Thermal Generation and Trading

39.0
GW
NET EFFICIENT INSTALLED CAPACITY
101.7
TWh
NET ELECTRICITY GENERATION
2.5
%
“COAL” REVENUE
1,700
million
GROSS OPERATING PROFIT

Operations

NET ELECTRICITY GENERATION

Millions of kWh      
  2020 2019 Change
Coal plants 13,155 37,592 (24,437) -65.0%
Fuel-oil and turbo-gas plants 19,401 20,887 (1,486) -7.1%
Combined-cycle plants 43,353 44,980 (1,627) -3.6%
Nuclear plants 25,839 26,279 (440) -1.7%
Total net generation 101,748 129,738 (27,990) -21.6%
- of which Italy 19,044 22,604 (3,560) -15.7%
- of which Iberia 42,853 51,312 (8,459) -16.5%
- of which Latin America 21,764 23,388 (1,624) -6.9%
- of which Europe 18,087 32,434 (14,347) -44.2%

The decrease in net electricity generation is essentially attributable to a sharp reduction in coal-fired generation (24,437 kWh), mainly in Russia (13,333 million kWh) following the sale on October 1, 2019 of the Reftinskaya GRES coal-fired plant, as well as in Iberia (6,210 million kWh), Italy (3,672 million kWh), and Chile (1,280 million kWh) in response to the acceleration of the energy transition. Generation at other high-emission plants generally decreased while renewable generation increased. More specifically, generation at fuel-oil and turbo-gas plants decreased by 1,486 million kWh, while combined-cycle plants saw a reduction of 1,627 million kWh.

NET EFFICIENT INSTALLED CAPACITY

MW      
  2020 2019 Change
Coal plants 8,903 11,695 (2,792) -23.9%
Fuel-oil and turbo-gas plants 11,711 12,211 (500) -4.1%
Combined-cycle plants 15,009 14,991 18 0.1%
Nuclear plants 3,328 3,318 10 0.3%
Total 38,951 42,215 (3,264) -7.7%
- of which Italy 12,414 13,480 (1,066) -7.9%
- of which Iberia 13,871 15,957 (2,086) -13.1%
- of which Latin America 7,406 7,523 (117) -1.6%
- of which Europe 5,260 5,255 5 0.1%

 
Compared with 2019, the 3,264 MW decrease in net efficient installed capacity was primarily due to the decommissioning of 3,023 MW in coal, fuel-oil and turbo-gas plants in Spain and Italy.

Performance(1)

Millions of euro      
  2020 2019 Change
Revenue 20,804 32,012 (11,208) -35.0%
Gross operating profit 1,700 1,364 336 24.6%
Ordinary gross operating profit 2,230 1,585 645 40.7%
Operating profit/(loss) 15 (3,525) 3,540 -
Capital expenditure 694 851 (157) -18.4%

(1) The comparative figures for 2019 have been adjusted to take account of the fact that as from 2020 in South America and Mexico amounts attributable to large customers managed by the power generation companies were reallocated to the End-user Markets Business Line.

With regard to revenue, in response to strategic decisions inspired by a sustainable business model under which we pursue the goals, inter alia, of decarbonization and combating climate change, coal-related revenue experienced a progressive, generalized decline as shown in the following table:

REVENUE FROM THERMAL AND NUCLEAR GENERATION

Millions of euro    

Revenue(1)

2020 2019 Change
Revenue from thermal generation 7,512 10,300 -27.1%
- of which: coal generation 1,639 2,827 -42.0%
Revenue from nuclear generation 1,360 1,296 4.9%
       
Revenue from thermal generation as a percentage of total revenue 11.6% 12.8%  
- of which: revenue from coal generation as a percentage of total revenue 2.5% 3.5%  
Revenue from nuclear generation as a percentage of total revenue 2.1% 1.6%  

(1) Revenue from third parties is “segment” revenue from non-Group counterparties and transactions between the various segments.

The following tables show a breakdown of performance by Region/Country in 2020.

REVENUE(1)

Millions of euro      
  2020 2019 Change
Italy 14,029 23,688 (9,659) -40.8%
Iberia 5,129 6,261 (1,132) -18.1%
Latin America 1,304 1,875 (571) -30.5%
- of which Argentina 148 323 (175) -54.2%
- of which Brazil 182 283 (101) -35.7%
- of which Chile 627 813 (186) -22.9%
- of which Colombia 183 102 81 79.4%
- of which Peru 164 354 (190) -53.7%
North America 12 29 (17) -58.6%
Europe 539 956 (417) -43.6%
- of which Romania - 42 (42) -
- of which Russia 539 911 (372) -40.8%
- of which other countries - 3 (3) -
Other 130 54 76 -
Eliminations and adjustments (339) (851) 512 60.2%
Total 20,804 32,012 (11,208) -35.0%

(1) The comparative figures for 2019 have been adjusted to take account of the fact that as from 2020 in South America and Mexico amounts attributable to large customers managed by the power generation companies were reallocated to the End-user Markets Business Line.

