Analysis of the Group’s financial position and financial structure

 

     

Analysis of the Group’s financial position

Millions of euro

    
 

at Dec. 31, 2019

at Dec. 31, 2018

Change

Net non-current assets:

    

- property, plant and equipment and intangible assets

99,010

95,780

3,230

3.4%

- goodwill

14,241

14,273

(32)

-0.2%

- equity investments accounted for using the equity method

1,682

2,099

(417)

-19.9%

- other net non-current assets/(liabilities)

(5,022)

(5,696)

674

11.8%

Total net non-current assets

109,911

106,456

3,455

3.2%

Net current assets:

    

- trade receivables

13,083

13,587

(504)

-3.7%

- inventories

2,531

2,818

(287)

-10.2%

- net receivables due from institutional market operators

(3,775)

(3,200)

(575)

-18.0%

- other net current assets/(liabilities)

(7,282)

(7,589)

307

4.0%

- trade payables

(12,960)

(13,387)

427

3.2%

Total net current assets

(8,403)

(7,771)

(632)

-8.1%

Gross capital employed

101,508

98,685

2,823

2.9%

Provisions:

    

- employee benefits

(3,771)

(3,187)

(584)

-18.3%

- provisions for risks and charges and net deferred taxes

(5,722)

(6,838)

1,116

16.3%

Total provisions

(9,493)

(10,025)

532

5.3%

Net assets held for sale

98

281

(183)

-65.1%

Net capital employed

92,113

88,941

3,172

3.6%

Total shareholders equity

46,938

47,852

(914)

-1.9%

Net financial debt

45,175

41,089

4,086

9.9%

Property, plant and equipment and intangible assets increased, essentially reflecting investment in the period (€9,255 million), changes in the scope of consolidation (€1,192 million), largely due to the acquisition of control of a number of companies of EGPNA REP that had previously been accounted for using the equity method, the consolidation of Tradewind Energy and the acquisition of YouSave. Other factors included the adjustment of the carrying amount (including dismantling charges) of the Bocamina I and Tarapacá plants in Chile and a number of plants in Italy and Spain (€762 million) and the effects of accounting for hyperinflation. These factors were partly offset by adverse exchange rate developments (€607 million), mainly in Latin America, by depreciation, amortization and impairment losses of €9,535 million for the year, and by the sale of the Reftinskaya GRES coal-fired plant to JSC Kuzbassenergo.

The change in goodwill mainly reflects the writedown of certain assets of a project company in North America, as the project will no longer be pursued.

Net assets held for sale mainly regard the value of a number of hydro companies accounted for using the equity method held by EGPNA (now Enel North America) and the Rionegro plant in Colombia, while as noted above the Reftinskaya GRES coal-fired plant was sold during the 4th Quarter of 2019.

Net capital employed at December 31, 2019 amounted to €92,113 million and was funded by shareholders’ equity attributable to the shareholders of the Parent Company and non-controlling interests in the amount of €46,938 million and net financial debt of €45,175 million. At December 31, 2019, the debt/equity ratio was 0.96 (0.86 at December 31, 2018).

     

Analysis of the Group’s financial structure

Net financial debt (note 41)

Net financial debt and changes in the period are detailed in the table below.

Millions of euro

    
 

at Dec. 31, 2019

at Dec. 31, 2018

Change

Long-term debt:

    

- bank borrowings

8,407

8,819

(412)

-4.7%

- bonds

43,294

38,633

4,661

12.1%

- other borrowings

2,473

1,531

942

61.5%

Long-term debt

54,174

48,983

5,191

10.6%

Long-term financial receivables and securities

(3,185)

(3,272)

87

2.7%

Net long-term debt

50,989

45,711

5,278

11.5%

Short-term debt

    

Bank borrowings:

    

- short-term portion of long-term bank borrowings

1,121

1,830

(709)

-38.7%

- other short-term bank borrowings

579

512

67

13.1%

Short-term bank borrowings

1,700

2,342

(642)

-27.4%

Bonds (short-term portion)

1,906

1,341

565

42.1%

Other borrowings (short-term portion)

