Analysis of the Group’s financial position and financial structure

87772
million
NET CAPITAL EMPLOYED
45415
million
NET FINANCIAL DEBT
33
%
SUSTAINABLE FINANCING
10197
million
TOTAL CAPITAL EXPENDITURE

Analysis of the Group’s financial position

Millions of euro        
  at Dec. 31, 2020 at Dec. 31, 2019 Change
Net non-current assets:        
- property, plant and equipment and intangible assets 96,489 99,010 (2,521) -2.5%
- goodwill 13,779 14,241 (462) -3.2%
- equity-accounted investments 861 1,682 (821) -48.8%
- other net non-current assets/(liabilities) (6,807) (5,022) (1,785) -35.5%
Total net non-current assets 104,322 109,911 (5,589) -5.1%
Net working capital:        
- trade receivables 12,046 13,083 (1,037) -7.9%
- inventories 2,401 2,531 (130) -5.1%
- net receivables due from institutional market operators (2,755) (3,775) 1,020 27.0%
- other net current assets/(liabilities) (6,977) (7,282) 305 4.2%
- trade payables (12,859) (12,960) 101 0.8%
Total net working capital (8,144) (8,403) 259 3.1%
Gross capital employed 96,178 101,508 (5,330) -5.3%
Provisions:        
- employee benefits (2,964) (3,771) 807 21.4%
- provisions for risks and charges and net deferred taxes (6,050) (5,722) (328) -5.7%
Total provisions (9,014) (9,493) 479 5.0%
Net assets held for sale 608 98 510 -
Net capital employed 87,772 92,113 (4,341) -4.7%
Total equity 42,357 46,938 (4,581) -9.8%
Net financial debt 45,415 45,175 240 0.5%

Property, plant, equipment, and intangible assets decreased as a result of adverse exchange rate developments (€5,873 million), mainly in Latin America, and depreciation, amortization and impairment losses for the year (€6,906 million), These factors were partially offset by capital expenditure during the period (€9,548 million) and changes in the consolidation scope (€106 million), related mainly to the acquisition by Enel X of a controlling interest in Paytipper and the acquisition of a number of companies in the renewable energy segment in Spain and Italy. These effects were compounded by the value adjustment of assets in Argentina due to hyperinflation.
Goodwill decreased following the impairment loss recognized in Argentina in the amount of €253 million and unfavorable exchange rate developments, particularly in Brazil, in the amount of €178 million. 

Equity-accounted investments decreased mainly as a result of the impairment loss on the equity investment held in Slovak Power Holding (-€385 million) in relation to the change in the formula to calculate the sale price called for by contract under certain conditions, net of results for the year.


Net assets held for sale refer mainly to a number of projects in South Africa for which there is a binding offer for their future sale, as well as assets held in Bulgaria, which were sold in January 2021, and the equity-accounted investment in OpEn Fiber.

Net capital employed came to €87,772 million at December 31, 2020 and was funded by equity attributable to owners of the Parent and non-controlling interests in the amount of €42,357 million and net financial debt of €45,415 million. The debt-to-equity ratio at December 31, 2020, was 1.07 (compared with 0.96 at December 31, 2019).

Analysis of the Group’s financial structure

NET FINANCIAL DEBT

The following schedule shows the composition of and changes in net financial debt.

