the interpretative differences between Endesa and the trade union representatives regarding the effects of the resolution of the 4th Collective Bargaining Agreement with regard, in particular, to the social benefits granted to retired personnel, led to the initiation of a suit by the unions having representation in the company. On March 13, 2019 a hearing was held before the court of first instance, which on March 26, 2019, issued a ruling in favor of Endesa, upholding the company’s position concerning the legitimacy of abolishing certain social benefits for retired personnel as a consequence of the termination of the 4th Endesa Collective Bargaining Agreement. The unions appealed this decision before the Supreme Court, while the initial ruling remains provisionally enforceable. On June 19, 2019, Endesa submitted its defense. In order to submit the dispute to arbitration, in December 2019, Endesa’s largest union agreed to waive its appeal before the Supreme Court against the ruling of the court of first instance of March 26, 2019. The other trade unions involved refused to join the arbitration proceeding, electing to go ahead with the proceedings before the Supreme Court.
On January 21, 2020, the arbitration award was issued, with the amendment of the corresponding parts of the 5th Endesa Collective Bargaining Agreement, which was subsequently signed by the social partners. It entered force on January 23, 2020. On the same date, Endesa also signed two further collective bargaining agreements (a “framework guarantee contract” and an “agreement on voluntary measures to suspend or terminate employment contracts”) with all the unions present in the company. On June 17, 2020, 5th Endesa Collective Bargaining Agreement was published in the Spanish Official Journal (Boletín Oficial del Estado), taking full effect.
In view of the foregoing, the proceedings before the Supreme Court continue at the request of the three minority unions that had initially initiated the action together with the most representative union.
In parallel, numerous individual actions have been filed by retired staff and former employees who had agreed to participate in termination incentive agreements in order to obtain judicial confirmation that the termination of the 4th Endesa Collective Bargaining Agreement did not affect them. Currently, the majority of these proceedings have been suspended or are being suspended, pending the definition of the collective action pending before the Supreme Court, on whose outcome these proceedings depend.
“Endesa II” industrial relations dispute - Spain
On December 30, 2020, the Audiencia Nacional notified Endesa a petition for a “collective dispute” initiated by three trade unions with minority representation filed on December 16, 2020 concerning the cancellation of some “derogatory provisions” of the 5th Endesa Collective Bargaining Agreement. The plaintiffs claim that the contested “derogatory provisions” would imply the illegitimate abolition of social benefits and economic rights of workers. Endesa considers these provisions to be fully legitimate, in line with the arguments made during proceeding concerning the reduction of social benefits for retired personnel (ruling of the court of first instance of March 26, 2019, now under appeal before the Supreme Court). The conciliation hearing is scheduled for June 23, 2021.
Furnas-Tractebel litigation - Brazil
In 1998 the Brazilian company CIEN (now Enel CIEN) signed an agreement with Tractebel for the delivery of electricity from Argentina through its Argentina-Brazil interconnection line. As a result of Argentine regulatory changes introduced as a consequence of the economic crisis in 2002, CIEN was unable to make the electricity available to Tractebel.
In October 2009, Tractebel sued CIEN, which submitted its defense. CIEN cited force majeure as a result of the Argentine crisis as the main argument in its defense. Out of court, the Tractebel has indicated that it plans to acquire 30% of the interconnection line involved in the dispute. On February 14, 2019, CIEN received notice of an order beginning expert witness operation, which is still pending. The amount involved in the dispute is estimated at about R$118 million (about €28 million), plus unspecified damages.
For analogous reasons, in May 2010 Furnas had also filed suit against CIEN for failure to deliver electricity, requesting payment of about R$520 million (about €124 million), in addition to unspecified damages, seeking to acquire ownership (in this case 70%) of the interconnection line. The proceeding was decided in CIEN’s favor with a ruling of the Tribunal de Justiça with a definitive ruling of October 18, 2019, which denied all of the claims of Furnas.
Cibran litigation - Brazil
Companhia Brasileira de Antibióticos (Cibran) has filed six suits against the Enel Group company Ampla Energia e Serviços SA (Ampla)(1) to obtain damages for alleged losses incurred as a result of the interruption of electricity service by the Brazilian distribution company between 1987 and 2002, in addition to non-pecuniary damages. The Court ordered a unified technical appraisal for those cases, the findings of which were partly unfavorable to Ampla. The latter challenged the findings, asking for a new study, which led to the denial of part of Cibran’s petitions. Cibran subsequently appealed the decision and the ruling was in favor of Ampla.
