46. Derivatives and hedge accounting

 

The following tables show the notional amount and the fair value of derivative financial assets and derivative financial liabilities eligible for hedge accounting or measured a FVTPL, classified on the basis of the type of hedge relationship and the hedged risk, broken down into current and non-current instruments.

The notional amount of a derivative contract is the amount on the basis of which cash flows are exchanged. This amount can be expressed as a value or a quantity (for example tons, converted into euros by multiplying the notional amount by the agreed price). Amounts denominated in currencies other than the euro are converted at the official end-year exchange rates provided by the World Markets Reuters (WMR) Company.

 

Millions of euro

Non-current

Current

 

Notional

Fair value

Notional

Fair value

 

at Dec. 31, 2019

at Dec. 31, 2018

at Dec. 31, 2019

at Dec. 31, 2018

at Dec. 31, 2019

at Dec. 31, 2018

at Dec. 31, 2019

at Dec. 31, 2018

DERIVATIVE ASSETS

        

Fair value hedge derivatives:

        

- on interest rates

12

12

7

6

-

15

-

1

- on exchange rates

166

171

25

19

-

66

-

3

- on commodities

-

-

-

-

-

-

-

-

Total

178

183

32

25

-

81

-

4

Cash flow hedge derivatives:

        

- on interest rates

335

404

26

12

133

427

-

1

- on exchange rates

11,705

8,318

1,081

675

2,717

4,689

132

252

- on commodities

1,628

1,126

215

262

3,081

1,428

847

494

Total

13,668

9,848

1,322

949

5,931

6,544

979

747

Trading derivatives:

        

- on interest rates

50

50

2

2

-

-

-

-

- on exchange rates

-

197

-

4

3,399

4,057

34

51

- on commodities

322

261

27

25

17,203

20,553

3,052

3,112

Total

372

508

29

31

20,602

24,610

3,086

3,163

TOTAL DERIVATIVE ASSETS

14,218

10,539

1,383

1,005

26,533

31,235

4,065

3,914

     

Millions of euro

Non-current

Current

 

Notional

Fair value

Notional

Fair value

 

at Dec. 31, 2019

at Dec. 31, 2018

at Dec. 31, 2019

at Dec. 31, 2018

at Dec. 31, 2019

at Dec. 31, 2018

at Dec. 31, 2019

at Dec. 31, 2018

DERIVATIVE LIABILITIES

        

Fair value hedge derivatives:

        

- on exchange rates

5

-

1

-

-

-

-

-

Total

5

-

1

-

-

-

-

-

Cash flow hedge derivatives:

        

- on interest rates

7,704

8,605

779

605

65

272

1

1

- on exchange rates

11,049

13,025

1,560

1,803

2,573

2,791

115

348

- on commodities

601

656

47

167

1,613

2,050

457

859

Total

19,354

22,286

2.386

2,575

4,251

5,113

573

1,208

Trading derivatives:

        

- on interest rates

62

478

6

17

100

138

79

66

- on exchange rates

2

191

-

3

1,679

3,101

38

33

- on commodities

154

133

14

14

17,650

21,845

2,864

3,036

Total

218

802

20

34

19,429

25,084

2,981

3,135

TOTAL DERIVATIVE LIABILITIES

19,577

23,088

2.407

2,609

23,680

30,197

3,554

4,343

         

46.1 Derivatives designated as hedging instruments

 

Derivatives are initially recognized at fair value, on the trade date of the contract and are subsequently re-measured at their fair value. The method of recognizing the resulting gain or loss depends on whether the derivative is designated as a hedging instrument, and if so, the nature of the item being hedged.
Hedge accounting is applied to derivatives entered into in order to reduce risks such as interest rate risk, foreign exchange rate risk, commodity price risk and net investments in foreign operations when all the criteria provided by IFRS 9 are met.
At the inception of the transaction, the Group documents the relationship between hedging instruments and hedged items, as well as its risk management objectives and strategy. The Group also documents its assessment, both at hedge inception and on an ongoing basis, of whether hedging instruments are highly effective in offsetting changes in fair values or cash flows of hedged items.
For cash flow hedges of forecast transactions designated as hedged items, the Group assesses and documents that they are highly probable and present an exposure to changes in cash flows that affect profit or loss.
Depending on the nature of the risks exposure, the Group designates derivatives as either:

  • fair value hedges; or 
  • cash flow hedges. 

For more details about the nature and the extent of risks arising from financial instruments to which the Group is exposed, please refer the note 44 “Risk management”.
To be effective a hedging relationship shall meet all of the following criteria:

  • existence of an economic relationship between hedging instrument and hedged item; 
  • the effect of credit risk does not dominate the value changes resulting from the economic relationship; 
  • the hedge ratio defined at initial designation shall be equal to the one used for risk management purposes (i.e. same quantity of the hedged item that the entity actually hedges and the quantity of the hedging instrument that the entity actually uses to hedge the quantity of the hedged item). 

Based on the IFRS 9 requirements, the existence of an economic relationship is evaluated by the Group through a qualitative assessment or a quantitative computation, depending of the following circumstances:

  • if the underlying risk of the hedging instrument and the hedged item is the same, the existence of an economic relationship will be provided through a qualitative analysis; 
  • on the other hand, if the underling risk of the hedging instrument and the hedged item is not the same, the existence of the economic relationship will be demonstrated through a quantitative method in addition to a qualitative analysis of the nature of the economic relationship (i.e., linear regression). 

