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Washington, D.C. 20549
o | REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR(g) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
OR | ||
þ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
For the Fiscal Year Ended: December 31, 2006 | ||
OR | ||
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
OR | ||
o | SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
Date of event requiring this shell company report For the transition period from to |
Title of Each Class | Name of Each Exchange on Which Registered | |||
American Depositary Shares | New York Stock Exchange | |||
Ordinary shares with a par value of €1 each | New York Stock Exchange(*) |
None
(Title of Class)
(*) | Not for trading, but only in connection with the registration of the American Depositary Shares. |
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• | References to “dollars,” “$” and “U.S. dollars” are to United States dollars; | |
• | References to “€” or “euro” are to the euro, the single currency established for participants in the third stage of the European Economic and Monetary Union, or EMU, commencing January 1, 1999; and | |
• | References to “lire,” “lira” or “Lit.” are to Italian lire. |
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Antitrust Authority | The Italian Antitrust Authority. | |
Average thermal efficiency | A measure of the efficiency of a thermal generating plant in converting sources of energy such as fuel oil into electricity. Average thermal efficiency is expressed as the amount of electricity actually produced in kWh as a percentage of the kWh equivalent of the energy source consumed. | |
Bersani Decree | Legislative Decree No. 79 of March 16, 1999, aimed at liberalizing the Italian electricity market. | |
CIP 6 | Regulation 6/92 issued byComitato Interministeriale Prezzi, an Italian governmental committee, which established incentives for new generation plants using renewable resources and for the sale of electricity produced from renewable resources. | |
CO2 | Carbon dioxide. | |
Combined Cycle Gas Turbine (or “CCGT”) | A type of generating plant that produces electricity through both gas turbines and steam turbines. Conventional boilers or other generators recover and use the exhaust heat exiting from gas turbines. | |
Co-generation | The simultaneous generation of steam and electricity, typically where the need arises for industrial purposes. | |
Communications Authority | The Italian Authority for the Guarantee of Communications. | |
Decommissioning | The phase of declassification, decontamination and dismantling of nuclear power installations and clean up of the plant site with the aim of achieving: (i) the complete demolition of the nuclear power plant; (ii) the removal of any limitation due to the presence of radioactive material; and (iii) the restoration of the site for other activities. | |
Eligible Customer | Electricity customers in Italy who meet consumption thresholds that permit them to participate in the free market for electricity. | |
However, from July 1, 2007, all customers will be eligible to purchase electricity on the free market. | ||
Emission trading rights | Tradable emission permits that give the right to produce the equivalent of one ton of carbon dioxide. These permits can either be assigned through a national allowance plan or earned through investments in projects in developing countries (Certified Emission Reductions) or in transition economies countries (Emission Reduction Units). | |
Energy Authority | The Italian Authority for Electric Energy and Gas. | |
Environment Ministry | The Italian Ministry of the Environment. | |
Gencos | The three generating companies we disposed of in order to comply with the Bersani Decree, Elettrogen S.p.A. (now Endesa Italia S.p.A.), |
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Eurogen S.p.A. (now Edipower S.p.A.) and Interpower S.p.A. (now Tirreno Power S.p.A.). | ||
Generating unit | An electric generator together with the turbine or other device which drives it. | |
Gigawatt (GW) | 1,000,000,000 watts (1,000 megawatts). | |
Gigawatt hour (GWh) | One gigawatt of power supplied or demanded for one hour. | |