The first suit, filed in 1999 and regarding the years from 1995 to 1999, was adjudicated in September 2014 when the court of first instance issued a ruling against Ampla, levying a fine of about R$200,000 (about €46,000) as well as other damages to be quantified at a later stage. Ampla appealed the ruling and the appeal was upheld by the Tribunal de Justiça. In response, on December 16, 2016, Cibran filed an appeal (recurso especial) before the Superior Tribunal de Justiça, which was denied on June 19, 2020. The ruling became definitive on August 24, 2020.
With regard to the second case, filed in 2006 and regarding the years from 1987 to 1994, on June 1, 2015, the courts issued a ruling ordering Ampla to pay R$80,000 Brazilian (about €19,000) in non-pecuniary damages as well as R$96,465,103 (about €23 million) in pecuniary damages, plus interest. On July 8, 2015 Ampla appealed the decision with the Tribunal de Justiça of Rio de Janeiro, which on November 6, 2019 issued a ruling granting Ampla’s petition and denying all of Cibran’s claims. On November 25, 2019, Cibran filed an appeal against the ruling of the Tribunal de Justiça of Rio de Janeiro, which was preliminarily denied on September 10, 2020. On January 29, 2021 Cibran appealed the decisions before the Superior Tribunal de Justiça. Decisions at first instance are still pending with regard to the remaining four suits for the years 2001 and 2002. The value of all the disputes is estimated at about R$605 million (about €103 million).
Coperva litigation - Brazil
As part of the project to expand the grid in rural areas of Brazil, in 1982 Companhia Energética do Ceará SA (Coelce), then owned by the Brazilian government and now an Enel Group company, had entered into contracts for the use of the grids of a number of cooperatives established specifically to pursue the expansion project. The contracts provided for the payment of a monthly fee by Coelce, which was also required to maintain the networks.
Those contracts, between cooperatives established in special circumstances and the then public-sector company, do not specifically identify the grids governed by the agreements, which has prompted a number of the cooperatives to sue Coelce asking for, among other things, a revision of the fees agreed in the contracts.
These actions include the suit filed by Cooperativa de Eletrificação Rural do Vale do Acarau Ltda (Coperva) with a value of about R$310 million (about €53 million). Coelce was granted rulings in its favor from the trial court and the court of appeal, but Coperva filed a further appeal (Embargo de Declaração) based on procedural issues, which was also denied by the appeal court in a ruling of January 11, 2016. On February 3, 2016, Coperva lodged an extraordinary appeal before the Superior Tribunal de Justiça (the court of third instance) against the appeal court ruling on the merits, which was granted on November 5, 2018 for the ruling issued in the previous appeal (Embargo de Declaração). On December 3, 2018, Enel filed an appeal (Agravo Interno) against this ruling of the Superior Tribunal de Justiça. The proceedings are currently pending.
AGM litigation - Brazil
In 1993, Celg-D(2), the Association of Municipalities of Goiás (AGM), the State of Goiás and the Banca di Goiás reached an agreement (convenio) for the payment of municipal debts to Celg-D through the transfer of the portion of ICMS - Imposto sobre Circulação de Mercadorias e Serviços (VAT) that the State would have transferred to those governments. In 2001 the parties to the agreement were sued by the individual municipal governments to obtain a ruling that the agreement was invalid, a position then upheld by the Supreme Federal Court on the grounds of the non-participation of the local governments themselves in the agreement process. In September 2004, Celg-D reached a settlement with 23 municipalities. Between 2007 and 2008, Celg-D was again sued on numerous occasions (there are currently 90 pending suits) seeking the restitution of amounts paid under the agreement. Despite the ruling that the agreement was void, Celg-D argues that the payment of the debts on the part of the local governments is legitimate, as electricity was supplied in accordance with the supply contracts and, accordingly, the claims for restitution of amounts paid should be denied.
The proceedings pending before the Goiás State Court include: (i) a suit filed by the Municipio de Aparecida de Goiânia, which is pending at the preliminary stage at first instance, for an amount of approximately R$624 million (approximately €106 million); (ii) a suit filed by the Municipio de Quirinópolis, also pending at the preliminary stage of the proceeding at first instance for an amount of about R$334 million (about €57 million); and (iii) a suit filed by the Municipio de Anápolis, submitted to the court of first instance after a failed attempt at conciliation between the parties, for an amount of approximately R$320 million (about €54 million).