In order to demonstrate that the behavior of the hedging instrument is in line with those of the hedged item, different scenarios will be analyzed.
For hedging of commodity price risk, the existence of an economic relationship is deduced from a ranking matrix that defines, for each possible risk component a set of all standard derivatives available in the market whose ranking is based on their effectiveness in hedging the considered risk.
In order to evaluate the credit risk effects, the Group considers the existence of risk mitigating measures (collateral, mutual break-up clauses, netting agreements, etc.).

The Group has established a hedge ratio of 1:1 for all the hedging relationships (including commodity price risk hedging) as the underlying risk of the hedging derivative is identical to the hedged risk, in order to minimize hedging ineffectiveness.
The hedge ineffectiveness will be evaluated through a qualitative assessment or a quantitative computation, depending on the following circumstances:

  • if the critical terms of the hedged item and hedging instrument match and there aren’t other sources of ineffectiveness included the credit risk adjustment on the hedging derivative, the hedge relationship will be considered fully effective on the basis of a qualitative assessment; 
  • if the critical terms of the hedged item and hedging instrument do not match or there is at least one source of ineffectiveness, the hedge ineffectiveness will be quantified applying the dollar offset cumulative method with hypothetical derivative. This method compares changes in fair values of the hedging instrument and the hypothetical derivative between the reporting date and the inception date. 

The main causes of hedge ineffectiveness can be the followings:

  • basis differences (i.e. the fair value or cash flows of the hedged item depend on a variable that is different from the variable that causes the fair value or cash flows of the hedging instrument to change); 
  • timing differences (i.e. the hedged item and hedging in strument occur or are settled at different dates); 
  • quantity or notional amount differences (i.e. the hedged item and hedging instrument are based on different quantities or notional amounts); 
  • other risks (i.e. changes in the fair value or cash flows of a derivative hedging instrument or hedged item relate to risks other than the specific risk being hedged);
  • credit risk (i.e. the counterparty credit risk differently impact the fair value movements of the hedging instruments and hedge items).

 

Fair value hedges

Fair value hedges are used to protect the Group against exposures to changes in the fair value of assets, liabilities or firm commitment attributable to a particular risk that could affect profit or loss.
Changes in fair value of derivatives that qualify and are designated as hedging instruments are recognized in the income statement, together with changes in the fair value of the hedged item that are attributable to the hedged risk.
If the hedge no longer meets the criteria for hedge accounting, the adjustment to the carrying amount of a hedged item for which the effective interest rate method is used is amortized to profit or loss over the period to maturity.

 

Cash flow hedges

Cash flow hedges are applied in order to hedge the Group exposure to changes in future cash flows that are attributable to a particular risk associated with a recognized asset or liability or a highly probable transaction that could affect profit or loss.
The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is recognized in other comprehensive income. The gain or loss relating to the ineffective portion is recognized immediately in the income statement.
Amounts accumulated in equity are reclassified to profit or loss in the periods when the hedged item affects profit or loss (for example, when the hedged forecast sale takes place).
If the hedged item results in the recognition of a non-financial asset (i.e., property, plant and equipment or inventories, etc.) or a non-financial liability, or a hedged forecast transaction for a non-financial asset or a non-financial liability becomes a firm commitment for which fair value hedge accounting is applied, the amount accumulated in equity (i.e., cash flow reserve) shall be removed and included in the initial value (cost or other carrying amount) of the asset or the liability hedged (i.e., “basis adjustment”).
When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss existing in equity at that time remains in equity and is recognized when the forecast transaction is ultimately recognized in the income statement. When a forecast transaction is no longer expected to occur, the cumulative gain or loss that was reported in equity is immediately transferred to the income statement.
For hedging relationships using forward as hedging instrument, where only the change in the value of the spot element is designated as the hedging instrument, accounting for the forward element (profit or loss vs OCI) is defined case by case. This approach is actually applied by the Group for hedging of foreign currency risk on renewables assets. Conversely, hedging relationships using cross currency interest rate swaps as hedging instruments, the Group separates foreign currency basis spread, in designating the hedging derivative, and present them in other comprehensive income (OCI) as hedging costs.
With specific regard to cash flow hedges of commodity risk, in order to improve their consistency with the risk management strategy, the Enel Group applies a dynamic hedge accounting approach based on specific liquidity requirements (the so-called liquidity-based approach).
This approach requires the designation of hedges through the use of the most liquid derivatives available on the market and replacing them with others that are more effective in covering the risk in question.
Consistent with the risk management strategy, the liquidity-based approach allows the roll-over of a derivative by replacing it with a new derivative, not only in the event of expiry but also during the hedging relationship, if and only if the new derivative meets both of the following requirements:

  • it represents a best proxy of the old derivative in terms of ranking;
  • it meets specific liquidity requirements. 

Satisfaction of these requirements is verified quarterly. At the roll-over date, the hedging relationship is not discontinued. Accordingly, starting from that date, changes in the effective fair value of the new derivative will be recognized in shareholders’ equity (the cash flow hedge reserve), while changes in the fair value of the old derivative are recognized through profit or loss.

