6. Main changes in the scope of consolidation

 

In the two periods under review, the scope of consolidation changed as a result of a number of transactions.

2018

  • Disposal, on March 12, 2018, of 86.4% of Erdwärme Oberland GmbH, a company developing geothermal plants headquartered in Germany. The total transaction price was €0.9 million, with a realized capital gain of €1 million; 
  • acquisition, on April 2, 2018, of 33.6% of the minority interests in Enel Generación Chile, enabling Enel Chile to increase its stake in Enel Generación Chile to 93.55%. In addition, on that date the merger of the renewables company Enel Green Power Latin America SA into Enel Chile took effect; 
  • acquisition, on April 3, 2018, acting through Enel Green Power España, of 100% of Parques Eólicos Gestinver SLU and Parques Eólicos Gestinver Gestión SLU for €57 million, of which €15 million of existing debt assumed; 
  • acquisition, on June 7, 2018, by Enel Sudeste of control of the Brazilian distribution company Enel Distribuição São Paulo (formerly Eletropaulo Metropolitana Eletricidade de São Paulo SA) following initial participation of shareholders. The tender for 100% of the shares ended on July 4, 2018. At September 30, 2018, the company was consolidated on the basis of a 95.88% holding by the Group; 
  • acquisition, on July 25, 2018, acting through the subsidiary Endesa Red, of 94.6% of Empresa de Alumbrado Eléctrico de Ceuta SA, a company operating in the distribution and sale of electricity in the autonomous city of Ceuta in North Africa; 
  • disposal, on September 28, 2018, to Caisse de Dépôt et Placement du Québec (CDPQ), a long-term institutional investor, and CKD Infraestructura México SA de CV (CKD IM), the investment vehicle of leading Mexican pension funds, of 80% of eight special purpose vehicles that own eight plants in operation or under construction in Mexico. Following the close of the transaction, Enel Green Power SpA holds 20% of their share capital, meaning that the companies are now accounted for using the equity method; 
  • disposal, on October 18, 2018, by Enel Green Power SpA of the biomass generation plant of Finale Emilia;
  • disposal, on December 14, 2018, by Enel Green Power SpA of its wholly owned subsidiary Enel Green Power Uruguay SA, which in turn owns the vehicle Estrellada SA of the 50 MW Melowind wind farm at Cerro Largo.

2019

  • Disposal, on March 1, 2019, of 100% of Mercure Srl, a company to which the business unit consisting of the Mercure biomass plant and the related legal relationships had been previously transferred. The price for the transaction was €168 million; 
  • acquisition, on March 14, 2019, by Enel Green Power SpA, acting through its US renewables subsidiary Enel Green Power North America (EGPNA, now renamed Enel North America), of 100% of 13 companies that own seven operating renewable generation plants from Enel Green Power North America Renewable Energy Partners (EGPNA REP), a joint venture 50% owned by EGPNA and 50% by General Electric Capital’s Energy Financial Services; 
  • acquisition, on March 27, 2019, by Enel Green Power SpA (EGP), acting through its US renewables subsidiary EGPNA (now ENA), of Tradewind Energy, a renewable energy project development company based in Lenexa, Kansas. EGP has incorporated the entire Tradewind development platform, which includes 13 GW of wind, solar and storage projects located in the United States. The agreement also provided for the sale, which took place in June, of Savion, a wholly owned subsidiary of Tradewind; 
  • acquisition, on April 30, 2019, by Enel X Italia of 100% of YouSave SpA, an Italian company operating in the energy services sector, providing assistance to large electricity consumers; 
  • on May 31, 2019, the finalization, acting through the renewables subsidiary Enel Green Power Brasil Participações Ltda, of the disposal of 100% of three renewables plants in Brazil. The total price of the transaction was about R$2.7 billion, the equivalent of about €603 million; 
  • acquisition, on November 14, 2019, by Enel X Srl of 55% of PayTipper, an authorized payment institution that offers its customers financial services to facilitate their daily lives. The contract is accompanied by a put option for the remaining 45%.

