Letter to shareholders and other stakeholders

Dear shareholders and stakeholders,

Our sustainable and fully integrated business model has allowed us to maximize shared value with all our stakeholders, even during a year characterized by the global recession triggered by the COVID-19 pandemic, confirming our leading role in the energy transition.
We are the largest private renewable energy operator in the world, with 49 GW of managed capacity, and the largest private electricity distribution company globally, with 74 million end users connected to the world’s most advanced digitalized grids. We manage the largest customer base in the world among private companies, with approximately 70 million customers.


Our strategy of basing all our business on digital platforms, together with industrial leadership, allows us to optimally seize opportunities arising from the energy transition now under way around the globe.
Our solid financial and sustainability performance in recent years has enhanced investor confidence in us. This is demonstrated by the 17% increase in the Enel stock price during the year, outperforming both the sector index (EURO STOXX Utilities: +10%) and the general Italian index (FTSE-MIB: -5%).
Enel’s leadership in sustainability is also confirmed worldwide by the Group’s presence in a number of important sustainability ratings, indices and rankings, including the AAA rating from MSCI and confirmation of our presence in the MSCI ESG Leaders Indexes, the Dow Jones World and Europe sustainability indices, the CDP Climate “A” List, the Vigeo Eiris rating in which the Group is ranked first in all sectors and the Euronext Vigeo Eiris 120 index, the ESG rating of Refinitiv and the FTSE4Good index, being the sector leader in both cases. Enel is also present in the three main indices that monitor corporate gender diversity performance: Bloomberg Gender Equality Index, Refinitiv Top 100 Diversity and Inclusion Index, and Equileap Gender Equality Top 100 ranking.
In 2020 we confirmed ourselves as the leading European utility by market capitalization and the second in the world.

The macroeconomic environment

The global economic environment in 2020 was characterized by an unprecedented recession, caused by the COVID-19 pandemic. The health crisis and the resulting restrictions have had a negative impact on supply and demand, leading to a contraction in world GDP estimated at around 3.7% in 2020.
The waves of the pandemic had a strong impact on the euro area, with GDP contracting by about 6.8% during the year, and on the United States, where the contraction in GDP was 3.5%.
In response to the recession, the European Central Bank has pursued an expansionary monetary policy, keeping its main interest rates at very low levels through the Pandemic Emergency Purchase Program. For its part, the European Commission is using the Next Generation EU program to channel €750 billion, divided into loans and subsidies, to the Member States.
The US government has also adopted major expansionary fiscal policies to support families and firms, and the Fed has implemented an unlimited public and private debt purchase program.
In Latin America, economic developments were highly influenced by the pandemic and the consequent responses of the individual countries, which varied considerably and in some cases exacerbated existing structural problems. The Chilean economy was among the most resilient thanks to its considerable openness, with exports driven by the Chinese recovery (GDP -6.1%), while in Brazil economic activity in 2020 was supported by a broad fiscal stimulus program in support of families (GDP -4.4%).
During 2020, the oil market was characterized by sharp volatility, with oil prices collapsing during the 1st Quarter due to weak demand, followed by a sharp rise in the 2nd Half of the year thanks to the reopening of the main world economies.
The gas market also experienced strong volatility during 2020. During the 1st Half of the year, the benchmarks of all the main European hubs contracted by almost 50% compared with the same period of 2019, while prices in the last quarter returned to the average levels seen in 2019.
The price of CO2 displayed excellent resilience. Recent statements by the European Commission about the central role of the ETS in achieving decarbonization and climate neutrality goals have supported the market, leaving prices on a gradually rising path towards long-term equilibrium.


Performance achieved in 2020, which was also the fruit of our business model, based on the central role of digitalization and platforms, key tools in dealing with the pandemic emergency, underscored the resilience of the Group from both an operational and financial point of view. Despite the economic crisis, the Group continued its growth path by continuing to generate value.
The 2020 financial year closed with ordinary EBITDA of €17.9 billion, in line with last year’s results. Ordinary profit, on which the dividend is calculated, reached €5.2 billion, up 9% compared with the previous year. The dividend for 2020 amounts to about €0.36 per share, up 8% compared with 2019. The FFO/net debt ratio, an indicator of financial strength, reached 25% at the end of the year. Net debt is equal to €45.4 billion, lower than the forecasts previously provided to the market.

