43.3 Borrowings

43.3.1 Long-term borrowings (including the portion falling due within 12 months) - €57,583 million

The following table reports the carrying amount and fair value for each category of debt, including the portion falling due within 12 months. For listed debt instruments, the fair value is given by official prices, while for unlisted debt instruments, fair value is determined using valuation techniques appropriate for each category of financial instrument and the associated market data for the reporting date, including the credit spreads of Enel SpA.
The table reports the situation of long-term borrowings and repayment schedules at December 31, 2019, broken down by type of borrowing and interest rate.

The table below reports long-term financial debt by currency and interest rate.

Long-term financial debt by currency and interest rate

Long-term financial debt denominated in currencies other than the euro increased by €1,349 million. The change is largely attributable to new borrowing in US dollars and Brazilian reals.  

Change in the nominal value of long-term debt

Compared with December 31, 2019, the nominal value of longterm debt at December 31, 2019 increased by €5,197 million, the net effect of €8,899 million in new borrowings, the increase in financial debt under leases of €1,370 million due to the application of the new IFRS 16, and the impact of adverse exchange rate developments in the amount of €527 million, only partly offset by repayments of €5,511 million and other changes in debt of €(88) million.

Repayments in 2019 concerned bonds in the amount of €1,652 million and borrowings totaling €3,859 million.

More specifically, the main bonds maturing in 2019 included:

• a fixed-rate bond (equivalent to €617 million) issued by Enel SpA, maturing in June 2019;
• a fixed-rate bond (€125 million) issued by Enel Finance International, maturing in November 2019; 
• two bonds (equivalent to €331 million) issued by Enel Distribuição São Paulo repaid in advance as part of a liability management operations carried out by the company in June 2019. 

The main repayments of borrowings in the year included the following: 

• €500 million in respect of loans of Enel SpA repaid in advance; 
• €200 million in respect of bank borrowings of Endesa, of which €46 million in subsidized loans; 
• the equivalent of €459 million in respect of bank borrowings of Enel Russia, of which €73 million in sustainable loans; 
• €285 million in respect of sustainable loans of the Italian companies; 
• the equivalent of €1,782 million in respect of loans of companies in South America, of which €248 million in sustainable financing. 

The main new borrowing carried out in 2019 involved bonds in the amount of €6,349 million and borrowings of €2,550 million.
The table below shows the main characteristics of financial transactions carried out in 2019.

The Group’s main long-term financial liabilities are governed by covenants that are commonly adopted in international business practice. These liabilities primarily regard the bond issues carried out within the framework of the Global/Euro Medium-Term Notes program, issues of subordinated unconvertible hybrid bonds (so-called “hybrid bonds”) and loans granted by banks and other financial institutions (including the European Investment Bank and Cassa Depositi e Prestiti SpA).
The main covenants regarding bond issues carried out within the framework of the Global/Euro Medium-Term Notes program of (i) Enel and Enel Finance International NV (including the green bonds of Enel Finance International NV guaranteed by Enel SpA, which are used to finance the Group’s so-called eligible green projects) and those regarding bonds issued by Enel Finance International NV on the US market guaranteed by Enel SpA can be summarized as follows:

• negative pledge clauses under which the issuer and the guarantor may not establish or maintain mortgages, liens or other encumbrances on all or part of its assets or revenue to secure certain financial liabilities, unless the same encumbrances are extended equally or pro rata to the bonds in question; 
• pari passu clauses, under which the bonds and the associated security constitute a direct, unconditional and unsecured obligation of the issuer and the guarantor and are issued without preferential rights among them and have at least the same seniority as other present and future unsubordinated and unsecured bonds of the issuer and the guarantor; 
• cross-default clauses, under which the occurrence of a default event in respect of a specified financial liability (above a threshold level) of the issuer, the guarantor or, in some cases, “significant” subsidiaries constitutes a default in respect of the liabilities in question, which become immediately repayable. 