GHG | “Greenhouse gases,” which are gases that contribute to the greenhouse effect, such as carbon dioxide, methane, nitrous oxide, chlorofluorocarbons and SF 6 (sulphur exafluoride). | |
Gross installed capacity | The maximum power that can be produced continuously throughout a prolonged period of operation with all equipment assumed to be fully operational. | |
GRTN | A company owned by the MEF that until October 2005 mainly managed Italy’s national electricity transmission grid. These activities were transferred to Terna in November 2005. Since that time, the GRTN has focused on managing and promoting renewable resources (an activity it carried out also prior to November 2005). GRTN also owns the Single Buyer and the Market Operator (both as defined below). On October 2, 2006, GRTN was renamedGestore dei Servizi Elettrici(GSE). | |
Independent power producers | Industrial companies that produce electricity for their own use and for sale to third parties. | |
Italian power exchange(Borsa dell’Energia Elettrica) | A virtual marketplace in which producers, importers, wholesalers, the GRTN and Terna, other Eligible Customers and the Single Buyer buy and sell electricity at prices determined through a competitive bidding process. | |
Kilovolt (kV) | 1,000 volts. | |
Kilovolt ampere (kVA) | 1,000 volts ampere. | |
Kilowatt (kW) | 1,000 watts. | |
Kilowatt hour (kWh) | One kilowatt of power supplied or demanded for one hour. | |
Market Operator | The entity, wholly owned by the GRTN, that manages the Italian power exchange. | |
Marzano Law | Law No. 239 of August 23, 2004, aimed at reorganizing existing energy market regulation and further liberalizing the energy market. | |
MEF | The Italian Ministry of the Economy and Finance and its predecessor, the Ministry of the Treasury, Budget and Economic Planning. | |
Megawatt (MW) | 1,000,000 watts (1,000 kilowatts). | |
Megawatt hour (MWh) | One megawatt of power supplied or demanded for one hour. | |
Megavolt ampere (MVA) | 1,000,000 volts ampere. | |
Ministry of Productive Activities | The Italian Ministry of Productive Activities and its predecessor, the Ministry of Industry, Commerce and Handcrafts. |
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Net Installed Capacity | The maximum power that can be produced continuously throughout a prolonged period of operation with all equipment assumed to be fully operational, as measured at the point of entry to the transmission network (or minus the power absorbed by plant use and the power lost in the transformers required to raise the voltage to the network level). | |
Non-Eligible Customers | Electricity customers in Italy who do not meet consumption thresholds entitling them to participate in the free market. | |
However, from July 1, 2007, all customers will be eligible to purchase electricity on the free market. | ||
NH3 | Ammonia. | |
NOx | Nitrogen oxides. | |
Orimulsion | Abbreviation of “Orinoco emulsion,” which is a fossil fuel from the Orinoco river basin in Venezuela consisting of very fine bitumen dispersed in water. Orimulsion emits the same amount of CO2 as fuel oil of equivalent energy value. | |
Resellers | Other distribution companies to whom we transport electricity because their networks are attached to our network rather than directly to the national transmission grid. | |
Single Buyer(Acquirente Unico) | A company wholly owned by the GRTN, responsible for ensuring the supply of electricity to regulated customers who do not yet have access to the liberalized electricity market. | |
SO2 | Sulfur dioxide. | |
Substation | Equipment which switches and/or changes or regulates the voltage of electricity in a transmission and/or distribution network. | |
Terawatt (TW) | 1,000,000,000,000 watts (1,000 gigawatts). | |
Terawatthour (TWh) | One terawatt of power supplied or demanded for one hour. | |
Thermal unit | A generating unit which uses combustible fuel as the source of energy to drive an electric generator. | |
Volt | The basic unit of electric force. | |
Voltampere | The basic unit of apparent electrical power. | |
Watt | The basic unit of active electrical power. |