         

46.1.1 Hedge relationships by type of risk hedged

 

Interest rate risk

The following table shows the notional amount and the average interest rate of instruments hedging the interest rate risk on transactions outstanding at December 31, 2019 and December 31, 2018, broken down by maturity.

   Millions of euro

     

2020

2021

2022

2023

2024

Beyond

At Dec. 31, 2019

      

Interest rate swaps

      

Total notional amount

199

140

499

187

170

7,054

Notional amount related to IRS in euro

47

-

143

187

170

6,042

Average IRS rate in euro

3.1825

 

4.9699

4.0516

4.1629

1.8298

Notional amount related to IRS in US dollars

134

134

356

-

-

665

Average IRS rate in US dollars

1.574

2.035

3.523

  

2.967

       
       
 

2019

2020

2021

2022

2023

Beyond

At Dec. 31, 2018

      

Interest rate swaps

      

Total notional amount

714

199

131

396

697

7,598

Notional amount related to IRS in euro

18

68

-

396

697

7,298

Average IRS rate in euro

0.5444

2.7151

 

2.7098

1.8872

1.9491

Notional amount related to IRS in US dollars

87

131

131

-

-

229

Average IRS rate in US dollars

1.6208

1.5745

2.0359

  

2.7943

 

The following table shows the notional amount and the fair value of the hedging instruments on the interest rate risk of transactions outstanding as at December 31, 2019 and December 31, 2018, broken down by type of hedged item.

 

  Millions of euro

 

Fair value

Notional amount

Fair value

Notional amount

Hedging instrument

Hedged item

Assets

Liabilities

 

Assets

Liabilities

 
  

at Dec. 31, 2019

at Dec. 31, 2018

Fair value hedges

       

Interest rate swaps

Fixed-rate bank borrowings

7

 

12

7

 

12

Cash flow hedges

       

Interest rate swaps

Floating-rate bond

11

(499)

3,953

1

(406)

6,105

Interest rate swaps

Floating-rate loans

15

-

140

7

 

142

Interest rate swaps

Floating-rate borrowings

-

(281)

4,144

5

(200)

3,476

Total

 

33

(780)

8,249

20

(606)

9,735

     

The following table shows the notional amount and the fair value of hedging derivatives on interest rate risk as at December 31, 2019 and December 31, 2018, broken down by type of hedge.

 

 Millions of euro

Notional amount

Fair value assets

Notional amount

Fair value liabilities

Derivatives

at Dec. 31, 2019

at Dec. 31, 2018

at Dec. 31, 2019

at Dec. 31, 2018

at Dec. 31, 2019

at Dec. 31, 2018

at Dec. 31, 2019

at Dec. 31, 2018

Fair value hedges

        

Interest rate swaps

12

27

7

7

-

-

-

-

Total

12

27

7

7

-

-

-

-

Cash flow hedges

        

Interest rate swaps

468

831

26

13

7,769

8,877

780

606

Total

468

831

26

13

7,769

8,877

780

606

TOTAL INTEREST RATE DERIVATIVES

480

858

33

20

7,769

8,877

780

606

The notional amount of derivatives classified as hedging instruments at December 31, 2019, came to €8,249 million, with a corresponding negative fair value of €747 million.
Compared with December 31, 2018, the notional amount decreased by €1,486 million, mainly reflecting:

  • the early termination of pre-hedge interest rate swaps amounting to €750 million in respect of Enel SpA’s “exchange offer” for the repurchase of hybrid bonds expiring January 15, 2075 and January 10, 2074; 
  • the early termination of pre-hedge interest rate swaps amounting to €2,000 million in respect of “sustainable” bond issues during the year; > the expiry of interest rate swaps amounting to €714 million; 
  • new interest rate swaps amounting to €1,745 million. 

The value also reflects the reduction of €203 million in the notional amount of amortizing interest rate swaps. The deterioration in the fair value of €161 million mainly reflects developments in the yield curve.

Fair value hedge derivatives

Net gains and losses recognized through profit or loss, reflecting changes in the fair value of fair value hedge derivatives and the changes in the fair value of the hedged item that are attributable to interest rate risk demonstrated that these hedging relationships were totally effective both in 2019 and the previous year. The following table shows the impact of fair value hedges of interest rate risk in the balance sheet at December 31, 2019 and December 31, 2018.

Millions of euro

2019

2018

 

Notional amount

Carrying amount

Fair value used to measure ineffectiveness in period

Notional amount

Carrying amount

Fair value used to measure ineffectiveness in period

Interest rate swaps

12

7

7

27

7

7

 

The following table shows the impact of the hedged item of fair value hedges in the balance sheet at December 31, 2019 and December 31, 2018.

 

Millions of euro

2019

2018 
 

Carrying amount

Cumulative adjustment of fair value of hedged item

Fair value used to measure ineffectiveness in period

Carrying amount

Cumulative adjustment of fair value of hedged item

Fair value used to measure ineffectiveness in period

Fixed-rate borrowings

20

7

(7)

35

7

(7)

       

Cash flow hedge derivatives

The following table shows the cash flows expected in coming years from cash flow hedge derivatives on interest rate risk.