382

196

186

94.9%

Commercial paper

2,284

2,393

(109)

-4.6%

Cash collateral on derivatives and other financing

750

301

449

-

Other short-term financial payables (1)

351

438

(87)

-19.9%

Other short-term debt

5,673

4,669

1,004

21.5%

Long-term financial receivables (short-term portion)

(1,585)

(1,522)

(63)

-4.1%

Financial receivables - cash collateral

(2,153)

(2,559)

406

-15.9%

Other short-term financial receivables

(369)

(859)

490

57.0%

Cash and cash equivalents with banks and short term securities

(9,080)

(6,693)

(2,387)

-35.7%

Cash and cash equivalents and short-term financial receivables

(13,187)

(11,633)

(1,554)

-13.4%

Net short-term debt

(5,814)

(4,622)

(1,192)

25.8%

NET FINANCIAL DEBT

45,175

41,089

4,086

9.9%

Net financial debt of Assets held for sale

-

362

(362)

-

(1) Includes current financial payables included in Other current financial liabilities.

 

Net financial debt amounted to €45,175 million at December 31, 2019, an increase of €4,086 million compared with December 31, 2018, due mainly to the increase in bond issues and other borrowings, only partly offset by changes in cash holdings and financial receivables.

At December 31, 2019, gross financial debt amounted to €61,547 million, an increase of €5,553 million on the previous year.

 

Gross financial debt

Millions of euro

at Dec. 31, 2019                                     at Dec. 31, 2018                                              

 

Gross long-term debt

Gross short-term debt

Gross debt

Gross long-term debt

Gross short-term debt

Gross debt

Gross-long-term debt

57,583

3,964

61,547

52,350

3,644

55,994

of which:

 

 

 

 

 

 

Debt connected with achievement of SDGs

13,758

-

13,758

8,535

8,535

Debt connected with achievement of SDGs/Total gross debt (%)

 

 

22%

 

 

15%

     

More specifically, gross long-term debt (including the shortterm portion) amounted to €57,583 million, of which €13,758 million in respect of financing connected with achievement of SDGs. It breaks down as follows:

  • bonds in the amount of €45,200 million, of which €7,260 million in respect of sustainable bonds. More specifically, bonds increased by a total of €5,226 million compared with December 31, 2018, mainly reflecting the following sustainable issues of Enel Finance International: 
    • €1,000 million in respect of a fixed-rate green bond, issued in January 2019 and maturing in 2025; 
    • $1,500 million (equivalent to €1,336 million) in respect of a bond issue in September 2019 and maturing in September 2024, linked to the Group’s ability to achieve a certain percentage of installed renewables capacity by December 31, 2021 (SDG 7); 
    • €2,500 million in respect of multi-tranches bond issues in October 2019 and maturing in 2024, 2027 and 2034, linked to the Group’s ability to achieve a certain percentage of installed renewables capacity (SDG 7) and to reduce direct greenhouse gas emissions (SDG 13); 
  • bank borrowings of €9,528 million, of which €6,498 in respect of sustainable loans. The aggregate decreased by €1,121 million compared with the previous year, mainly reflecting repayments during the year.
    The following sustainable credit facilities were obtained in 2019, on which no drawings were outstanding at December 31, 2019: 
    • a credit facility of €1,000 million obtained on October 2, 2019 by Enel SpA linked to the achievement of the United Nations Sustainable Development Goals; 
    • a credit line of $220 million (equivalent to €196 million) and a loan of $340 million (equivalent to €303 million) obtained on November 20, 2019 by Enel Finance America linked to the achievement of the United Nations’ Sustainable Development Goals; 
  • other borrowings of €2,855 million, which increased by €1,128 million due to the application of the IFRS 16 on leases. 

Gross short-term financial debt amounted to €3,964 million, decreasing by €320 million compared with December 31, 2018. It consists mainly of commercial paper in the amount of €2,284 million and cash collateral on derivatives and other financing totaling €750 million.

Cash and cash equivalents and short- and long-term financial receivables came to €16,372 million, an increase of €1,467 million compared with the end of 2018, mainly due to the increase in cash held at banks and short-term securities in the amount of €2,387 million, only partly offset by declines in cash collateral paid to counterparties and in other short-term financial receivables in the amount of €406 million and €489 million, respectively.

