Fortaleza - Brazil
Petroleo Brasileiro SA - Petrobras, the gas supplier for the Fortaleza plant (Central Geradora Termelétrica Fortaleza or CGTF) in Brazil, has – as discussed in note 52 “Contingent assets and liabilities” – notified its intention to terminate the contract signed between those parties on the basis of an alleged financial imbalance in consideration of current market conditions.
Accordingly, on January 27, 2020, Petrobras filed two different types of extraordinary appeal before the Supreme Court and the Federal Court of Brasilia, respectively, to contest this decision. The proceedings are currently pending.
Endesa arbitration award
Following numerous unsuccessful negotiations, on December 4, 2019, the most representative union within Endesa decided to voluntarily participate in an arbitration proceeding before the Servicio Interconfederal de Mediación y Arbitraje (SIMA) with the aim of resolving the main differences relating to 5th Endesa Collective Bargaining Agreement.
As a prerequisite to the arbitration proceeding, in December 2019, Endesa’s largest union agreed to waive its appeal pending before the Supreme Court against the judgment of the court of first instance of March 26, 2019, which was favorable to Endesa, finding that the company’s interpretation of the appropriateness of the elimination of certain social benefits for retired staff as a consequence of the termination of 4th Endesa Collective Bargaining Agreement was legitimate.
The other trade unions involved have refused to join the arbitration proceeding, electing to go ahead with the proceedings before the Supreme Court. On January 21, 2020, the arbitration award was issued, with the amendment of the corresponding parts of the 5th Endesa Collective Bargaining Agreement, which was subsequently signed by the social partners.
It entered force on January 23, 2020. On the same date, Endesa also signed two further collective bargaining agreements (a “framework guarantee contract” and an “agreement on voluntary measures to suspend or terminate employment contracts”) with all the unions present in the company.
At present, it is not possible to quantify the financial impact that the changes adopted will have on 2020, which are currently being evaluated by the company. The parties involved are working together in the transition process to determine and formalize the financial aspects of the accord.
Coronavirus pandemic (COVID-19)
The novel coronavirus (COVID-19) epidemic began in Wuhan, China, and was first reported by national authorities to the World Health Organization on December 30, 2019. In the early weeks of 2020, despite the considerable concern expressed by international organizations, the epidemic appeared to be limited to certain areas of Southeast Asia and the Middle East, affecting only a number of regions in China, South Korea and Iran. In the second half of February, the first sporadic full-blown cases of COVID-19 in Italy started a second phase of the epidemic, with a rapid escalation of its spread throughout Europe. Recently, the World Health Organization confirmed that the health emergency linked to COVID-19 has risen to the level of a pandemic and, just over two months after its initial reporting, the number of cases identified outside China has now exceeded those reported within the country in which the epidemic first occurred.
This is due to the growing spread of the virus in Europe, where Italy and Spain have the largest number of infections to date, the rapid rise in the United States, as well as the emergence of the first outbreaks in Latin America and Africa. To contain the effects of the disease, pending medical trials to develop a vaccine that can be administered to humans, governments have adopted numerous containment measures, essentially aimed at restricting the free movement of people, which may be maintained, or made more stringent, based on the future spread of the virus. The Group has issued guidelines aimed at ensuring compliance with the measures introduced at the local level and taken numerous steps to adopt the most suitable procedures to prevent and/or mitigate the effects of contagion in the workplace. In particular, business continuity is being managed thanks above all to:
- the use of smart working for all employees whose jobs can be done remotely in the countries where the Group has its largest presences, an approach introduced some years ago that, thanks to investments in digitalization, allows our people to work remotely at the same level of efficiency and effectiveness;
- the use of digitalized infrastructures that ensure the normal operation of our generation assets, the continuity of elecPerformance & Metrics Strategy & Risk Management Governance Enel Group Notes to the financial statements 331 Consolidated financial Outlook statements tricity service and the remote management of all activities relating to the market and our relationship with customers.
An Enel Global Task Force is also operational at the country level, which is charged with coordinating and directing the actions to be undertaken in the countries where the Group operates, in synergy with the global technological Business Lines. In compliance with ESMA’s recommendations of March 11, 2020, the Group has conducted internal analyzes to assess the real and potential impacts of COVID-19 on business activities, on the financial situation and on performance, which essentially concern the following dimensions:
- forecasting the macroeconomic impacts on the main areas of interest and in the main countries in which the Group operates;
- forecasting electricity and gas prices in energy and other commodity markets;
- forecasting of the impacts on electricity demand in the countries in which the Group operates of the various measures taken at the local level to contain the spread of the disease;
- analyzing possible delays in supplies and tenders, at the single Business Line supply chain level, that could be caused by the restrictions imposed on economic activity in some countries.
On the basis of the current information available, in a constantly evolving scenario, we are constantly monitoring changes in macroeconomic and business variables in order to obtain the best estimate of the potential impacts on the Group in real time and enable their mitigation with response and contingency plans. Thanks to the Group’s geographical diversification, its integrated business model all along the value chain, a sound financial structure, as well as the level of digitalization achieved, which enables us guarantee the continuity of our operating activities with the same level of service, there is no evidence that COVID- 19 will have a significant impact on the Group.