 

 Millions of euro

Fair value

Distribution of expected cash flows

 

at Dec. 31, 2019

2020

2021

2022

2024

2025

Beyond

Cash flow hedge derivatives on interest rates

       

Positive fair value

26

1

(1)

(2)

(2)

2

32

Negative fair value

(780)

(102)

(121)

(110)

(110)

(94)

(284)

 

The following table shows the impact of cash flow hedges of interest rate risk in the balance sheet at December 31, 2019 and December 31, 2018.

Millions of euro

2019

2018

 

Notional amount

Carrying amount

Fair value used to measure ineffectiveness in period

Notional amount

Carrying amount

Fair value used to measure ineffectiveness in period

Interest rate swaps

8,237

(754)

(754)

9,723

(593)

(593)

 

The following table shows the impact of the hedged item of cash flow hedges in the balance sheet at December 31, 2019 and December 31, 2018:

 

Millions of euro

2019

2018

 

Fair value used to measure ineffectiveness in period

Cash flow hedge reserve

Hedging costs reserve

Ineffective portion of carrying amount of CFH derivatives

Fair value used to measure ineffectiveness in period

Cash flow hedge reserve

Hedging costs reserve

Ineffective portion of carrying amount of CFH derivatives

Floating-rate bonds

486

(486)

-

(2)

395

(395)

-

(10)

Floating-rate loans

(15)

15

-

-

(7)

7

-

-

Floating-rate borrowings

275

(275)

-

(6)

190

(190)

-

(5)

Total

746

(746)

-

(8)

578

(578)

-

(15)

 

The following table shows the impact of cash flow hedges of interest rate risk through profit or loss and other comprehensive income in the period, gross of tax effects:

 

Millions of euro

at Dec. 31, 2019

 

Gross changes in fair value through OCI

Net gain/(loss) gross of tax effects through profit or loss for ineffectiveness

Hedging costs through OCI

Net gain/(loss) gross of tax effects through profit or loss for reclassification from OCI

Interest rate hedges

(121)

7

-

47

         

Exchange risk

The following table reports the maturity profile of the notional amount and associated average contractual exchange rate for the instruments hedging exchange risk on transactions outstanding at December 31, 2019 and December 31, 2018.

  Millions of euro

 

2020

2021

2022

2023

2024

Beyond

Total

At Dec. 31, 2019

       

Cross currency interest rate swaps (CCIRS)

       

Notional amount

831

1,115

1,781

3,339

3,146

12,511

22,723

        

Notional amount for CCIRS EUR-USD

-

202

1,781

3,339

1,336

8,904

15,562

Average exchange rate EUR/USD

 

1.1348

1.1213

1.2184

1.1039

1.2067

 
        

Notional amount for CCIRS EUR-GBP

470

587

-

-

999

3,041

5,097

Average exchange rate EUR/GBP

0.8466

0.8245

  

0.8765

0.8062

 
        

Notional amount for CCIRS EUR-CHF

92

-

-

-

207

120

419

Average exchange rate EUR/CHF

1.2169

   

1.0642

1.2100

 
        

Notional amount for CCIRS USD-BRL

269

326

-

-

-

288

883

Average exchange rate USD/BRL

3.9273

3.4742

   

3.5655

 
        

Currency forwards

       

Notional amount

4,459

1,015

18

-

-

-

5,492

        

Notional amount - currency forward EUR/USD

2,899

958

18

-

-

-

3,875

Average currency forward rate - EUR/USD

1.1774

1.1803

1.1609

-

-

-

 
        

Notional amount - currency forward USD/CLP

527

44

-

-

-

-

571

Average currency forward rate - USD/CLP

678.0443

680.0000

-

-

-

-

 
        

Notional amount - currency forward USD/BRL

313

14

-

-

-

-

327

Average currency forward rate - USD/BRL

4.1274

4.1330

-

-

-

-

 
        

Notional amount - currency forward EUR/ZAR

221

-

-

-

-

-

221

Average currency forward rate - EUR/ZAR

17.7856

-

-

-

-

-

 
        

Notional amount - currency forward EUR/RUB

181

-

-

-

-

-

181

Average currency forward rate - EUR/RUB

74.1277

-

-

-

-

-

 

     

Millions of euro

 

2019

2020

2021

2022

2023

Beyond

Total

At Dec. 31, 2018

       

Cross currency interest rate swaps (CCIRS)

       

Notional amount

2,474

855

934

1,746

3,274

13,149

22,432

        

Notional amount for CCIRS EUR-USD

-

-

198

1,746

3,274

8,729

13,947

Average exchange rate EUR/USD

  

1.1348

1.1213

1.2184

1.1726

 
        

Notional amount for CCIRS EUR-GBP

1,229

447

559

-

-

3,846

6,081

Average exchange rate EUR/GBP

0.6753

0.8466

0.8245

  

0.8261

 
        

Notional amount for CCIRS EUR-CHF

-

89

-

-

-

315

404

Average exchange rate EUR/CHF

 

1.2170

   

1.1133

 
        

Notional amount for CCIRS USD-BRL

528

319

177

-

-

94

1,118

Average exchange rate USD/BRL

3.5679

3.5508

3.2948

  

3.1037

 
        

Currency forwards

-

-

-

-

-

  

Notional amount

5,070

1,512

44

-

-

 

6,626

        