Millions of euro        
  at Dec. 31, 2020 at Dec. 31, 2019 Change
Long-term debt:        
 - bank borrowings 8,663 8,407 256 3.0%
 - bonds 38,357 43,294 (4,937) -11.4%
 - other borrowings 2,499 2,473 26 1.1%
Long-term debt 49,519 54,174 (4,655) -8.6%
Long-term financial assets and securities (2,745) (3,185) 440 13.8%
Net long-term debt 46,774 50,989 (4,215) -8.3%
Short-term debt        
Bank borrowings:        
- current portion of long-term bank borrowings 1,369 1,121 248 22.1%
- other short-term bank borrowings 711 579 132 22.8%
Short-term bank borrowings 2,080 1,700 380 22.4%
Bonds (current portion) 1,412 1,906 (494) -25.9%
Other borrowings (current portion) 387 382 5 1.3%
Commercial paper 4,854 2,284 2,570 -
Cash collateral on derivatives and other financing 370 750 (380) -50.7%
Other short-term financial borrowings(1) 415 351 64 18.2%
Other short-term debt 7,438 5,673 1,765 31.1%
Long-term loan assets (short-term portion) (1,428) (1,585) 157 9.9%
Loan assets - cash collateral (3,223) (2,153) (1,070) -49.7%
Other short-term financial assets (253) (369) 116 31.4%
Cash and cash equivalents with banks and short-term securities (5,973) (9,080) 3,107 34.2%
Cash and cash equivalents and short-term financial assets (10,877) (13,187) 2,310 17.5%
Net short-term debt (1,359) (5,814) 4,455 -76.6%
NET FINANCIAL DEBT 45,415 45,175 240 0.5%
Net financial debt of Assets held for sale 646 - 646 -

(1) Includes current financial borrowings included under “Other current financial liabilities”.

Net financial debt, in the amount of €45,415 million at December 31, 2020, increased by €240 million over December 31, 2019. The decline in gross financial debt was more than offset by the decline in cash and financial assets. More specifically, this was due mainly to the following factors: (i) investment needs for the year (€10,197 million), including contract assets; (ii) the payment of dividends totaling €4,742 million; and (iii) extraordinary transactions in non-controlling interests to acquire additional stakes in Enel Américas and Enel Chile (€1,065 million).

Cash flows from operating activities (€11,508 million), the issue of perpetual hybrid bonds (€592 million, net of transaction costs), the conversion of hybrid bonds into perpetual hybrid bonds (€1,794 million, net of transaction costs) and the impact of favorable exchange rate developments on debt denominated in foreign currencies partially offset cash needs related to the factors listed above.

Gross financial debt as at December 31, 2020, came to €59,037 million, down €2,510 million from the previous year.

GROSS FINANCIAL DEBT

Millions of euro at Dec. 31, 2020 at Dec. 31, 2019
  Gross long-term debt Gross short-term debt Gross debt Gross long-term debt Gross short-term debt Gross debt
Gross financial debt 52,687 6,350 59,037 57,583 3,964 61,547
of which:            
sustainable financing 15,748 3,901 19,649 13,758 - 13,758
Sustainable financing/Total gross debt (%)     33%     22%

 

More specifically, gross long-term financial debt (including the current portion) amounted to €52,687 million, of which €15,748 million in sustainable financing, and breaks down as follows:

  • bonds in the amount of €39,769 million, of which €7,710 million related to sustainable bonds, a decrease of €5,431 million compared with December 31, 2019. The new bond issues, including a bond of £500 million (equivalent to €557 million) linked to sustainability objectives issued by Enel Finance International in October 2020, were easily offset by redemptions, positive exchange rate developments and the accounting effects of the consent solicitation directed at the holders of three non-convertible subordinated hybrid bonds denominated in euros in order to align their features with those of new issues, for a total amount of €1,797 million. More specifically, the main change to those instruments regarded their maturity, which was transformed from fixed to perpetual, which means that they will be redeemed only in the event of liquidation. As a result, those bonds are no longer recognized as debt instruments but as equity instruments;
  • bank borrowings in the amount of €10,032 million, of which €8,038 million related to sustainable financing. These borrowings increased by €504 million compared with the previous year due mainly to the use of new financing, only partially offset by exchange gains and repayments during the year. New bank borrowings include:
    • €1,000 million in respect of the use of a floating-rate loan granted to Enel SpA linked to sustainability goals;
    • €300 million in respect of a floating-rate loans granted to Endesa linked to sustainability goals;
    • $340 million (equivalent to €277 million) in respect of the use of a floating-rate loan granted to Enel Finance America linked to sustainability goals;
    • €250 million in respect of the use of a floating-rate loan granted to e-distribuzione by the European Investment Bank linked to sustainability goals;
  • other borrowings in the amount of €2,886 million, essentially unchanged from the previous year.