Cash flows

Millions of euro

  
 

2019

2018

Change

Cash and cash equivalents at the beginning of the year(1)

6,714

7,121

(407)

Cash flows from operating activities

11,251

11,075

176

Cash flows from investing/disinvesting activities

(9,115)

(9,661)

546

Cash flows from financing activities

306

(1,636)

1,942

Effect of exchange rate changes on cash and cash equivalents

(76)

(185)

109

Cash and cash equivalents at the end of the year(2)

9,080

6,714

2,366

(1) Of which cash and cash equivalents equal to €6,630 million at January 1, 2019 (€7,021 million at January 1, 2018), short-term securities equal to €63 million at January 1, 2019 (€69 million at January 1, 2018) and cash and cash equivalents pertaining to assets held for sale in the amount of €21 million at January 1, 2019 (€31 million at January 1, 2018).
(2) Of which cash and cash equivalents equal to €9,029 million at December 31, 2019 (€6,630 million at December 31, 2018), short-term securities equal to €51 million at December 31, 2019 (€63 million at December 31, 2018) and cash and cash equivalents pertaining to assets held for sale in the amount of €21 million at December 31, 2018.

Cash flows from operating activities in 2019 were a positive €11,251 million, an increase of €176 million compared with the previous year, mainly reflecting the improvement in the gross operating margin, partly offset by the increase in cash requirements connected with the change in net current assets.

Cash flows from investing/disinvesting activities in 2019 absorbed funds in the amount of €9,115 million, while in 2018 they had absorbed liquidity totaling €9,661 million. Capital expenditure by Business Line is reported in the next section.
Investments in entities (or business units) less cash and cash equivalents acquired amounted to €692 million and were mainly accounted for by the acquisition through Enel Green Power North America (EGPNA, now renamed Enel North America), of 100% of seven renewables plants previously held by Enel Green Power North America Renewable Energy Partners (EGPNA REP), a joint venture held equally by 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 €320 million. They mainly regarded the disposal of 100% of three solar plants in Brazil, the disposal of the business unit comprising the Mercure biomass generation plant and the disposal by EGPNA (now Enel North America) of 30% of its stake in the EGPNA REP joint venture, which holds a number of renewable energy project development companies (the Athena operation).

Cash flows from financing activities generated an increase in liquidity in the amount of €306 million, while in 2018 they showed cash absorption of €1,636 million. The flow in 2019 is essentially associated with:

  • the increase in net financial debt (the net balance of repayments and new borrowing) in the amount of €3,743 million; 
  • the payment of dividends totaling €3,957 million; 
  • transactions in non-controlling interests amounting to €530 million, mainly regarding the increase in the interest in Enel Américas under a number of share swap contracts with a financial institution, which increased the stake from 51.8% to 59.97%, and the non-proportional capital increase in the subsidiary. 

In 2019, cash flows from operating activities in the amount of €11,251 million more than offset the cash needs for investing activities totaling €9,115 million.
The Group also made greater recourse to external sources of financing in order to benefit from favorable market conditions, creating a substantial liquidity buffer for use in future operations.

Capital expenditure (note 7)

Millions of euro

   
 

2019

 

2018

 

Change

Thermal Generation and Trading

851

 

839

 

12

1.4%

Enel Green Power

4,293

(1)

2,784

(2)

1,509

54.2%

Infrastructure and Networks

3,905

 

3,830

 

75

2.0%

End-user Markets

449

 

374

 

75

20.1%

Enel X

270

 

183

 

87

47.5%

Services

134

 

106

 

28

26.4%

Other, eliminations and adjustments

45

 

36

 

9

25.0%

Total

9,947

 

8,152

 

1,795

22.0%

(1) The figure does not include €4 million regarding units classified as “held for sale”.
(2) The figure does not include €378 million regarding units classified as “held for sale”.

Capital expenditure increased by €1,795 million compared with 2018, mainly reflecting investment in wind and solar plants in Spain, the United States, Canada, South Africa and Brazil.