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ITEM 1. | IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS |
ITEM 2. | OFFER STATISTICS AND EXPECTED TIMETABLE |
ITEM 3. | KEY INFORMATION |
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As of December 31, | ||||||||||||||||
2004 | 2005 | 2006 | 2006(2) | |||||||||||||
(Euro in millions, | (Dollars in | |||||||||||||||
except per share | millions, except | |||||||||||||||
amounts)(1) | per share amounts) | |||||||||||||||
CONSOLIDATED STATEMENT OF INCOME DATA | ||||||||||||||||
Amounts in accordance with IFRS-EU: | ||||||||||||||||
Operating revenues | 31,027 | 33,787 | 38,513 | 50,826 | ||||||||||||
Income from equity exchange transaction | 263 | 347 | ||||||||||||||
Operating expenses: | ||||||||||||||||
Depreciation, amortization and impairment losses | 2,201 | 2,207 | 2,463 | 3,250 | ||||||||||||
Other | 22,940 | 26,314 | 29,880 | 39,433 | ||||||||||||
Total operating expenses | 25,141 | 28,521 | 32,343 | 42,683 | ||||||||||||
Net income/(charge) from commodity risk management | (16 | ) | 272 | (614 | ) | (810 | ) | |||||||||
Operating income | 5,870 | 5,538 | 5,819 | 7,679 | ||||||||||||
Financial income | 365 | 230 | 513 | 677 | ||||||||||||
Financial expense | (1,192 | ) | (944 | ) | (1,160 | ) | (1,530 | ) | ||||||||
Loss from investments accounted for using the equity method | (25 | ) | (30 | ) | (4 | ) | (5 | ) | ||||||||
Income before taxes | 5,018 | 4,794 | 5,168 | 6,820 | ||||||||||||
Income taxes | 2,116 | 1,934 | 2,067 | 2,728 | ||||||||||||
Income from continuing operations | 2,902 | 2,860 | 3,101 | 4,092 | ||||||||||||
Income (loss) from discontinued operations (net of tax) | (155 | ) | 1,272 | — | — | |||||||||||
Net income (before minority interest) | 2,747 | 4,132 | 3,101 | 4,092 | ||||||||||||
Basic earnings per share(2) | 0.45 | 0.67 | 0.50 | 0.66 | ||||||||||||
Number of shares outstanding (in millions) | 6,104 | 6,157 | 6,176 |
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As of December 31, | ||||||||||||||||
2004 | 2005 | 2006 | 2006(2) | |||||||||||||
(Euro in millions, | (Dollars in | |||||||||||||||
except per share | millions, except | |||||||||||||||
amounts)(1) | per share amounts) | |||||||||||||||
Amounts in accordance with U.S. GAAP(3) | ||||||||||||||||
Operating revenues | 31,535 | 35,875 | 39,023 | 51,498 | ||||||||||||
Income from equity exchange transaction | — | — | 263 | 347 | ||||||||||||
Operating expenses | 24,436 | 29,235 | 32,551 | 42,957 | ||||||||||||
Net income/(charges) from commodity risk management | (16 | ) | 272 | (614 | ) | (810 | ) | |||||||||
Operating income(4) | 7,083 | 6,912 | 6,121 | 8,078 | ||||||||||||
Income from continuing operations before income taxes and minority interest(4) | 6,344 | 6,119 | 5,762 | 7,604 | ||||||||||||
Income from continuing operations (before minority interest) | 4,056 | 4,128 | 3,777 | 4,984 | ||||||||||||
Basic earnings per share(2) | 0.17 | 0.76 | 0.60 | 0.79 |
As of December 31, | ||||||||
2002 | 2003 | |||||||
(Euro in millions, except per share amounts) | ||||||||
CONSOLIDATED STATEMENT OF INCOME DATA | ||||||||
Amounts in accordance with U.S. GAAP: | ||||||||
Operating revenues | € | 30,604 | € | 31,237 | ||||
Depreciation and amortization | 4,069 | 4,506 | ||||||
Operating income | 2,617 | (5) | 4,966 | |||||
Income before taxes | 1,373 | 3,798 | ||||||
Net income | 1,399 | 2,376 | ||||||
Earnings per share(2) | 0.23 | 0.39 |
As of December 31, | ||||||||||||||||
2004 | 2005 | 2006 | 2006(1) | |||||||||||||
(Euro in millions) | (Dollars in | |||||||||||||||
millions) | ||||||||||||||||
CONSOLIDATED BALANCE SHEET DATA | ||||||||||||||||
Amounts in accordance with IFRS-EU: | ||||||||||||||||
Property, plant and equipment, net | € | 36,702 | € | 30,188 | € | 34,846 | $ | 45,986 | ||||||||
Current assets | 13,532 | 12,746 | 13,000 | 17,156 | ||||||||||||
Total assets | 65,378 | 50,502 | 54,500 | 71,924 | ||||||||||||
Current liabilities(10) | 18,607 | 10,322 | 11,424 | 15,076 | ||||||||||||
Short-term debt(6) | 6,589 | 2,296 | 1,409 | 1,859 | ||||||||||||
Long-term debt(7) | 20,291 | 10,967 | 12,194 | 16,092 | ||||||||||||
Shareholders’ equity | 17,953 | 19,057 | 18,460 | 24,362 | ||||||||||||