Notional amount - currency forward EUR/USD

3,071

1,343

44

-

-

-

4,458

Average currency forward rate - EUR/USD

1.2014

1.2199

1.2392

-

-

-

 
        

Notional amount - currency forward USD/CLP

838

92

-

-

-

-

930

Average currency forward rate - USD/CLP

667.5891

667.5175

-

-

-

-

 
        

Notional amount - currency forward USD/BRL

409

-

-

-

-

-

409

Average currency forward rate - USD/BRL

3.6958

-

-

-

-

-

 
        

Notional amount - currency forward EUR/ZAR

220

77

-

-

-

-

297

Average currency forward rate - EUR/ZAR

16.7884

18.0229

-

-

-

-

 
        

Notional amount - currency forward EUR/RUB

139

-

-

-

-

-

139

Average currency forward rate - EUR/RUB

79.4094

-

-

-

-

-

 

     

The following table shows the notional amount and the fair value of the hedging instruments on the exchange risk of transactions outstanding as at December 31, 2019 and December 31, 2018, broken down by type of hedged item.

 

  Millions of euro

 

Fair value

Notional amount

Fair value

Notional amount

Hedging instrument

Hedged item

Assets

Liabilities

 

Assets

Liabilities

 
  

at Dec. 31, 2019

at Dec. 31, 2018

Fair value hedges

       

Cross currency interest rate swaps (CCIRS)

Fixed-rate borrowings in foreign currencies

24

(1)

171

7

-

87

Cross currency interest rate swaps (CCIRS)

Floating-rate borrowings in foreign currencies

-

-

-

15

-

150

Cash flow hedges

       

Cross currency interest rate swaps (CCIRS)

Floating-rate borrowings in foreign currencies

55

(5)

999

37

(4)

525

Cross currency interest rate swaps (CCIRS)

Fixed-rate borrowings in foreign currencies

-

(4)

72

85

(2)

793

Cross currency interest rate swaps (CCIRS)

Floating-rate bonds in foreign currencies

6

(1)

302

47

-

346

Cross currency interest rate swaps (CCIRS)

Fixed-rate bonds in foreign currencies

1,022

(1,535)

20,877

598

(2,013)

20,234

Cross currency interest rate swaps (CCIRS)

Future cash flows denominated in foreign currencies

-

(17)

302

-

(71)

297

Currency forwards

Future cash flows denominated in foreign currencies

3

(63)

811

4

(33)

1,089

Currency forwards

Future commodity purchases denominated in foreign currencies

124

(7)

3,462

114

(15)

4,298

Currency forwards

Purchases of investment goods and other

3

(43)

1,219

42

(12)

1,241

Total

 

1,237

(1,676)

28,215

949

(2,150)

29,060

Cash flow hedges and fair value hedges include:

  • CCIRSs with a notional amount of €21,120 million used to hedge the exchange risk on fixed-rate debt denominated in currencies other than the euro, with a negative fair value of €495 million; 
  • CCIRSs with a notional amount of €1,603 million used to hedge the exchange risk on floating-rate debt denominated in currencies other than the euro, with a positive fair value of €38 million; 
  • currency forwards with a notional amount of €4,273 million used to hedge the exchange risk associated with purchases of natural gas, purchases of fuel and expected cash flows in currencies other than the euro, with a positive fair value of €57 million; 
  • currency forwards with a notional amount of €1,219 million and a negative fair value of €40 million in respect of OTC transactions to mitigate the exchange risk on expected cash flows in currencies other than the currency of account connected with the purchase of investment goods in the renewables and infrastructure and networks sectors (new generation digital meters), on operating expenses for the supply of cloud services and on revenue from the sale of renewable energy.

   

The following table reports the notional amount and fair value of foreign exchange derivatives at December 31, 2019 and December 31, 2018, broken down by type of hedge.

     

 Millions of euro

Notional amount

Fair value assets

Notional amount

Fair value liabilities

Derivatives

at Dec. 31, 2019

at Dec. 31, 2018

at Dec. 31, 2019

at Dec. 31, 2018

at Dec. 31, 2019

at Dec. 31, 2018

at Dec. 31, 2019

at Dec. 31, 2018

Fair value hedges

        

Currency forwards

        

CCIRS

166

237

25

22

5

-

(1)

-

Total

166

237

25

22

5

-

(1)

-

Cash flow hedges

        

Currency forwards

3,253

4,302

130

160

2,238

2,326

(113)

(61)

CCIRS

11,169

8,705

1,083

767

11,384

13,490

(1,562)

(2,090)

Total

14,422

13,007

1,213

927

13,622

15,816

(1,675)

(2,151)

TOTAL EXCHANGE RATE DERIVATIVES

14,588

13,244

1,238

949

13,627

15,816

(1,676)

(2,151)

 

The notional amount of CCIRSs at December 31, 2019 amounted to €22,723 million (€22,432 million at December 31, 2018), an increase of €291 million. Cross currency interest rate swaps with a total value of €2,070 million expired, while new derivatives amounted to €2,510 million, of which €1,336 million in respect of bond issues denominated in US dollars in September 2019. The value also reflects developments in the exchange rate of the euro against the main other currencies, which caused their notional amount to increase by €466 million.
The notional amount of currency forwards at December 31, 2019 amounted to €5,491 million (€6,628 million at December 31, 2018), a decrease of €1,137 million. The exposure to exchange risk, especially that associated with the US dollar, is mainly due to purchases of natural gas, purchase of fuel and cash flows in respect of investments. Changes in the notional amount are connected with normal developments in operations.