Gross short-term financial debt increased by €2,386 million compared with December 31, 2019, to €6,350 million and mainly includes commercial paper in the amount of €4,854 million, of which €3,901 million linked to sustainability goals issued by Enel Finance International and Endesa.

Cash and cash equivalents and short-term financial assets amounted to €13,622 million, a decrease of €2,750 million compared with the end of 2019, due mainly to the decrease in cash and cash equivalents with banks and short-term securities totaling €3,107 million.

CASH FLOWS

Millions of euro    
  2020 2019 Change
Cash and cash equivalents at the beginning of the year(1) 9,080 6,714 2,366
Cash flows from operating activities 11,508 11,251 257
Cash flows used in investing activities (10,117) (9,115) (1,002)
Cash flows from/(used in) financing activities (3,972) 306 (4,278)
Effect of exchange differences on cash and cash equivalents (497) (76) (421)
Cash and cash equivalents at the end of the year(2) 6,002 9,080 (3,078)

(1) Of which, cash and cash equivalents in the amount of €9,029 million at January 1, 2020 (€6,630 million at January 1, 2019), short-term securities in the amount of €51 million at January 1, 2020 (€63 million at January 1, 2019), and cash and cash equivalents pertaining to assets held for sale in the amount of €21 million at January 1, 2019.
(2) Of which, cash and cash equivalents in the amount of €5,906 million at December 31, 2020 (€9,029 million at December 31, 2019), short-term securities in the amount of €67 million at December 31, 2020 (€51 million at December 31, 2019), and cash and cash equivalents pertaining to assets held for sale in the amount of €29 million at December 31, 2020.

Cash flows from operating activities for 2020 were a positive €11,508 million, up €257 million on the previous year due mainly to a decrease in financial expense paid, lower taxes paid and a decrease in the use of provisions for risks and charges, which offset the change in the gross operating profit and the increase in cash requirements connected with the change in net working capital.

Cash flows used in investing activities for 2020 amounted to €10,117 million, while they amounted to €9,115 million in 2019.
Investments in property, plant and equipment, intangible assets, investment property and contract assets totaled €10,197 million, an increase compared with the previous year. For more details, please see the following section.
Investments in entities (or business units) less cash and cash equivalents acquired amounted to €33 million and mainly included the acquisition of 100% of Parque Eólico Tico SLU, Tico Solar 1 SLU and Tico Solar 2 SLU by Enel Green Power España and the acquisition of 100% of Suggestion Power Unipessoal Lda by Endesa Generación Portugal. In 2019, this aggregate mainly included the acquisition, by EGPNA (now Enel North America), of 100% of seven renewable energy plants from EGPNA REP, a 50/50 joint venture between EGPNA and General Electric Capital’s Energy Financial Services.
Disposals of entities and business units, net of cash and cash equivalents sold, generated cash flows of €154 million and mainly regarded the sale by Enel North America of a number of companies that owned hydroelectric plants and were measured using the equity method; the sale by Endesa of 80% of its stake in Endesa Soluciones; the sale of a number of storage facilities in North America; and the collection of a receivable related to the sale last year of the Reftinskaya coal-fired plant in Russia (net of the payment of a residual VAT liability related to the sale). In 2019, this aggregate referred mainly to the sale of 100% of three solar plants in Brazil; the sale of the business unit comprising the Mercure biomass plant; and the disposal by EGPNA (now Enel North America) of 30% of its stake in the EGPNA REP joint venture, which held a number of wind energy project development companies.

Cash flows used in other investing activities in 2020 amounted to €41 million, essentially regarding the capital contribution to the joint venture OpEn Fiber, partially offset by minor divestments, mainly in Italy, Iberia and Latin America.