Main developments

As in previous years, Enel reached a new record for renewables generation capacity in 2020, adding 3,106 MW of new renewables capacity globally, while at the same time increasing our pipeline of future renewables projects, reaching 180 GW worldwide at the end of the year.
The consolidated installed renewables capacity reached 45 GW, again exceeding thermal generation capacity, which fell to about 36 GW (-3.3 GW compared with 2019). Furthermore, 2020 was the first year in which consolidated renewable generation also surpassed thermal output, with 105.4 TWh. This is an important step in the Group’s journey towards a cleaner and more sustainable energy mix and an acceleration of the decarbonization process, which was also underscored by the rapid decline in specific CO2 emissions, which reached 214 gCO2eq/kWh, a decrease of 28% compared with 2019.
Thanks to our investments in grids and the simultaneous focus on the digitization of systems and processes, we continued to improve the quality of the service offered to our customers, reducing the average per-customer duration of outages by 12% compared with the previous year, registering a global SAIDI of 258.9 minutes. Furthermore, with the Grid Blue Sky project, we are completely overhauling the operating model of the distribution grids. The goal is to create a single global operating platform by 2022, which will enable the efficient integrated management of our grids in all the geographical areas in which we operate, supporting the sustainable development of the asset portfolio in order to maximize value. The benefits associated with the project are manifold. These include increasing the value of our services for customers, the rapid implementation of innovative solutions, an increase in the efficiency of our processes and the creation of shared value in the communities in which we operate.
During 2020, the development of public and private charging infrastructure for electric vehicles continued and, thanks in part to interoperability agreements, we have exceeded 185,000 charging points worldwide. The Group has also supported the electrification of public transport thanks to the supply of charging stations for electric buses, with Enel X closing 2020 with over 900 electric buses managed globally. We were once again the leader in terms of the number of lighting points operated, at 2.8 million worldwide. We also confirmed our ability to assist industrial customers in using energy more efficiently, bringing active demand management capacity to 6.0 GW and total battery capacity installed at those customers or directly connected with distribution and transmission grids to 123 MW.
With regard to the digital transformation, the decision to migrate 100% of applications to the cloud has enabled Enel to guarantee the continuity of supply of essential services even during the pandemic. The digitalization of plants and grids has enabled remote operation of our infrastructure, significantly reducing the number of interventions in the field. The complete transition to the cloud has also facilitated the adoption of continuous flexible working measures for all employees whose activities can be managed remotely. Between April and December 2020, approximately 53% of personnel worked remotely, supported by the robustness and resilience of the Group’s digital infrastructures and the enhanced IT equipment swiftly made available to those without appropriate devices, enabling a massive transition to working from home.
Among extraordinary corporate transactions, in December 2020, the Extraordinary Shareholders’ Meeting of Enel Américas approved the merger of EGP Américas into Enel Américas, as well as the removal of the limits in that company’s articles of association that currently do not permit a single shareholder to own more than 65% of shares with voting rights. In 2020, as part of the restructuring of the joint venture with General Electric, Enel Green Power North America closed the sale of 255 MW of hydroelectric capacity and 27 MW of wind capacity in Canada and 25 MW of hydroelectric capacity in the United States.
From a financial point of view, on September 1, 2020, an equity-accounted perpetual hybrid bond of €600 million was issued, the first of its kind for an Italian industrial group. At the same time, Enel also launched a voluntary purchase offer for hybrid bonds maturing in 2076 with a nominal value of £250 million.