Fair value hedge derivatives

The following table reports net gains and losses recognized through profit or loss, reflecting changes in the fair value of fair value hedge derivatives and the changes in the fair value of the hedged item that are attributable to exchange risk for 2019 and the previous year.

   

Millions of euro

2019

2018

 

Net gain/(loss)

Net gain/(loss)

Interest rate hedging instruments

1

6

Hedged item

(4)

(6)

Ineffective portion

(3)

-

   

The following table shows the impact of fair value hedges of interest rate risk in the balance sheet at December 31, 2019 and December 31, 2018.

   

Millions of euro

2019

2018

 

Notional amount

Carrying amount

Fair value used to measure ineffectiveness in period

Notional amount

Carrying amount

Fair value used to measure ineffectiveness in period

Cross currency interest rate swaps (CCIRS)

171

24

24

237

22

22

 

The following table shows the impact of the hedged item of fair value hedges in the balance sheet at December 31, 2019 and December 31, 2018:

   

Millions of euro

2019

2018

 

Carrying amount

Cumulative adjustment of fair value of hedged item

Fair value used to measure ineffectiveness in period

Carrying amount

Cumulative adjustment of fair value of hedged item

Fair value used to measure ineffectiveness in period

Cross currency interest rate swaps (CCIRS)

171

21

(22)

228

22

(22)

   

Cash flow hedge derivatives

The following table shows the cash flows expected in coming years from cash flow hedge derivatives on exchange risk.

 Millions of euro

Fair value

Distribution of expected cash flows

 

at Dec. 31, 2019

2020

2021

2022

2023

2024

Beyond

Cash flow hedge derivatives on exchange rates

       

Positive fair value

1,213

357

272

219

471

141

1,667

Negative fair value

(1,675)

(43)

42

47

33

36

(66)

 

The following table shows the impact of cash flow hedges of exchange risk in the balance sheet at December 31, 2019 and December 31, 2018.

 

Millions of euro20192018
Notional amountCarrying amountFair value used to measure ineffectiveness in periodNotional amountCarrying amountFair value used to measure ineffectiveness in period
Cross currency interest rate swaps (CCIRS)22,552(479)(345)22,195(1,323)(1,074)
Currency forwards5,49117526,62899136
Total28,043(462)(293)28,823(1,224)(938)

The following table shows the impact of the hedged item of cash flow hedges in the balance sheet at December 31, 2019 and December 31, 2018.

 Millions of euro

2019

2018

 

Fair value used to measure ineffectiveness in period

Cash flow hedge reserve

Hedging costs reserve

Ineffective portion of carrying amount of CFH derivatives

Fair value used to measure ineffectiveness in period

Cash flow hedge reserve

Hedging costs reserve

Ineffective portion of carrying amount of CFH derivatives

Floating-rate borrowings in foreign currencies

(49)

49

1

-

(32)

32

1

-

Fixed-rate borrowings in foreign currencies

3

(3)

(1)

-

(87)

87

(4)

-

Floating-rate bonds in foreign currencies

(5)

5

-

-

(47)

47

-

-

Fixed-rate bonds in foreign currencies

378

(378)

(135)

-

1,169

(1,169)

(246)

-

Future cash flows denominated in foreign currencies

17

(17)

-

-

71

(71)

-

-

Future cash flows denominated in foreign currencies

59

(59)

(1)

-

30

(30)

1

-

Future commodity purchases denominated in foreign currencies

(119)

119

-

(2)

(100)

100

-

(1)

Purchases of investment goods and other

9

(9)

(32)

1

(66)

66

(36)

(1)

Total

293

(293)

(168)

(1)

938

(938)

(284)

(2)

   

The following table shows the impact of cash flow hedges of exchange risk through profit or loss and other comprehensive income in the period, gross of tax effects.

 

Millions of euro

at Dec. 31, 2019

 

Gross changes in fair value through OCI

Net gain/(loss) gross of tax effects through profit or loss for ineffectiveness

Hedging costs through OCI

Net gain/(loss) gross of tax effects through profit or loss for reclassification from OCI

Exchange rate hedges

834

1

116

189

     

Commodity risk

Millions of euro

2020

2021

2022

2023

2024

Beyond

Total

At Dec. 31, 2019

       

Commodity swaps

       

Notional value on power

703

123

121

135

128

712

1,922

Average commodity swap price on power (€/MWh)

47.7

20.5

20.2

20.2

20.2

20.7

 

Notional value on coal/shipping

253

-

-

-

-

-

253

Average commodity swap price on coal/shipping ($/ton)

62.4

-

-

-

-

-

 

Notional value on gas

13

13

13

13

41

66

159

Average commodity swap price on gas (€/MWh)

3.0

3.0

3.0

3.0

7.0

7.9

 

Commodity forwards/futures

       

Notional value on power

726

2

-

-

-

-

728

Average commodity forward/future price on power (€/MWh)

50.5

50.4

-

-

-

-

 

Notional value on gas

1,869

662

1

-

-

-

2,532

Average commodity forward/future price on gas (€/MWh)