Amounts in accordance with U.S. GAAP(3): | ||||||||||||||||
Property, plant and equipment, net | 37,589 | 30,320 | 33,684 | 44,453 | ||||||||||||
Total assets | 67,152 | 50,596 | 56,104 | 74,040 | ||||||||||||
Short-term debt(6) | 6,589 | 2,296 | 1,409 | 1,859 | ||||||||||||
Long-term debt(7) | 20,291 | 10,967 | 12,056 | 15,910 | ||||||||||||
Shareholders’ equity | 15,697 | 17,638 | 17,220 | 22,725 |
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As of December 31, | ||||||||
2002 | 2003 | |||||||
(Euro in millions) | ||||||||
CONSOLIDATED BALANCE SHEET DATA | ||||||||
Amounts in accordance with U.S. GAAP: | ||||||||
Fixed assets, net | € | 38,304 | € | 37,407 | ||||
Total assets | 66,423 | 68,505 | ||||||
Short-term debt(6) | 8,371 | 8,643 | ||||||
Long-term debt(7) | 17,172 | 18,005 | ||||||
Shareholders’ equity | 18,526 | 18,651 |
As of December 31, | ||||||||||||||||
2004 | 2005 | 2006 | 2006(1) | |||||||||||||
(Euro in millions)(1) | (Dollars in | |||||||||||||||
millions) | ||||||||||||||||
CONSOLIDATED CASH FLOW DATA | ||||||||||||||||
Amounts in accordance with IFRS-EU: | ||||||||||||||||
Net cash provided by operating activities | 4,835 | 5,693 | 6,756 | 8,917 | ||||||||||||
Net cash (used in) provided by investing activities | (1,953 | ) | 1,092 | (2,374 | ) | (3,133 | ) | |||||||||
Net cash (used in) provided by financing activities | (2,966 | ) | (6,654 | ) | (4,322 | ) | (5,704 | ) |
As of December 31, | ||||||||||||||||||||
2002 | 2003 | 2004 | 2005 | 2006 | ||||||||||||||||
Operating Data | ||||||||||||||||||||
Net installed capacity (GW) in Italy | 43.8 | (8) | 41.8 | 42.0 | 42.2 | 40.5 | ||||||||||||||
Net electricity production in Italy (TWh) | 145.1 | (9) | 137.8 | 125.9 | 112.1 | 103.9 | ||||||||||||||
Electricity sales to end users in Italy (TWh)(10) | 181.3 | 152.2 | 157.8 | 148.2 | 142.3 | |||||||||||||||
Total electricity distributed in Italy (TWh)(11) | 258.0 | 265.0 | 261.2 | 259.3 | 263.4 | |||||||||||||||
Natural gas sold to end users (billions of cubic meters) | 4.0 | 4.4 | 5.2 | 5.2 | 4.5 | |||||||||||||||
Natural gas sales customers at year end (millions) | 1.7 | 1.8 | 2.0 | 2.1 | 2.3 | |||||||||||||||
Employees | 71,204 | 64,770 | 61,898 | 51,778 | 58,548 |
(1) | We have translated euro amounts into dollar amounts at the noon buying rate for euro on December 31, 2006, of €1.00 = $1.3197. | |
(2) | We calculate earnings per share by dividing our consolidated net income by the number of Enel’s ordinary shares outstanding during each period. At December 31, 2006, the MEF owned 21.14% and its subsidiary Cassa Depositi e Prestiti owned 10.16% of Enel’s ordinary shares. As of December 31, 2006 Enel’s share capital amounts to €6,176,196,279 divided into 6,176,196,279 shares with a par value of €1. | |
(3) | For information concerning differences between IFRS-EU and U.S. GAAP that are relevant to our consolidated financial statements, you should read note 23 to our consolidated financial statements. | |
(4) | You should read note 23 to our consolidated financial statements for a discussion of the impacts generated by the differences between IFRS-EU and U.S. GAAP in calculating operating income. | |
(5) | Includes gain on sale of Eurogen, previously classified as other non-operating income (expense). | |
(6) | Includes current portion of long-term debt. | |
(7) | Excludes current portion of long-term debt. | |
(8) | Including 2.6 GW of capacity of Interpower, which was divested in January 2003. | |
(9) | Including 8.0 TWh generated by Eurogen before it was divested, and 5.7 TWh generated by Interpower. | |
(10) | Excludes short term debt. |
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(10) | Excluding sales to resellers. | |
(11) | Including electricity distributed to resellers. |
End of Period | Average | High | Low | |||||||||||||
U.S. dollars per euro(1) | ||||||||||||||||
Year: | ||||||||||||||||
2002 | 1.0485 | 0.9495 | 1.0485 | 0.8594 | ||||||||||||
2003 | 1.2597 | 1.1411 | 1.2597 | 1.0361 | ||||||||||||
2004 | 1.3538 | 1.2478 | 1.3625 | 1.1801 | ||||||||||||
2005 | 1.1842 | 1.2400 | 1.3476 | 1.6667 | ||||||||||||
2006 | 1.3197 | 1.2661 | 1.3327 | 1.1860 | ||||||||||||