The total value of the suits is equal to about R$3.5 billion (about €599 million). It is important to emphasize that the contingent liability deriving from this dispute is covered by the “Funac” provision established during the privatization of Celg-D.
ANEEL litigation - Brazil
In 2014, Eletropaulo(3) initiated an action before the federal courts seeking to void the administrative measure of ANEEL (the National Electricity Agency), which in 2012 retroactively introduced a negative coefficient to be applied in determining rates for the following regulatory period (2011-2015). With this provision, the Authority ordered the restitution of the value of some components of the network previously included in rates because they were considered non-existent and denied Eletropaulo’s request to include additional components in rates. On September 9, 2014, the administrative measure of ANEEL was suspended on a precautionary basis. The first-instance proceeding is in its preliminary stages and the value of the suit is R$1,093 million (about €186 million).
El Quimbo - Colombia
A number of legal actions (“acciones de grupo” and “acciones populares”) brought by residents and fishermen in the affected area are pending with regard to the El Quimbo project for the construction of a 400 MW hydroelectric plant in the region of Huila (Colombia). More specifically, the first collective action, currently in the preliminary stage, was brought by around 1,140 residents of the municipality of Garzón, who claim that the construction of the plant would reduce their business revenue by 30%. A second action was brought, between August 2011 and December 2012, by residents and businesses/associations of five municipalities of Huila claiming damages related to the closing of a bridge (Paso El Colegio). With regard to acciones populares, or class action lawsuits, in 2008 a suit was filed by a number of residents of the area demanding, among other things, that the environmental permit be suspended. As part of this action, on September 11, 2020, the Huila Court issued an unfavorable ruling against Emgesa, sentencing it to fulfill the obligations already provided for in the environmental license. ANLA has submitted a request for clarification of the ruling. Another acción popular was brought by a number of fish farming companies over the alleged impact that filling the Quimbo basin would have on fishing in the Betania basin downstream from Quimbo. After a number of precautionary rulings, on February 22, 2016, the Huila court issued a ruling allowing generation to continue for six months. The court ordered Emgesa to prepare a technical design that would ensure compliance with oxygen level requirements and to provide collateral of about 20,000,000,000 Colombian pesos (about €5.5 million).
The Huila court subsequently extended the six-month time limit, and therefore, in the absence of contrary court rulings the Quimbo plant is continuing to generate electricity as the oxygenation system installed by Emgesa has so far demonstrated that it can maintain the oxygen levels required by the court.
On March 22, 2018, ANLA and CAM jointly presented the final report on the monitoring of water quality downstream of the dam of the El Quimbo hydroelectric plant. Both authorities confirmed the compliance of Emgesa with the oxygen level requirements. On June 15, 2018, Emgesa filed its final pleadings. On January 12, 2021, it was learned that the ruling of first instance of the Court of Huila had been issued (it was subsequently notified to the company on February 1, 2021). The ruling, while acknowledging that the oxygenation system implemented by Emgesa has mitigated the risks associated with the protection of fauna in the Bethany basin, imposed a series of obligations on the environmental authorities involved, as well as on Emgesa itself. In particular, the latter is required to implement a decontamination project to ensure that the water in the basin does not generate risks for the flora and fauna of the river, which will be subject to verification by ANLA, and to make permanent the operation of the oxygenation system, adapting it to comply with the parameters established by ANLA. Emgesa will take all necessary actions to safeguard its rights.
Nivel de Tensión Uno proceedings - Colombia
This dispute involves an “acción de grupo” brought by Centro Médico de la Sabana hospital and other parties against Codensa seeking restitution of allegedly excess rates. The action is based upon the alleged failure of Codensa to apply a subsidized rate that they claim the users should have paid as Tensión Uno category users (voltage of less than 1 kV) and owners of infrastructure, as established in Resolution no. 82/2002, as amended by Resolution no. 97/2008. The suit is at a preliminary stage. The estimated value of the proceeding is about 337 billion Colombian pesos (about €96 million).
Arbitration proceedings in Colombia
On October 8, 2018 the Grupo Energía de Bogotá (GEB) (which holds about 51.5% of Emgesa and Codensa) announced that it had started arbitration proceedings before the Centro de Arbitraje y Conciliación de la Cámara de Comercio de Bogotá against Enel Américas SA for an alleged breach of contract in relation to the non-distribution of dividends in the 2016, 2017 and 2018 financial years for the companies Emgesa and Codensa and for the failure to comply with certain provisions of the shareholders’ agreement. The GEB is claiming damages of about €514 million plus interest. The preliminary phase has been completed and the procedure is currently suspended.