Other changes

In addition to the above changes in the scope of consolidation, note the following transactions, which although they do not represent transactions involving the acquisition or loss of control, gave rise to a change in the interest held by the Group in the investees:

  • Enel SpA increased its stake over the course of 2019 in Enel Américas by 5.74% under the provisions of the two share swap contracts signed with a financial institution and as a result of a non-proportional capital increase in the subsidiary, bringing the Group’s interest to 59.97%; 
  • on March 25, 2019, Enel X International acquired 40% of EnerNOC Japan K.K, bringing its stake to 100%; 
  • on September 5, 2019, Enel Green Power Development acquired 23.44% of Enel Green Power India, bringing its interest to 100%; > on November 21, 2019, Enel Brasil acquired 4.1% of Eletropaulo Metropolitana Eletricidade de São Paulo SA for about €93 million; 
  • on December 5, 2019, Enel SpA increased its stake in Enel Chile by 0.11% under the provisions of two share swap transactions with a financial institution to increase its interest in Enel Chile SA by a maximum of 3% of share capital.

Acquisition of geothermal, solar and wind plants from Enel Green Power North America Renewable Energy Partners

On March 14, 2019, Enel Green Power SpA, acting through its US subsidiary Enel Green Power North America (EGPNA, now called Enel North America), acquired 100% of 13 companies owning seven operating renewable generation plants with a total capacity of 650 GW from Enel Green Power North America Renewable Energy Partners (EGPNA REP), a joint venture 50% owned by EGPNA (now ENA) and 50% by General Electric Capital’s Energy Financial Services.
The acquisition involved a cash outflow of €225 million, of which €198 million for the equity acquired and €27 million for the settlement with the counterparty of a number of creditor positions that the latter had in respect of the companies acquired.
The 13 companies included in the transaction own the following seven plants: Cove Fort, Salt Wells, Stillwater (two plants), Cimarron Bend, Lindahl, Sheldon Springs.
The transaction involved the provisional recognition of negative goodwill of €106 million and the concomitant recognition of a loss by EGPNA REP, which is accounted for using the equity method, reflecting the capital loss (€88 million pertaining to EGPNA) on the sale of the 13 companies to EGPNA.

The following table reports the provisional fair values of the net assets acquired:

Millions of euro

Carrying amount prior to March 14, 2019

Adjustments from purchase price allocation

Carrying amount at March 14, 2019

Property, plant and equipment

947

86

1.033

Intangible assets

20

(20)

-

Goodwill

13

(13)

-

Investments accounted for using the equity method

(10)

-

(10)

Inventories

2

-

2

Trade receivables

6

-

6

Other current assets

7

-

7

Cash and cash equivalents

6

-

6

Borrowings

(579)

(24)

(603)

Provisions for risks and charges - non-current portion

(9)

7

(2)

Deferred tax liabilities

-

(56)

(56)

Other non-current liabilities

(2)

(5)

(7)

Short-term borrowings

(2)

-

(2)

Current portion of long-term borrowings

(41)

8

(33)

Trade payables

(8)

-

(8)

Other current liabilities

(2)

-

(2)

Non-controlling interests

 -

 -

-

Net assets acquired

348

(17)

331

Cost of the acquisition

225

-

225

(of which paid in cash)

225

-

225

Goodwill/(Badwill)

(123)

17

(106)


The companies acquired contributed €112 million in revenue and €41 million in operating income to results for 2019.

 

Acquisition of Tradewind Energy

On March 27, 2019, Enel Green Power acquired Tradewind Energy, a renewables project development company with 13 GW of wind, solar and storage projects located in the United States.

Under the terms of the agreement, Savion, a 100% subsidiary of Tradewind, which has a 6 GW development platform of solar and storage projects, would be sold to the Green Investment Group, part of the Australian multinational Macquarie, and the Cheyenne Ridge company would be sold to Xcel. At June 30, 2019, those disposals had been finalized. Definitive regulatory approval of the disposal of Savion was obtained in July 2019.