Month ended: | ||||||||||||||||
December 31, 2006 | 1.3197 | 1.3204 | 1.3327 | 1.3073 | ||||||||||||
January 31, 2007 | 1.2998 | 1.2993 | 1.3286 | 1.2904 | ||||||||||||
February 28, 2007 | 1.3230 | 1.3080 | 1.3246 | 1.2933 | ||||||||||||
March 31, 2007 | 1.3374 | 1.3245 | 1.3374 | 1.3094 | ||||||||||||
April 30, 2007 | 1.3660 | 1.3512 | 1.3660 | 1.3363 | ||||||||||||
May 31, 2007 | 1.3453 | 1.3517 | 1.3616 | 1.3419 |
(1) | Based on the Noon Buying Rate for the euro for the periods indicated. |
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• | a reduction in our generating capacity, through the mandatory disposal of three generating companies, which we refer to as the Gencos, | |
• | the introduction of limits on the amount of energy we may produce and import, | |
• | the introduction on April 1, 2004, of the Italian power exchange, where prices are determined by competitive bidding, | |
• | the required disposal of certain of our municipal networks to local utilities, and | |
• | mandated increases in the number of consumers who are eligible to buy electricity on the free market, with all non-residential customers having become eligible as of July 1, 2004, and all customers scheduled to become eligible as of July 1, 2007. |
• | an increase in bilateral contracts between our competitors and final customers, | |
• | the construction of new generation facilities by our competitors and the development of new interconnection lines that will increase the volume of electricity that may be imported in Italy, | |
• | possible initiatives taken by the Energy Authority to further competition, such as the imposition of virtual power plant contracts that would oblige us to sell electricity to resellers (who otherwise compete with us) at lower-than-market prices set by Energy Authority, thus increasing the supply available for resale to final customers, and restrictions on the operation of pumped-storage plants (hydroelectric plants that use some of the energy they produce to pump water to elevated areas for use at a later time to generate electricity). |
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• | On December 28, 2006, the Spanish Antitrust Court (Tribunal de Defensa de la Competencia) imposed a fine of €2.5 million and temporary injunctive measures on our subsidiary Enel Viesgo Generación for abuse of dominant position. Enel Viesgo Generación appealed the decision. Currently, Enel Viesgo Generación is also subject to another proceeding for abuse of dominant position. | |
• | On May 3, 2007, the Spanish Antitrust Authority initiated proceedings against all electricity distribution companies operating in Spain, including our subsidiary Enel Viesgo Distribution, for abuse of dominant position in the access to market information. | |
• | In 2006, the Energy Authority started an inquiry against Enel Trade for violations of the minimum gas storage requirements during the2004-2005 and2005-2006 winter seasons. At the end of the inquiry, the Authority imposed an aggregate fine of €24 million, equal to €12 million for each winter season. Enel Trade paid a cash settlement of €52,000 with respect to2004-2005 winter season, and decided to appeal the decision imposing this fine before the Administrative Court of Lombardy with respect to the 2005-2006 winter season. On June 25, 2007 the Administrative Court of Lombardy issued a decree canceling the €12 million fine for the 2005-2006 winter season. | |
• | In November 2006, the Energy Authority started an inquiry against Enel Distribuzione for alleged violations in the period2003-2005 of the obligation to carry out yearly meter readings for customers having contracted for power equal to 30 kW or less. The final decision is expected by July 2007. The Energy Authority could impose a fine on Enel Distribuzione ranging from approximately €25,800 to €154,937,070. | |
• | In December 2006, the Energy Authority started an inquiry against Enel Distribuzione for alleged violations through March 2006 of the duty to disclose to clients a means by which they could pay their energy bills without having to pay additional processing charges. On March 21, 2007, the Energy Authority imposed a €11.7 million fine on Enel Distribuzione. Although Enel Distribuzione appealed this decision before the |