In parallel, GEB also initiated, respectively, 17 arbitration proceedings against Codensa and 20 against Emgesa, for a total of 37 pending disputes (now joined into two separate proceedings for each company), in an attempt to void the decisions of the Junta Directiva and shareholders’ meetings of the defendant companies for alleged violation of mandatory rules, defect of absolute nullity for illegality of motive and subject matter and alleged violation of shareholders’ agreements. On February 24, 2020, GEB filed a revision of the arbitration petition filed against Emgesa, including, among other things, claims concerning the failure to pursue the corporate purpose and abuse of the exercise of voting rights by Enel Américas and its directors. Emgesa filed a defense brief challenging GEB’s new claims. Both of the two suits launched against Emgesa and Codensa are currently suspended due to negotiations by agreement of the parties. The value of the disputes is undetermined and the proceedings are both in the preliminary phase.
Gabčíkovo dispute - Slovakia
Slovenské elektrárne (SE) is involved in a number of cases before the national courts concerning the 720 MW Gabčíkovo hydroelectric plant, which is administered by Vodohospodárska Výsatavba Štátny Podnik (VV) and whose operation and maintenance, as part of the privatization of SE in 2006, had been entrusted to SE for a period of 30 years under an operating agreement (the VEG Operating Agreement).
Immediately after the closing of the privatization, the Public Procurement Office (PPO) filed suit with the Court of Bratislava seeking to void the VEG Operating Agreement on the basis of alleged violations of the regulations governing public tenders, qualifying the contract as a service contract and as such governed by those regulations. In November 2011 the trial court ruled in favor of SE, whereupon the PPO immediately appealed the decision.
In parallel with the PPO action, VV also filed a number of suits, asking in particular for the voidance of the VEG Operating Agreement.
On December 12, 2014, VV withdrew unilaterally from the VEG Operating Agreement, notifying its termination on March 9, 2015, for breach of contract. On March 9, 2015, the decision of the appeals court overturned the ruling of the trial court and voided the contract as part of the action pursued by the PPO. SE lodged an extraordinary appeal against that decision before the Supreme Court. At a hearing of June 29, 2016, the Supreme Court denied the appeal. SE then appealed the ruling to the Constitutional Court, which denied the appeal on January 18, 2017.
In addition, SE lodged a request for arbitration with the Vienna International Arbitral Centre (VIAC) under the VEG Indemnity Agreement. Under that accord, which had been signed as part of the privatization between the National Property Fund (now MH Manazment) of the Slovak Republic and SE, the latter is entitled to an indemnity in the event of the early termination of the VEG Operating Agreement for reasons not attributable to SE. The arbitration court rejected the objection that it did not have jurisdiction and the arbitration proceeding continued to examine the merits of the case, with a ruling on the amount involved being deferred to any subsequent proceeding. Following the hearing held on February 2, 2017, the arbitration court issued its ruling denying the request of SE on June 30, 2017.
In parallel with the arbitration proceeding launched by SE, both VV and MH Manazment filed two suits in the Slovakian courts to void the VEG Indemnity Agreement owing to the alleged connection of the latter with the VEG Operating Agreement. These proceedings were joindered and, on September 27, 2017, a hearing was held before the Court of Bratislava in which the judge denied the request of the plaintiffs for procedural reasons. Both VV and MH Manazment appealed that decision. The appeal filed by MH Manazment was denied by the Bratislava Court of Appeal on June 8, 2019, upholding the decision of the court of first instance in favor of SE. Similarly, the appeal filed by VV was denied, upholding the trial court decision in favor of SE. VV filed a further appeal (dovolanie) against that decision on March 9, 2020, to which SE replied with a brief submitted on June 8, 2020. At the local level, SE was sued by VV for alleged unjustified enrichment (estimated at about €360 million plus interest) for the period from 2006 to 2015. SE filed counter-claims for all of the proceedings under way and, in particular: (i) for 2006, 2007 and 2008, at the hearing of June 26, 2019, the Court of Bratislava denied the claims of both parties for procedural reasons. The ruling in first instance was appealed by both VV and SE and the appeals for the years 2006-2008 are pending. As for the appeal proceedings relating to 2007, in November 2019, SE had raised a preliminary question which was rejected by the Court of Appeal on January 15, 2020. On August 18, 2020, SE filed an appeal with the Constitutional Court; (ii) for the proceedings relating to 2009, the Court of Bratislava had initially scheduled the first hearing for October 13, 2020, which was then postponed to November 24, 2020 and again postponed to March 23, 2021; (iii) for the proceeding relating to 2011, the Court set the first hearing for November 19, 2020, again postponed to a date to be decided due to the COVID-19 situation; (iv) with regard to the proceeding involving 2012, at the hearing of April 24, 2019, the Court denied the petition of VV, which filed an appeal on June 21, 2019 and the appeal is under way; (v) for the proceedings relating to the years 2010 and 2013, the exchange of final pleadings between the parties was concluded and the hearing at first instance, initially set for May 12, 2020, was postponed to October 6, 2020. On this date, VV has asked for the hearing to be postponed to November 6, 2020, and subsequently to February 23, 2021. The hearing was subsequently postponed to a date to be determined as a result of the epidemiological emergency; (vi) for the proceeding relating to 2014, the hearing at first instance initially scheduled for October 6, 2020 was first postponed to November 6, 2020, and then to February 23, 2021. The hearing was subsequently postponed to a date to be determined due to the health emergency.