Cash flows used in financing activities amounted to €3,972 million, compared with cash flows from financing activities of €306 million in 2019. Cash flows for 2020 essentially reflected:

  • the payment of dividends in the amount of €4,742 million;
  • transactions in non-controlling interests in the amount of €1,067 million, mainly related to increasing the stakes held in Enel Américas and Enel Chile (€1,065 million) through a number of share swaps entered into with a leading financial institution;
  • an increase as the net effect of repayments and new borrowing and other changes in financial debt in the amount of €1,262 million;
  • the generation of liquidity in the amount of €588 million with the issue of a non-convertible subordinated perpetual hybrid bond, net of transaction costs associated with the issue and the transaction costs connected with the conversion of a number of bonds into perpetual hybrid bonds.

In 2020, cash flows from operating activities in the amount of €11,508 million were sufficient to meet only a part of the funding needs for investment activities in the amount of €10,117 million and financing activities in the amount of €3,972 million. The difference was reflected in a decrease in cash and cash equivalents, which amounted to €6,002 million at December 31, 2020, compared with €9,080 million at the end of 2019. This change also reflects the impact of adverse developments in the exchange rates of the various local currencies with respect to the euro in the amount of €497 million.

CAPITAL EXPENDITURE

Millions of euro      
  2020 2019 Change
Thermal Generation and Trading 694 851 (157) -18.4%
Enel Green Power 4,629 4,293(1) 336 7.8%
Infrastructure and Networks 3,937 3,905 32 0.8%
End-user Markets 460 449 11 2.4%
Enel X 303 270 33 12.2%
Services 103 134 (31) -23.1%
Other, eliminations and adjustments 71 45 26 57.8%
Total 10,197 9,947 250 2.5%

(1) The figure does not include €4 million regarding units classified as “held for sale”.

Capital expenditure increased by €250 million on the previous year.
In line with the Paris Agreement on the reduction of CO2 emissions, and guided by our energy efficiency and energy transition objectives, the Enel Group has invested primarily in renewable energy. More specifically, the increase mainly involved Chile (€447 million), the United States (€447 million), South Africa (€143 million), Russia (€74 million), India (€47 million), Italy (€43 million) and Brazil (€20 million, net of the significant adverse impact of exchange rate developments in the amount of €241 million). These increases were only partially offset by a decrease in investment in Iberia (€305 million), Mexico (€334 million), Canada (€84 million), Greece (€98 million), and Australia (€25 million).
In order to enhance grid resilience in response to increasingly volatile weather events, investment in electricity distribution also increased.
Investment in distribution increased in Italy (€213 million) for quality and remote control projects and in Romania (€13 million) for efforts related to service quality and new connections. These increases were primarily offset by reductions in capital expenditure in South America (€179 million, especially in Argentina, Colombia and Brazil, with the latter primarily reflecting adverse exchange rate developments) and in Spain. Capital expenditure on electronic meters decreased due to a slowdown in the mass replacement effort as a result of the pandemic.
Capital expenditure by Enel X increased in Latin America in relation to the e-Bus project in Colombia and in Italy due to increased investment in public lighting and the development of the e-Home and Vivi Meglio businesses. These effects were partially offset by decreased capital expenditure on storage distributed energy and demand response in the United States and on the e-Home business in Spain, due mainly to a change in business model and to a slowing of capital expenditure in response to COVID-19.
Investment in thermal generation plants and trading decreased, especially in Iberia (€57 million) and Latin America (€73 million).

With regard to capital expenditure, the results of the alignment of this metric with the European taxonomy are reported as previously specified in the section “European Union taxonomy”.

Eligible capital expenditure under the European taxonomy

Elegible activities

56,1%

42,0%

1,9%

RESULT EXCLUDING ACTIVITIES NOT COVERED FROM THE TAXONOMY

9,2

Billions of euro

 

In 2020, 80.3% of capital expenditure was generated by business activities that meet climate change mitigation criteria, compared with 76.8% in 2019. Excluding activities that are currently not covered by the European taxonomy regulation, 88.8% of capital expenditure was eligible.