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Administrative Tribunal of Lombardy, and these proceedings remain pending, we cannot exclude an increase in the civil suits brought by our clients to recover damages originating from such alleged violations. |
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• | As a result of recent regulatory changes, gas distribution concessions awarded prior to May 2000 by means other than competitive tender expire by law at the earlier of their original expiration date or December 31, 2007, and may be extended up to December 31, 2009 if certain conditions are met; local authorities may at their option extend this date by one additional year. |
1. | The compatibility of the Italian law establishing these expiration dates with EU law is currently under scrutiny in a case unrelated to us before the Administrative Court of Lombardy. This tribunal has submitted the question to the European Court of Justice. A finding by European Court of Justice that the law is incompatible with EU law would bring into question the expiration date of our natural gas concessions falling under this category. |
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• | Certain gas distribution concessions for southern Italy, partially financed through public funds made available in the context of a public incentive plan for the use of natural gas, expire at the later of June 21, 2012 or twelve years from the entry into force of their approval by the Ministry of Economy and Finance. | |
• | Gas distribution concessions awarded prior to May 2000 by competitive tenders expire at the earlier of their original expiration date or December 31, 2012. |
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• | The power to oppose the acquisition by persons or entities of an interest in the us equal to or in excess of 3% of our shares with voting rights at ordinary shareholders’ meetings, |
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• | The power to oppose certain types of shareholders’ agreements entered into by holders of at least one-twentieth of the voting capital stock at ordinary shareholders’ meetings, | |
• | The power to veto any resolution to dissolve, merge or demerge us, transfer a significant part of our business or our registered headquarters outside of Italy, change our corporate purpose or eliminate or modify any of the MEF’s special powers, and | |
• | The power to directly appoint one non-voting member of our board of directors, in addition to the voting members elected by our shareholders. |
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• | Anticipated trends in our businesses, including trends in demand for electricity, | |
• | Changes in the regulatory environment and expectations on how and when new regulations will be implemented, | |
• | The remuneration of our generation activities based on competitive electricity prices rather than tariffs following the introduction of trading on the Italian power exchange, | |
• | The impact of changes in electricity and gas tariffs, | |
• | Our ability to implement our cost reduction program successfully, | |
• | The possibility that significant volumes of lower-cost electricity will become available as a result of increased imports and the construction of new plants in Italy, | |
• | Our intentions with respect to future dividend payments, | |
• | Our intention to expand our core businesses, including by increasing our presence in renewable energy and developing our gas distribution and sales business, | |
• | Our intention to expand our operations outside Italy, and | |
• | Future capital expenditures and investments. |
ITEM 4. | INFORMATION ON THE COMPANY |
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• | the separation of our significant businesses into separate subsidiaries (beginning in October 1999), | |
• | the transfer of management and control of the Italian national electricity transmission grid and electricity dispatching to the GRTN (now theGestore dei Servizi Elettricior GSE), a company wholly-owned by the MEF, and the subsequent sale of 94.88% of our former wholly-owned subsidiary Terna, which owns more than 90% the Italy’s transmission grid; as a result of this sale, Terna was deconsolidated on September 15, 2005, and | |