Finally, in another proceeding before the Court of Bratislava, VV asked for SE to return the fee for the transfer from SE to VV of the technology assets of the Gabčíkovo plant as part of the privatization, with a value of about €43 million plus interest. The parties exchanged briefs. At the hearing on November 19, 2019, the court issued a preliminary decision on the case in which it noted the lack of standing of VV. At the hearing of October 1, 2020, the parties filed their final briefs and on December 18, 2020, the court issued a decision in favor of SE, rejecting VV’s claims. On January 7, 2021, VV filed an appeal against the decision, and the proceeding is pending.
Precautionary administrative proceeding and Chucas arbitration
PH Chucas SA (Chucas) is a special purpose entity established by Enel Green Power Costa Rica SA after it won a tender organized in 2007 by the Instituto Costarricense de Electricidad (ICE) for the construction of a 50 MW hydroelectric plant and the sale of the power generated by the plant to ICE under a build, operate and transfer contract (BOT).
On May 27, 2015, under the provisions of the BOT contract, Chucas initiated an arbitration proceeding before the Cámara Costarricense-Norteamericana de Comercio (AMCHAM CICA) seeking reimbursement of the additional costs incurred to build the plant and as a result of the delays in completing the project as well as voidance of the fine levied by ICE for alleged delays in finalizing the works. In a decision issued in December 2017, the arbitration board ruled in Chucas’ favor, granting recognition of the additional costs in the amount of about $113 million (about €91 million) and legal costs and ruling that the fines should not be paid. ICE appealed the arbitration ruling before the Supreme Court and on September 5, 2019 Chucas was notified of the ruling upholding the ICE’s appeal to void the arbitration ruling for a number of formal procedural reasons. On September 11, 2019, Chucas filed a “recurso de aclaración y adición” with the same court and it was partially upheld on June 8, 2020. The Court’s decision expanded on the ruling of September 5, 2019 with information concerning the admission of evidence deposited by Chucas without, however, modifying the decision concerning the voidance of the arbitration award. On July 15, 2020, Chucas filed a request for arbitration with the AMCHAM CICA for an estimated amount of about $240 million. On August 14, 2020, ICE filed a response to Chucas’s arbitration petition, requesting the dismissal of the proceeding for lack of jurisdiction on the part of the arbitration tribunal. The request was denied by AMCHAM CICA. In parallel, ICE filed precautionary appeals to the Tribunal Contencioso Administrativo against Chucas and the AMCHAM CICA in order to suspend the arbitration proceedings. These appeals were preliminarily upheld and subsequently revoked. Arbitration is therefore in the initial stages.
GasAtacama Chile - Chile
On August 4, 2016, the Superintendencia de Electricidad y Combustibles (SEC) fined GasAtacama Chile $8.3 million (about 5.8 billion Chilean pesos) for information provided by the latter to the CDEC-SING (Centro de Despacho Económico de Carga) between January 1, 2011 and October 29, 2015, relating to the Minimum Technical and Minimum Operating Time variables at the Atacama plant.
GasAtacama Chile appealed this measure with the SEC, which denied the appeal on November 2, 2016. GasAtacama Chile appealed this decision before the Santiago Court of Appeal, which on April 9, 2019, issued a ruling reducing the fine to $432,000 (about 290 million Chilean pesos). Both GasAtacama Chile and the SEC have appealed this decision before the Supreme Court of Chile. On June 28, 2019, a hearing was held for both parties to submit arguments and on January 15, 2020 the Supreme Court upheld the ruling of the Santiago Court of Appeal, leaving unchanged the reduction in the fine established by that court. The adjusted fine was paid on March 12, 2020.