In October, after the issue in 2019 of the world’s first general-purpose bonds linked to the United Nations Sustainable Development Goals (SDGs), Enel successfully launched a £500 million “Sustainability-Linked Bond”, the first of its kind in that currency. The issue is linked to the achievement of a target for the percentage of consolidated installed renewables capacity, in line with the commitment to achieve the United Nations SDGs. Thanks to its success on the market, Enel has obtained savings of about 15 basis points compared with financial instruments with the same characteristics but not linked to the pursuit of the SDGs.

Strategy and forecasts for 2021-2023

The energy transition, driven by the fight against climate change and facilitated by decarbonization, the electrification of energy consumption and digitalization, is revolutionizing not only the energy sector but all areas of the economy, in a world in which the role of electricity will be increasingly significant.
In this context, it is essential to extend the time horizon of our strategic vision to the medium and long term. Guided by this intuition, in November 2020 the Group presented the new Strategic Plan with a vision that reaches 2030, placing the acceleration of the energy transition at the center of the strategy, which, in enabling sustainable and profitable growth, offers the concrete prospect of simultaneously generating significant shared value for all stakeholders and a satisfactory return for shareholders.
With the new Strategic Plan, the Group has indicated its direction for the next ten years, mobilizing approximately €190 billion between direct and third-party investments, in order to achieve our objectives in a decade that promises to be full of opportunities, to be seized through two complementary business models: the traditional Ownership model, based on direct investments to support long-term sustainable development, in which platforms contribute to business growth and value maximization; and a new Stewardship model, in which the use of platforms enables new services, products and know-how by catalyzing third-party investments.
The 2021-2023 Strategic Plan is ideally placed as the first step in a growth path that spans the entire coming decade. The Group’s ambitions are reflected in a marked increase in investments, both direct and indirect, to enable the acceleration of trends in decarbonization and electrification.
In the 2021-2023 period, the Group expects to directly invest around €40 billion, of which €38 billion through the Ownership model, mainly in expanding and upgrading grids and developing renewables, and around €2 billion through the Stewardship model, while mobilizing an additional €8 billion in investment by third parties.
These investments will allow the Group to increase the renewables capacity it manages from around 49 GW in 2020 to around 68 GW at the end of 2023, with renewables capacity reaching around 70% of the total by the end of 2023.
The Group also plans to invest in improving the service quality and resilience of our distribution grids, in new connections and digitalization. The acceleration of investment will grow the Group’s regulatory asset base (RAB) by 14% to about €48 billion in 2023.
The remainder of the investments envisaged in the plan will be allocated to the retail businesses and Enel X, to support the electrification of consumption by offering new “beyond commodity” services through platforms, generating an increase in the value of B2C and B2B customers of 30% and 45%, respectively, and supporting the decarbonization of cities. In support of these objectives, by 2023 the Group plans to achieve some 780,000 charging points, 10.6 GW of active demand management capacity and 5,500 electric buses globally.
About 90% of 2021-2023 consolidated investment is in line with the United Nations SDGs and it is estimated that between 80% and 90% of investments will be aligned with the criteria of the European taxonomy, given their substantial contribution to climate change mitigation.
This testifies to how sustainable development represents the intrinsic basis of our strategy, helping to direct all our actions towards increasingly sustainable and consequently less risky choices and approaches.
The Group’s strategy is aligned with a target of reducing direct CO2 emissions to 82 gCO2eq/kWh by 2030, down 80% compared with 2017 in accordance with a scenario that limits global warming to 1.5 °C compared with pre-industrial levels, as certified by the Science Based Targets initiative (SBTi), and achieving carbon neutrality by 2050.
As for performance, the Group expects that ordinary EBITDA will reach between €20.7 and 21.3 billion by 2023, with a CAGR of 5%-6% over the results achieved in 2020. At the same time, ordinary profit is expected to reach between €6.5 and 6.7 billion, with a CAGR of between 8% and 9%. The intrinsic sustainability of our business model, combined with a determination to achieve strategic objectives, has enabled Enel to establish a guaranteed fixed dividend per share that will increase over the Plan period to €0.43 per share in 2023.