• | the sale of three generation companies (accounting for approximately 15,000 MW of our generating capacity) and several municipal distribution companies. |
• | in April 2006, we acquired a 66% interest in Slovenské elektrárne (“SE”) for total consideration of approximately €840 million. SE, the principal electric power generation company in Slovakia, has a total net installed capacity of approximately 6,442 MW, | |
• | in June 2006, we won the auction for a 67.5% stake in the Romanian power distribution company Electrica Muntenia Sud (“EMS”), an electricity distributor with approximately 1.1 million customers in Bucharest, Romania, for total consideration of approximately €820 million. We expect to complete this acquisition in the second half of 2007, | |
• | in June 2007, we won an auction to acquire for approximately $1.5 billion (approximately €1.1 billion) a 25.03% stake in JCS Fifth Generation Company of the Wholesale Electricity Market or OGK-5, one of the six thermal wholesale generation companies in Russia, which has four thermal power plants located in various regions of the country with an aggregate installed capacity of approximately 8,700 MW. Later that same month, we increased our stake in OGK-5 by 4.96%, bringing our total stake in that company to 29.99%. |
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• | Domestic Generation and Energy Management Division, | |
• | Domestic Sales Division, | |
• | Domestic Infrastructure and Networks Division, and | |
• | International Division. |
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2004 | 2005 | 2006 | ||||||||||
(In millions of euro) | ||||||||||||
Current Operations: | ||||||||||||
Parent Company | 10 | 11 | 13 | |||||||||
Domestic Generation and Energy Management Division | 678 | 798 | 897 | |||||||||
Domestic Sales Division | — | 53 | 56 | |||||||||
Domestic Infrastructure and Networks Division | 1,663 | 1,570 | 1,459 | |||||||||
International Division | 227 | 299 | 467 | |||||||||
Services and Other Activities | 112 | 98 | 71 | |||||||||
Total for Current Operation | 2,690 | 2,829 | 2,963 | |||||||||
Discontinued Operations: | ||||||||||||
Transmission | 277 | 142 | — | |||||||||
Telecommunications | 867 | 286 | — | |||||||||
Total for Discontinued Operations | 1,144 | 428 | — | |||||||||
Total for Current and Discontinued Operations | 3,834 | 3,257 | 2,963 | |||||||||
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2004 | 2005 | 2006 | ||||||||||
(In millions of euro) | ||||||||||||
Current Operations: | ||||||||||||
Parent Company | — | 2 | 3 | |||||||||
Domestic Generation and Energy Management Division | 667 | 778 | 880 | |||||||||
Domestic Sales Division | — | 2 | 13 | |||||||||
Domestic Infrastructure and Networks Division | 1,586 | 1,508 | 1,381 | |||||||||
International Division | 221 | 290 | 444 | |||||||||
Services and Other Activities | 87 | 68 | 38 | |||||||||
Total for Current Operation | 2,561 | 2,647 | 2,759 | |||||||||
Discontinued Operations: | ||||||||||||
Transmission | 277 | 139 | — | |||||||||
Telecommunications | 680 | 251 | — | |||||||||
Total for Discontinued Operations | 957 | 390 | ||||||||||
Total for Current and Discontinued Operations | 3,518 | 3,037 | 2,759 | |||||||||
Geographical Region: | 2007-2011 | |||
(In millions of euro) | ||||
Italy | 14,523 | |||
Spain | 1,913 | |||
Slovakia | 1,724 | |||
Romania | 766 | |||
North America | 619 | |||
France | 381 | |||
Bulgaria | 247 | |||
South America | 128 | |||
Russia | 2 | |||
Total | 20,303 |
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• | with respect to CCGT conversions, we have completed the conversion of approximately 4,600 MW of capacity and plan to continue the CCGT conversion program at the Termini Imerese power plant (for approximately 375 MW), and | |
• | with respect to coal conversions, we plan to continue the conversions of our thermal generation plants at Torrevaldaliga North and begin similar conversions of certain other power generation units, expected to affect in the aggregate approximately 3,800 MW of net installed capacity. The conversion plans for approximately 1,900 MW of this amount are still subject to regulatory approval. |