The following table reports the provisional fair values of the net assets acquired:

Millions of euro

Carrying amount prior to March 27, 2019

Adjustments from purchase price allocation

Carrying amount at March 27, 2019

Property, plant and equipment

8

(2)

6

Intangible assets

2

100

102

Deferred tax assets

11

(11)

-

Other non-current assets

31

3

34

Trade receivables

3

(3)

-

Other current assets

1

117

118

Cash and cash equivalents

4

-

4

Deferred tax liabilities

(26)

(26)

Other non-current liabilities

(1)

-

(1)

Short-term borrowings

(87)

-

(87)

Trade payables

(6)

(4)

(10)

Other current financial liabilities

(54)

25

(29)

Other current liabilities

(3)

(2)

(5)

Net assets acquired

(91)

197

106

Cost of the acquisition

6

25

31

(of which paid in cash)

6

25

31

Goodwill/(Badwill)

97

(172)

(75)

The accounting effects of the transaction involved the recognition of negative goodwill of €75 million. During the year, the process of allocating the purchase price was completed by independent experts, who allocated the portfolio of projects under development to “intangible assets”. Those no longer considered strategic and subsequently sold were recognized under “other current assets”.

   

Acquisition of YouSave

On April 30, 2019, Enel X Italia acquired 100% of YouSave SpA, an Italian company that operates in the energy services sector, providing assistance to large energy consumers in the industrial, services and government sectors with the aim of significantly reducing energy expenditure by jointly improving prices and the amount of power consumed.
The total consideration, equal to €29 million, based on the structure of the operation, was divided as follows:

  • price at the date the agreement was signed, equal to €20 million; 
  • a final price adjustment of €9 million. 

The acquisition involved a cash outlay of €26 million, including the payment of €3 million into an escrow account. This residual amount of €3 million represents a deferred component to be paid on the 18th month from the execution date, unless the conditions for the payment of the indemnity by the seller to the buyer with respect to a dispute pending before the Court of Bergamo should exist.

The following table reports the provisional fair values of the net assets acquired.

Millions of euro

Carrying amount prior to April 30, 2019

Adjustments from purchase price allocation

Carrying amount at April 30, 2019

Net assets acquired

15

24 

39

Cost of the acquisition

29

-

29

Goodwill/(Badwill)

14

(24)

(10)

   

Acquisition of PayTipper

On November 14, 2019, Enel X acquired 55% of PayTipper, a payment institution with agreements with an extensive network of sales outlets that offers its customers financial services to facilitate their daily lives. In addition, the contract is associated with a put option for the remaining 45%, to be exercised no later than April 30, 2024. At December 31, 2019 the put option had a value of €17 million.
The Group will determine the fair value of the assets acquired and the liabilities assumed within 12 months of the acquisition date.

Determination of goodwill

Millions of euro

 

Net assets acquired

4

Cost of the acquisition

22

(of which paid in cash)

5

Goodwill

18

     

Disposal of eight companies owning renewables plants in Brazil

On May 31, 2019 the disposal of 100% of three operating renewables plants in Brazil was finalized through the renewables subsidiary Enel Green Power Brasil Participações Ltda. The total consideration in the transaction, paid to Enel at closing, was equal to the enterprise value of the plants and amounted to about R$2.7 billion, equivalent to about €603 million.

Millions of euro

 

Value of the transaction

603

Net assets sold

(565)

Transaction costs

(4)

Reversal of OCI reserve

(41)

Capital loss

(7)

Disposal of Mercure Srl

March 1, 2019, saw the finalization of the sale of 100% of Mercure Srl, a company to which a business unit consisting of the Mercure biomass power plant and related legal relationships had previously been transferred. The price for the sale was € 168 million.

Millions of euro

 

Value of the transaction

168

Net assets sold

60

Capital gain

108