During 2019, Enel Finance International NV issued two “sustainable” bonds on the European market (as part of the Euro Medium Term Notes - EMTN bond issue program) and on the American market, both guaranteed by Enel SpA, linked to the achievement of a number of the Sustainable Development Goals (SDGs) of the United Nations that contain the same covenants as other bonds of the same type.

The main covenants covering Enel’s hybrid bonds can be summarized as follows:

• subordination clauses, under which each hybrid bond is subordinate to all other bonds issued by the company and has the same seniority with all other hybrid financial instruments issued, being senior only to equity instruments; 
• prohibition on mergers with other companies, the sale or leasing of all or a substantial part of the company’s assets to another company, unless the latter succeeds in all obligations of the issuer. 

The main covenants envisaged in the loan contracts of Enel and Enel Finance International NV and the other Group companies can be summarized as follows:

• negative pledge clauses, under which the borrower and, in some cases, the guarantor are subject to limitations on the establishment of mortgages, liens or other encumbrances on all or part of their respective assets, with the exception of expressly permitted encumbrances; 
• disposals clauses, under which the borrower and, in some cases, the guarantor may not dispose of their assets or operations, with the exception of expressly permitted disposals; 
• pari passu clauses, under which the payment undertakings of the borrower have the same seniority as its other unsecured and unsubordinated payment obligations; 
• change of control clauses, under which the borrower and, in some cases, the guarantor could be required to renegotiate the terms and conditions of the financing or make compulsory early repayment of the loans granted; 
• rating clauses, which provide for the borrower or the guarantor to maintain their rating above a certain specified level;
• cross-default clauses, under which the occurrence of a default event in respect of a specified financial liability (above a threshold level) of the issuer or, in some cases, the guarantor constitutes a default in respect of the liabilities in question, which become immediately repayable. 

In some cases the covenants are also binding for the significant companies or subsidiaries of the obligated parties. All the financial borrowings considered specify “events of default” typical of international business practice, such as, for example, insolvency, bankruptcy proceedings or the entity ceases trading.
In addition, the guarantees issued by Enel in the interest of e-distribuzione SpA for certain loans to e-distribuzione SpA from Cassa Depositi e Prestiti SpA require that at the end of each six-month measurement period that Enel’s net consolidated financial debt shall not exceed 4.5 times annual consolidated EBITDA.
Finally, the debt of Enel Américas SA, Enel Chile SA and the other Latin American subsidiaries (notably Enel Generación Chile SA) contain covenants and events of default typical of international business practice, which had all been complied with as at December 31, 2019.

The following table reports the impact on gross long-term debt of hedges to mitigate exchange risk

Long-term financial debt by currency after hedging

The amount of floating-rate debt that is not hedged against interest rate risk is the main risk factor that could impact the income statement (raising borrowing costs) in the event of an increase in market interest rates.

At December 31, 2019, 27.4% of financial debt was floating rate (30.2% at December 31, 2018). Taking account of hedges of interest rates considered effective pursuant to the IFRSEU, 19.6% of net financial debt at December 31, 2019 (22.8% at December 31, 2018) was exposed to interest rate risk. Including interest rate derivatives treated as hedges for management purposes but ineligible for hedge accounting, 80% of net financial debt was hedged (77% hedged at December 31, 2018).

These results are in line with the limits established in the risk management policy.

43.3.2 Short-term borrowings - €3,917 million

At December 31, 2019 short-term borrowings amounted to €3,917 million, an increase of €301 million on December 31, 2018. They break down as follows.

(1) Does not include current financial debt included in other current financial liabilities.

Short-term bank borrowings amounted to €579 million. Commercial paper amounted to €2,284 million, issued by Enel Finance International, Enel Finance America, Endesa and a number of South American companies.
The main commercial paper programs include:

• €6,000 million of Enel Finance International guaranteed by Enel SpA; 
• €3,000 million of Endesa; 
• $3,000 million (equivalent to €2,671 million at December 31, 2019) of Enel Finance America.