8.a Revenue from sales and services - €77,366 million

Millions of euro

   
 

2019

2018

Change

Sale of electricity(1)

40,045

39,278

767

2.0%

Transport of electricity

10,470

10,101

369

3.7%

Fees from network operators

866

1,012

(146)

-14.4%

Transfers from institutional market operators

1,625

1,711

(86)

-5.0%

Sale of gas

3,294

4,401

(1,107)

-25.2%

Transport of gas

617

576

41

7.1%

Sale of fuels(1)

914

919

(5)

-0.5%

Connection fees to electricity and gas networks

785

714

71

9.9%

Construction contracts

749

735

14

1.9%

Sale of environmental certificates(1)

36

36

-

-

Sale of value-added services

343

390

(47)

-12.1%

Other sales and services

1,295

1,305

(10)

-0.8%

Total IFRS 15 revenue

61,039

61,178

(139)

-0.2%

Operating leases

24

26

(2)

-7.7%

Sale of energy commodities under contracts with physical delivery (IFRS 9)(1)

10,775

13,843

(3,068)

-22.2%

Gain/(Loss) on derivatives on sale of commodities with physical delivery (1)

5,519

(2,010)

7,529

-

Reinsurance premiums

6

-

6

-

Other revenue

3

-

3

-

TOTAL REVENUE FROM SALES AND SERVICES

77,366

73,037

4,329

5.9%

(1)The 2018 figures have been adjusted to take account of the interpretations of the International Financial Reporting Interpretations Committee (IFRIC) contained in the Agenda Decision of March 2019, which involved changes in the classification, with no impact on margins, of the effects of purchase and sales contracts for commodities measured at fair value through profit or loss (for more details, see note 4.3 of the consolidated financial statements).

The increase in revenue from energy sales (€767 million) is mainly attributable to the consolidation of Enel Distribuição São Paulo in June 2018.

Revenue from the transport of electricity came to €10,470 million in 2019, an increase of €369 million. This increase was mainly due to the acquisition of Enel Distribuição São Paulo and the greater distribution revenue in Italy, above all as a result of the regulatory change with Resolution no. 654/2015 of the Regulatory Authority for Energy, Networks and the Environment (ARERA) (related to “regulatory lag”).

Revenue generated by fees from network operators came to €866 million, a decrease of €146 million compared with the previous year due, above all, to lower fees for the remuneration of generation plants in Italy. Revenue from the sale of natural gas for 2019, which totaled €3,294 million, decreased by €1,107 million from the previous year (€4,401 million in 2018). The decrease reflects lower quantities sold and, above all, lower average prices applied for sales in Spain (€1,136 million) compared with the previous year. Other non-IFRS 15 revenue increased by €4,468 million due to the sale of commodities under contracts for physical delivery and adjustments to their fair value, including for the unsettled portion following reclassification as a result of application of the IFRIC Agenda Decision of March 2019 concerning the recognition of contracts on commodities with the physical delivery of energy within the scope of IFRS 9. Revenue from contracts with customers (IFRS 15) for 2019 totaled €61,039 million and can be broken down into point-intime and over-time revenue as shown in the table below:

Millions of euro

2019

 

Italy

Iberia

Latin America

Europe and Euro-Mediterranean Affairs

North America

Africa, Asia and Oceania

Other, eliminations and adjustments

Total

 

Over time

Point in time

Over time

Point in time

Over time

Point in time

Over time

Point in time

Over time

Point in time

Over time

Point in time

Over time

Point in time

Over time

Point in time

Total revenue (IFRS 15)

22,635

522

17,860

785

15,573

503

1,383

934

646

27

76

81

7

7

58,180

2,859

 

The table below gives a breakdown of revenue from sales and services by geographical area.

Millions of euro

  
 

2019

2018

Italy (1)

26,420

27,385

Europe

  

Iberia (1)

18,265

18,379

France

1,259

1,006

Switzerland

217

1,039

Germany

3,746

2,297

Austria

173

155

Slovenia

40

27

Slovakia

1

-

Romania

1,311

1,214

Greece

73

62

Bulgaria

8

9

Belgium

26

320

Czech Republic

152

113

Hungary

418

399

Russia

897

989

Netherlands

6,553

2,139

United Kingdom

726

1,685

Other European countries

(23)

113

Americas

  

United States

501

466

Canada

18

23

Mexico (1)

233

519

Brazil

7,752

6,518

Chile

3,263

3,169

Peru

1,261

1,275

Colombia

2,243

2,242

Argentina

1,323

1,265

Other South American countries

169

14

Other

  

Africa

92

82

Asia

249

133

Total

77,366

73,037

(1)The 2018 figures have been adjusted to take account of the interpretations of the International Financial Reporting Interpretations Committee (IFRIC) contained in the Agenda Decision of March 2019, which involved changes in the classification, with no impact on margins, of the effects of purchase and sales contracts for commodities measured at fair value through profit or loss (for more details, see note 4.3 of the consolidated financial statements).