15.9

19.1

17.2

-

-

-

 

Notional value on CO2

217

9

-

-

-

-

226

Average commodity forward/future price on CO2 (€/ton)

18.0

25.0

-

-

-

-

 

Notional value on oil

988

115

-

-

-

-

1,103

Average commodity forward/future price on oil ($/bbl)

64.8

59.7

-

-

-

-

 

     

 

 

Millions of euro

2019

2020

2021

2022

2023

Beyond

Total

At Dec. 31, 2018

       

Commodity swaps

       

Notional value on power

765

234

90

82

96

494

1,761

Average commodity swap price on power (€/MWh)

52.8

44.2

19.4

19.0

19.0

19.0

 

Notional value on coal/shipping

582

47

-

-

-

-

629

Average commodity swap price on coal/shipping ($/ton)

85.0

78.9

-

-

-

-

 

Commodity forwards/futures

       

Notional value on power

436

16

-

-

-

-

452

Average commodity forward/future price on power (€/MWh)

61.1

54.4

-

-

-

-

 

Notional value on gas

352

390

-

-

-

-

742

Average commodity forward/future price on gas (€/MWh)

24.1

20.0

-

-

-

-

 

Notional value on CO2

213

67

-

-

-

-

280

Average commodity forward/future price on CO2 (€/ton)

13.4

7.8

-

-

-

-

 

Notional value on oil

1,170

226

-

-

-

-

1,396

Average commodity forward/future price on oil ($/bbl)

71.4

68.8

-

-

-

-

 

   

The following table reports the notional amount and fair value of instruments hedging interest rate risk on transactions outstanding at December 31, 2019 and December 31, 2018, broken down by type of commodity.

   

Millions of euro

Notional amount

Fair value assets

Notional amount

Fair value liabilities

 

at Dec. 31, 2019

at Dec. 31, 2018

at Dec. 31, 2019

at Dec. 31, 2018

at Dec. 31, 2019

at Dec. 31, 2018

at Dec. 31, 2019

at Dec. 31, 2018

Derivatives

        

Cash flow hedges

        

Derivatives on power:

        

- swaps

1,301

1,249

234

139

621

512

(107)

(227)

- forwards/futures

280

293

34

20

448

159

(44)

(12)

- options

-

-

-

-

-

-

-

-

Total derivatives on power

1,581

1,542

268

159

1,069

671

(151)

(239)

Derivatives on coal/shipping:

        

- swaps

-

10

7

74

253

619

(54)

(94)

- forwards/futures

-

-

-

-

-

-

-

-

- options

-

-

-

-

-

-

-

-

Total derivatives on coal/shipping

-

10

7

74

253

619

(54)

(94)

Derivatives on gas and oil:

        

- swaps

79

-

9

-

80

-

(1)

-

- forwards/futures

2,823

723

694

222

812

1,415

(298)

(693)

- options

-

-

-

-

-

-

-

-

Total derivatives on gas and oil

2,902

723

703

222

892

1,415

(299)

(693)

Derivatives on CO2:

- swaps

--------

- forwards/futures

22627984301-1--

- options

--------

Total derivatives on CO2

22627984301-1--

TOTAL DERIVATIVES ON COMMODITIES

4,7092,5541,0627562,2142,706(504)(1,026)

   

The table reports the notional amount and fair value of derivatives hedging the price risk on commodities at December 31, 2019 and at December 31, 2018, broken down by type of hedge.
The positive fair value of cash flow hedge derivatives on commodities regards derivatives on gas and oil commodities in the amount of €703 million, derivatives on CO2 (€84 million), derivatives on power (€268 million) and, to a lesser extent, hedges of coal purchases requested by the generation companies in the amount of €7 million. The first category primarily regards hedges of fluctuations in the price of natural gas, for both purchases and sales, carried out for oil commodities and gas products with physical delivery (all-in-one hedges).
Cash flow hedge derivatives on commodities included in liabilities regard derivatives on gas and oil commodities in the amount of €299 million, derivatives on power in the amount of €151 million and derivatives on coal (€54 million).

Cash flow hedge derivatives

The following table shows the cash flows expected in coming years from cash flow hedge derivatives on commodity risk.

 

 Millions of euro

Fair value

Distribution of expected cash flows

 

at Dec. 31, 2019

2020

2021

2022

2023

2024

Beyond

Cash flow hedge derivatives on commodities

       

Positive fair value

1,062

662

187

69

13

11

120

Negative fair value

(504)

(400)

(79)

(12)

(3)

(3)

(7)

 

The following table shows the impact of cash flow hedges of commodity risk in the balance sheet at December 31, 2019 and December 31, 2018.

   

Millions of euro

2019

2018

 

Notional amount

Carrying amount

Fair value used to measure ineffectiveness in period

Notional amount

Carrying amount

Fair value used to measure ineffectiveness in period

Power swaps

1,922

127

127

1,761

(88)

(88)

Coal/shipping swaps

253

(47)

(47)

629

(20)

(20)

Gas and oil swaps

159

8

8

-

-

-

       

Power forwards/futures

728

(10)

(10)

452

8

8

Coal/shipping forwards/futures

-

-

-

-

-

-

Gas and oil forwards/futures

3,635

396

396

2,138

(471)

(471)

CO2 forwards/futures

226

84

84

280

301

301

Total

6,923

558

558

5,260

(270)

(270)

 

The following table shows the impact of the hedged item of cash flow hedges in the balance sheet at December 31, 2019 and December 31, 2018.