GROSS OPERATING PROFIT(1)

Millions of euro      
  2020 2019 Change
Italy 221 (14) 235 -
Iberia 1,039 590 449 76.1%
Latin America 309 609 (300) -49.3%
- of which Argentina 85 165 (80) -48.5%
- of which Brazil 66 102 (36) -35.3%
- of which Chile 35 198 (163) -82.3%
- of which Colombia 9 8 1 12.5%
- of which Peru 114 136 (22) -16.2%
North America 17 (16) 33 -
Europe 118 209 (91) -43.5%
- of which Romania (1) (2) 1 -50.0%
- of which Russia 119 209 (90) -43.1%
- of which other countries - 2 (2) -
Other (4) (14) 10 -71.4%
Total 1,700 1,364 336 24.6%

(1) The comparative figures for 2019 have been adjusted to take account of the fact that as from 2020 in South America and Mexico amounts attributable to large customers managed by the power generation companies were reallocated to the End-user Markets Business Line.

The increase in gross operating profit in 2020 is mainly due to:

  • an increase of €449 million in Iberia, essentially attributable to the following factors:
    • a decrease of €1,093 million in fuel consumption costs, which mainly reflects the reduction in thermal generation and the consequent decline in other provisioning costs, including electricity (€135 million), as well as improvements in operating efficiency, partly offset by a decrease in revenue from the sale of electricity and gas as result of a decline in volumes handled and prices charged;
    • a reduction in personnel expenses due to the modification of the electricity discount benefit, net of the provision for early retirement incentive plans (€165 million);
    • the decrease in costs associated with services in reflection of the lockdown imposed in response to the COVID-19 health emergency.

These effects were partially offset by:

  • increased provisions (€204 million) related to the Group’s restructuring plans as part of the energy transition, particularly related to coal plants in Spain;
  • a deterioration in net income from derivative contracts for the management of commodity risk in the amount of €124 million;
  • an increase of €235 million in the gross operating profit in Italy due essentially to:
    • a reduction in provisioning costs of thermal plants being decommissioned and improvements in operating efficiency, the effects of which were partially offset by reduced revenue from the sale of electricity due to both lower volumes and lower prices applied;
    • an improvement in the net profit from derivative contracts for the management of commodity risk in the amount of €255 million;
    • a write-down of €186 million of fuel and spare-parts inventories;
    • charges connected with restructuring plans for the energy transition in the amount of €71 million;
  • a reduction of €300 million in the gross operating profit in Latin America due mainly to:
    • a decrease of €163 million in the gross operating profit in Chile, mainly attributable to the effect of the recognition in 2019 of an indemnity of €80 million from a large industrial customer for having exercised the early withdrawal option and to a reduction in revenue from the sale of electricity and gas, which mainly reflected adverse exchange rate developments, partially offset by lower costs related to decarbonization, which involved the early closure of Unit I at the Bocamina coal plant;
    • a reduction of €80 million in the gross operating profit in Argentina due, above all, to adverse exchange rate developments and to the lower quantities of electricity sold;
    • a decrease of €36 million in the gross operating profit in Brazil due mainly both to lower volumes sold at declining average prices and to the weakening of the Brazilian real against the euro;
  • a decrease of €91 million in the gross operating profit in Europe, mainly in Russia, and due essentially to the sale of the Reftinskaya GRES coal-fired plant.

The ordinary gross operating profit of €2,230 million (€1,585 million in 2019) was affected by €299 million of costs relating to restructuring plans connected with the energy transition, €218 million in write-downs of the inventories and spare parts of a number of plants and €13 million of costs incurred following the COVID-19 pandemic for the sanitization of workplaces, personal protective equipment and donations.

OPERATING PROFIT(1)

Millions of euro      
  2020 2019 Change
Italy (40) (1,908) 1,868 -97.9%
Iberia 559 (1,650) 2,209 -
Latin America (589) 35 (624) -
- of which Argentina 32 100 (68) -68.0%
- of which Brazil 56 89 (33) -37.1%
- of which Chile (749) (246) (503) -
- of which Colombia (7) (9) 2 -22.2%
- of which Peru 79 101 (22) -21.8%
North America 14 (17) 31 -
Europe 76 30 46 -
- of which Romania (2) (1) (1) -
- of which Russia 83 31 52 -
- of which other countries (5) - (5) -
Other (5) (15) 10 -66.7%
Eliminations and adjustments - - - -
Total 15 (3,525) 3,540 -

(1) The comparative figures for 2019 have been adjusted to take account of the fact that as from 2020 in South America and Mexico amounts attributable to large customers managed by the power generation companies were reallocated to the End-user Markets Business Line.

In addition to the factors described above in relation to the gross operating profit, the increase in operating profit is connected with the decrease in depreciation, amortization and impairment losses (totaling €3,204 million) recognized in 2020 as compared with the previous year, when impairment losses were recognized on coal plants. More specifically, depreciation and amortization came to €364 million, while impairment losses totaled €2,840 million.

CAPITAL EXPENDITURE

Millions of euro      
  2020 2019 Change
Italy 180 189 (9) -4.8%
Iberia 331 388 (57) -14.7%
Latin America 120 193 (73) -37.8%
North America 7 - 7 -
Europe 56 79 (23) -29.1%
Other - 2 (2) -
Total 694 851 (157) -18.4%

The decrease of €157 million in capital expenditure involved all geographical segments, with the exception of North America, and mainly reflects the sale in Russia of the Reftinskaya GRES plant in the 4th Quarter of 2019, a change in scheduling and a redefinition of activities concerning gas and coal plants in Spain, the rest of Europe and Latin America, and cost-optimization efforts.