 

Performance obligations

The following table provides information about the Group’s performance obligations arising from contracts with customers with reference to the main revenue streams only, with a summary of the specific judgments made and the related revenue recognition policies:

Type of product/service

Nature and timing of satisfaction of performance obligation

Accounting policies

Sale/transport electricity/gas to end-users

An electricity/gas supply agreement signed with an end users includes a single performance obligation (sale and transport of the commodity) because the Group has determined that the contract does not provide distinct goods/services and the promise is satisfied by transferring control over the commodity to the customer when it is delivered at the point of delivery. In order to determine the nature of the promise included in such contracts, the Group carefully analyzes the facts and circumstances applicable to each contract and commodity.
However, the Group considers that the performance obligation provided for in a repetitive service contract, such as a supply or transport contract for the provision of electricity/gas to end users is typically satisfied over time (because the customer simultaneously receives and consumes the benefits of the commodity as it is delivered) as part of a series of distinct goods/services (i.e., each unit of commodity) that are substantially the same and have the same pattern of transfer to the customer. In these cases, the Group applies an output method to recognize revenue in the amount to which it has a right to invoice the customer if that amount corresponds directly with the value to the customer of the performance completed to date.

Revenue from the sale and transport of electricity/ gas to end users is recognized when these commodities are delivered to the customer and is based on the quantities provided during the period, even if these have not yet been invoiced. It is determined using estimates as well as periodic meter readings. Where applicable, this revenue is based on the rates and related restrictions established by law or by the Regulatory Authority for Energy, Networks and the Environment (ARERA) and analogous foreign authorities during the applicable period.

Network connection services

The network connection fees received from customers for connecting them to the electricity/ gas distribution networks require a specific Group assessment to take into consideration all terms and conditions of the connection arrangements.
This assessment is intended to determine whether the contract includes other distinct goods or services, such as for example, the right to obtain ongoing access to the infrastructure in order to receive the commodity or, when the connection fee is a “non-refundable up-front fee” paid at or near contract inception, a material right that gives rise to a performance obligation.
In particular, in some countries in which the Group operates, it has determined that the nature of the consideration received represents a “non-refundable up-front fee” whose payment provides a material right to the customer. In order to determine if the period over which this material right should be recognized extends beyond the initial contractual period, the Group takes into consideration the applicable local legal and regulatory framework applicable to the contract and that affect the parties.
In such cases, if there is an implied assignment of the material right and an obligation from the initial customer to the new customer, the Group recognizes the connection fee over a period beyond the relationship with the initial customer, considering the concession terms as the period during which the initial customer and any future customer can benefit from the ongoing access without paying an additional connection fee. As a consequence, the fee is recognized over the period for which the payment creates an obligation for the Group to make the lower prices available to future customers (i.e., the period during which the customer is expected to benefit from the ongoing access service without having to pay an “up-front fee” upon renewal).

Revenue from monetary and in-kind fees for connection to the electricity and gas distribution network is recognized on the basis of the satisfaction of the performance obligations included in the contract. The identification of distinct goods or services requires a careful analysis of the terms and conditions of the connection arrangements, which could vary from country to country based on the local context, regulations and law. In order to finalize this assessment, the Group considers not only the characteristics of the goods/services themselves (i.e., the good or service is capable of being distinct) but also the implied promises for which the customer has a valid expectation as it views those promises as part of the negotiated exchange, that is goods/services that the customer expects to receive and has paid for (i.e., the promise to transfer the good or service to the customer is separately identifiable from other promises in the contract).
Furthermore, the Group acts as an agent in some contracts for electricity/gas network connection services and other related activities, depending on local legal and regulatory framework. In such cases, it recognizes revenue on a net basis, corresponding to any fee or commission to which it expects to be entitled.

Construction contracts

The construction contracts typically include a performance obligation satisfied over time. For these contracts, the Group generally considers it appropriate to use an input method for measuring progress, except when a specific contract analysis suggests the use of an alternative method that better depicts the Group’s performance obligation fulfilled at reporting date.

For construction contracts that include a performance obligation satisfied over time, the Group recognizes revenue over time by measuring progress toward the complete satisfaction of that performance obligation. The cost-incurred method (cost-to-cost method) is generally considered the best method to depict the Group’s performance obligation fulfilled at the reporting date.
The amount due from customers under a construction contract is presented as a contract asset; the amount due to customers under a construction contract is presented as a contract liability