 

Millions of euro

2019

2018

 

Fair value used to measure ineffectiveness in period

Cash flow hedge reserve

Hedging costs reserve

Ineffective portion of carrying amount of CFH derivatives

Fair value used to measure ineffectiveness in period

Cash flow hedge reserve

Hedging costs reserve

Ineffective portion of carrying amount of CFH derivatives

Future transactions in power

(110)

110

-

7

82

(82)

-

2

Future transactions in coal/shipping

47

(47)

-

-

20

(20)

-

-

Future transactions in gas and oil

(404)

404

-

-

471

(471)

-

-

Future transactions in CO2

(84)

84

-

-

(301)

301

-

-

Total

(551)

551

-

7

272

(272)

-

2

     

The following table shows the impact of cash flow hedges of commodity risk through profit or loss and other comprehensive income in the period, gross of tax effects.

Millions of euro

at Dec. 31, 2019

 

Gross changes in fair value through OCI

Net gain/(loss) gross of tax effects through profit or loss for ineffectiveness

Hedging costs through OCI

Net gain/(loss) gross of tax effects through profit or loss for reclassification from OCI

Commodity price hedges

914

5

-

91

             

 46.2 Derivatives at fair value through profit or loss 

The following table shows the notional amount and the fair value of derivatives at FVTPL as at December 31, 2019 and December 31, 2018.

 

Millions of euroNotional amountFair value assetsNotional amountFair value assets
at Dec. 31, 2019at Dec. 31, 2018at Dec. 31, 2019at Dec. 31, 2018at Dec. 31, 2019at Dec. 31, 2018at Dec. 31, 2019at Dec. 31, 2018
Derivatives at FVTPL:
- derivatives on interest rates:
- interest rate swaps505022112566(80)(79)
- interest rate options----5050(5)(5)

- derivatives on exchange rates:

- currency forwards

3,3994,09234541,6481,175(37)(18)

- CCIRS

-162-1332,117-(18)

- derivatives on commodities

--------

Derivatives on power:

        

- swaps

282

1,070

25

167

281

229

(28)

(28)

- forwards/futures

5,353

6,260

403

814

4,329

6,955

(155)

(1,016)

- options

3

15

2

28

27

20

(14)

(11)

Total derivatives on power

5,638

7,345

430

1,009

4,637

7,204

(197)

(1,055)

Derivatives on coal:

        

- swaps

311

201

69

56

367

823

(80)

(48)

- forwards/futures

-

-

-

-

-

-

-

-

- options

-

-

-

-

-

-

-

-

Total derivatives on coal

311

201

69

56

367

823

(80)

(48)

Derivatives on gas and oil:

        

- swaps

1,259

896

168

215

852

728

(97)

(186)

- forwards/futures

9,782

11,894

2,126

1,640

11,047

12,712

(2,190)

(1,531)

- options

315

225

247

147

309

289

(273)

(165)

Total derivatives on gas and oil

11,356

13,015

2,541

2,002

12,208

13,729

(2,560)

(1,882)

Derivatives on CO2:

        

- swaps

-

-

-

-

-

-

-

-

- forwards/futures

185

243

31

68

524

221

(32)

(65)

- options

-

-

-

-

-

-

-

-

Total derivatives on CO2

185

243

31

68

524

221

(32)

(65)

Derivatives on other:

        

- swaps

4

9

2

2

16

-

(1)

-

- forwards/futures

6

1

3

-

9

1

(4)

-

- options

-

-

-

-

-

-

-

-

Total derivatives on other

10

10

5

2

25

1

(5)

-

Embedded derivatives

25

-

3

-

43

-

(4)

-

TOTAL DERIVATIVES

20,974

25,118

3,115

3,194

19,647

25,886

(3,000)

(3,170)

   

At December 31, 2019 the notional amount of trading derivatives on interest rates came to €212 million. The fair value of a negative €83 million deteriorated by €1 million on the previous year, mainly due to developments in the yield curve. At December 31, 2019, the notional amount of derivatives on exchange rates was €5,080 million. The overall decrease in their notional value and the decline in the associated net fair value of €3 million mainly reflected normal operations and developments in exchange rates.
At December 31, 2019, the notional amount of derivatives on commodities came to €35,329 million. The fair value of trading derivatives on commodities classified as assets mainly reflects the market valuation of hedges of gas and oil amounting to €2,541 million and derivatives on power amounting to €430 million.
The fair value of trading derivatives on commodities classified as liabilities mainly regards hedges of gas and oil amounting to €2,560 million and derivatives on power amounting to €197 million.
These values include transactions that, although established for hedging purposes, did not meet the requirements for hedge accounting.
The “other” category includes hedges using weather derivatives. In addition to commodity risk, the Group companies are also exposed to changes in volumes associated with weather conditions (for example, temperature impacts the consumption of gas and power).
Embedded derivatives, which are held by Enel Green Power North America, regard supplementary financial clauses in more complex tax equity partnership agreements, which are used to finance investment in new renewable capacity.