In parallel, GasAtacama Chile also filed an appeal before the Constitutional Court, claiming that the legal provisions under which the SEC imposed the fine had been repealed at the time the penalty was issued. On July 17, 2018, the Constitutional Court rejected GasAtacama Chile’s appeal.
In relation to this issue, some operators of the Sistema Interconectado del Norte Grande (SING), including Aes Gener SA, Eléctrica Angamos SA and Engie Energía Chile SA, have initiated actions in order to obtain damages in an amount of about €58 million (the former) and about €141 million (the latter two). The disputes were joindered in part in a single proceeding and the preliminary phase is currently suspended under the state of national emergency declared in response to the COVID-19 pandemic.
Kino arbitration - Mexico
On September 16, 2020, Kino Contractor SA de Cv, Kino Facilities Manager SA de Cv and Enel SpA were notified of a request for arbitration filed by Parque Solar Don José SA de Cv, Villanueva Solar SA de Cv and Parque Solar Villanueva Tres SA de Cv (together, “Project Companies”) in which the Project Companies alleged the violation (i) by Kino Contractor of certain provisions of the EPC Contract and (ii) by Kino Facilities of certain provisions of the Asset Management Agreement, both contracts concerning solar projects owned by the three companies filing for arbitration.
Enel SpA which is the guarantor of the obligations of Kino Contractor and Kino Facilities deriving from the above contracts has also been called into the arbitration proceeding, but without specific claims being filed against it.
The Project Companies, in which Enel Green Power SpA is a non-controlling shareholder, are controlled by Caisse de Dépôt et Placement du Québec and CKD Infraestructura México SA de Cv. The proceeding is in the preliminary phase and the formation of the arbitration panel is in progress. The claim is provisionally quantified at about $140 million, while the Project Companies provisionally quantified their claim at about $15.4 million.
Tax litigation in Brazil
Withholding tax - Ampla
In 1998, Ampla Energia e Serviços SA (Ampla) financed the acquisition of Coelce with the issue of bonds in the amount of $350 million (“Fixed Rate Notes” - FRN) subscribed by its Panamanian subsidiary, which had been established to raise funds abroad. Under the special rules then in force, subject to maintaining the bond until 2008, the interest paid by Ampla to its subsidiary was not subject to withholding tax in Brazil.
However, the financial crisis of 1998 forced the Panamanian company to refinance itself with its Brazilian parent, which for that purpose obtained loans from local banks. The tax authorities considered this financing to be the equivalent of the early extinguishment of the bond, with the consequent loss of entitlement to the exemption from withholding tax.
In December 2005, Ampla carried out a spin-off that involved the transfer of the residual FRN debt and the associated rights and obligations to Ampla Investimentos e Serviços SA.
On November 6, 2012, the Câmara Superior de Recursos Fiscais (the highest level of administrative courts) issued a ruling against Ampla, for which the company promptly asked that body for clarifications. On October 15, 2013, Ampla was notified of the denial of the request for clarification (Embargo de Declaração), thereby upholding the previous adverse decision. The company provided security for the debt and on June 27, 2014 continued litigation before the ordinary courts (Tribunal de Justiça).
In December 2017, the court appointed an expert to examine the issue in greater detail in support of the future ruling. In September 2018, the expert submitted a report, requesting additional documentation.
In December 2018, the company provided the additional documentation and is awaiting the court’s assessment of the arguments and documents presented.
The amount involved in the dispute at December 31, 2020 was about €206 million.
PIS - Eletropaulo
In July 2000, Eletropaulo filed suit seeking a tax credit for PIS (Programa Integração Social) paid in application of regulations (Decree Laws 2.445/1988 and 2.449/1988) that were subsequently declared unconstitutional by the Supremo Tribunal Federal (STF). In May 2012, the Superior Tribunal de Justiça (STJ) issued a final ruling in favor of the company that recognized the right to the credit.
In 2002, before the issue of that favorable final ruling, the company had offset its credit against other federal taxes. This behavior was contested by the federal tax authorities but the company, claiming it had acted correctly, challenged in court the assessments issued by the federal tax authorities. Following defeat at the initial level of adjudication, the company appealed.
The amount involved in the dispute at December 31, 2020 was about €103 million.
ICMS - Ampla, Coelce and Eletropaulo
The States of Rio de Janeiro, Ceará and São Paulo issued a number of tax assessments against Ampla Energia e Serviços SA (for the years 1996-1999 and 2007-2017), Companhia Energética do Ceará(4) (2003, 2004, 2006-2012 and 2015) and Eletropaulo (2008-2019), challenging the deduction of ICMS (Imposto sobre Circulação de Mercadorias e Serviços) in relation to the purchase of certain non-current assets. The companies challenged the assessments, arguing that they correctly deducted the tax and asserting that the assets, the purchase of which generated the ICMS, are intended for use in their electricity distribution activities.
The companies are continuing to defend their actions at the various levels of adjudication.
The amount involved in the disputes totaled approximately €75 million at December 31, 2020.
Withholding tax - Endesa Brasil
On November 4, 2014, the Brazilian tax authorities issued an assessment against Endesa Brasil SA (now Enel Brasil SA) alleging the failure to apply withholding tax to payments of allegedly higher dividends to non-resident recipients.
More specifically, in 2009, Endesa Brasil, as a result of the first-time application of the IFRS, had derecognized goodwill, recognizing the effects in equity, on the basis of the correct application of the accounting standards it had adopted. The Brazilian tax authorities, however, asserted – during an audit – that the accounting treatment was incorrect and that the effects of the derecognition should have been recognized through profit or loss. As a result, the corresponding amount (about €202 million) was reclassified as a payment of income to non-residents and, therefore, subject to withholding tax of 15%.
It should be noted that the accounting treatment adopted by the company was agreed with the external auditor and also confirmed by a specific legal opinion issued by a local firm.
Following unfavorable rulings from the administrative courts, the company is continuing to defend its actions in court and the appropriateness of the accounting treatment.
The overall amount involved in the dispute at December 31, 2020 was about €56 million.
PIS - Eletropaulo
In December 1995, the Brazilian government increased the rate of the federal PIS (Programa Integração Social) tax from 0.50% to 0.65% with the issue of a provisional measure (Executive Provisional Order).
Subsequently, the provisional measure was re-issued five times before its definitive ratification into law in 1998. Under Brazilian legislation, an increase in the tax rate (or the establishment of a new tax) can only be ordered by law and take effect 90 days after its publication.
Eletropaulo therefore filed suit arguing that an increase in the tax rate would only have been effective 90 days after the last Provisional Order, claiming that the effects of the first four provisional measures should be considered void (since they were never ratified into law). This dispute ended in April 2008 with recognition of the validity of the increase in the PIS rate starting from the first provisional measure.
In May 2008, the Brazilian tax authorities filed a suit against Eletropaulo to request payment of taxes corresponding to the rate increase from March 1996 to December 1998. Eletropaulo has fought the request at the various levels of adjudication, arguing that the time limit for the issue of the notice of assessment had lapsed. In particular, since more than five years have passed since the taxable event (December 1995, the date of the first provisional measure) without issuing any formal instrument, the right of the tax authorities to request the payment of additional taxes and the authority to undertake legal action to obtain payment have been challenged.
In 2017, following the unfavorable decisions issued in previous rulings, Eletropaulo filed an appeal in defense of its rights and its actions with the Superior Tribunal de Justiça (STJ) and the Supremo Tribunal Federal (STF). The proceedings are still pending while the amounts subject to dispute have been covered by a bank guarantee.
With regard to the request of the Office of the Attorney General of the Brazilian National Treasury Department to replace the bank guarantee with a deposit in court, the court of second instance granted the petition. The company therefore replaced the bank guarantee with a cash deposit and filed a clarification motion against the related decision, which is currently awaiting a decision.
The overall amount involved in the dispute at December 31, 2020 was about €38 million.
ICMS - Coelce
The State of Ceará has filed various tax assessments against Companhia Energética do Ceará SA over the years (for tax periods from 2005 to 2014), contesting the determination of the deductible portion of the ICMS (Imposto sobre Circulação de Mercadorias e Serviços) and in particular the method of calculation of the pro-rata deduction with reference to the revenue deriving from the application of a special rate envisaged by the Brazilian government for the sale of electricity to low-income households (Baixa Renda).
The company has appealed the individual assessments, arguing that the tax deduction was calculated correctly. The company is defending its actions in the various levels of jurisdiction.
The overall amount involved in the dispute at December 31, 2020 was about €39 million.
FINSOCIAL - Eletropaulo
Following a final ruling issued by the Federal Regional Court on September 11, 2011, Eletropaulo was recognized the right to compensation for certain FINSOCIAL credits (social contributions) relating to sums paid from September 1989 to March 1992.
Despite the expiration of the relative statute of limitations, the Federal Tax Authority contested the determination of some credits and rejected the corresponding offsetting, issuing tax assessments that the company promptly challenged in the administrative courts, defending the legitimacy of its calculations and actions.
After an unfavorable ruling at first instance, the company filed an appeal before the administrative court of second instance.
The overall amount involved in the dispute at December 31, 2020 was about €36 million.
Tax litigation in Spain
Income tax - Enel Iberia, Endesa and subsidiaries
In 2018, the Spanish tax authorities completed a general audit involving the companies of the Group participating in the Spanish tax consolidation mechanism. This audit, which began in 2016, involved corporate income tax, value added tax and withholding taxes (mainly for the years 2012 to 2014).
With reference to the main claims, the companies involved have challenged the related assessments at the first administrative level (Tribunal Económico-Administrativo Central - TEAC), defending the correctness of their actions.
With regard to the disputes concerning corporate income tax, the issues for which an unfavorable outcome is considered possible amounted to about €151 million at December 31, 2020: (i) Enel Iberia is defending the appropriateness of the criterion adopted for determining the deductibility of capital losses deriving from stock sales (around €103 million) and certain financial expense (around €18 million); (ii) Endesa and its subsidiaries are mainly defending the appropriateness of the criteria adopted for the deductibility of certain financial expense (about €24 million) and costs for decommissioning nuclear power plants (about €6 million).
Income taxes - Enel Green Power España SL
On June 7, 2017, the Spanish tax authorities issued a notice of assessment to Enel Green Power España SL, contesting the treatment of the merger of Enel Unión Fenosa Renovables SA (“EUFER”) into Enel Green Power España SL in 2011 as a tax neutral transaction, asserting that the transaction had no valid economic reason.
On July 6, 2017, the company appealed the assessment at the first administrative level (Tribunal Económico-Administrativo Central - TEAC), defending the appropriateness of the tax treatment applied to the merger. The company has provided the supporting documentation demonstrating the synergies achieved as a result of the merger in order to prove the existence of a valid economic reason for the transaction. On December 10, 2019, the TEAC denied the appeal and the company is continuing to defend its actions in court (Audiencia Nacional).
The overall amount involved in the dispute at December 31, 2020 was about €95 million.
Tax litigation in Italy
Withholding tax - Enel Servizio Elettrico Nazionale
As a result of a tax audit initiated in March 2018 and following a subsequent investigation conducted with questionnaires submitted to the banks involved as assignees in certain transfers of receivables from Servizio Elettrico Nazionale SpA (SEN) in respect of mass market customers under a framework agreement, on December 19, 2018, the Revenue Agency Regional Directorate of Lazio Large Taxpayers Office, notified the company of an assessment in respect of the alleged violation of withholding tax obligations relating to the amounts paid to the banks as part of the aforementioned transfers in 2013.
In particular, the dispute arises from an assessment by the Office that: (i) reclassified, for tax purposes only, the assignment of receivables as a financing transaction; (ii) asserted an alleged withholding obligation for the company commensurate with the cost of the transaction (as the difference between the nominal value of the assigned receivables and the transfer price), reconstructing the subsequent transactions involving the assigned receivables (further sales and/or securitizations with non-residents carried out by the banks), in which the company had no role.
In the first stages of the proceeding, which arose following SEN’s appeal of the assessment, the company’s objections concerning the illegitimacy of the Office’s reclassification of the transaction for tax purposes and, consequently, of the payment flows were not upheld, despite significant procedural violations in the assessment activity.
Believing that it has valid legal grounds to continue the dispute, the company filed an appeal with the Court of Cassation, asserting the illegitimacy of the tax claim for violation and false application of the rules that, in the view of the trial court, permit the classification of the income generated by the assignment of receivables as “property income”, which, consequently, would require SEN to apply withholding tax.
The overall amount involved in the dispute at December 31, 2020 is about €81 million.
(1) The trading name of Ampla is Enel Distribuição Rio de Janeiro.
(2) The trading name of Celg-D is Enel Distribuição Goiás.
(3) The trading name of Eletropaulo is Enel Distribuição São Paulo.
(4) The trading name of Coelce is Enel Distribuição Ceará.