• | approximately €2,652 million to connect new customers to our electricity distribution network, | |
• | approximately €1,230 million to improve the service quality of our electricity network, so that we may continue to exceed the targets established by the Energy Authority in those areas in which we are exceeding them, and improve our performance in those areas in which we are not, and | |
• | approximately €452 million in developing our natural gas distribution networks, primarily by building new pipelines, either in response to customer requests or as part of our business development policies, as well as by improving the quality of our gas service levels and safety. |
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• | approximately €175 million for the conversion of certain of Enel Viesgo Generación’s plants to CCGT technology, | |
• | approximately €79 million for the Maritza East III’s ongoing plant refurbishment project, | |
• | approximately €71 million for recurrent maintenance at Slovenské elektrárne, | |
• | approximately €54 million for the development of renewable generation facilities by Enel Unión Fenosa Renovables, | |
• | approximately €45 million for development of wind-generation projects and recurrent maintenance in North America, and | |
• | approximately €15 million for maintenance activities to sustain our current levels of generation capacity in Latin America. |
• | approximately €66 million invested by Electra de Viesgo Distribución SL on tangible assets, primarily to upgrade its distribution network in compliance with regulatory requirements and to roll out the digital meter project, | |
• | approximately €66 million to improve our distribution network in Romania, and | |
• | approximately €2 million to be invested by Viesgo Energia SL. |
• | approximately €1,724 million at SE, of which €1,110 million would be directed towards the construction of two units at the nuclear power plants at Mochovce, | |
• | approximately €1,088 million at Enel Viesgo Generación, primarily to implement a program to convert certain of its coal plants to CCGT, | |
• | an aggregate of approximately €748 million in North America and South America, of which €128 million would be directed towards the development of a new hydroelectric plant in Guatemala (which we expect to become operational in 2011) and on geothermal exploration activities in Chile, and €620 million would be directed towards the development of new wind farms in North America, | |
• | approximately €421 million on further development of our generation capacity from renewable resources at Enel Unión Fenosa Renovables, | |
• | approximately €381 million that Enel Erelis plans to invest on various wind farms projects in France, and |
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• | approximately €233 million at Maritza East III in Bulgaria, primarily to complete its ongoing plant refurbishment program. |
• | In June 2006, we won the auction for a 67.5% stake in the Romanian power distribution company EMS. We expect to complete this acquisition in the second half of 2007. Upon successful completion of the acquisition, we expect to make capital expenditures of approximately €435 million at EMS. | |
• | Electra de Viesgo Distribución SL is planning to invest approximately €354 million to improve service performance and network safety, and to implement its own digital meter project. | |
• | We plan to invest approximately €332 million at Electrica Banat and Electrica Dobrogea to improve the quality and the efficiency of our distribution network in Romania, in line with the plan authorized by the Romanian Authority (ANRE) for the years2005-2007. |
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• | that the shares of Endesa tendered, together with any shares of Endesa held directly or indirectly by us or Acciona, represent more than 50% of the share capital of Endesa, and | |
• | that Endesa adopt certain amendments to its bylaws, such as removal of limits on shareholders’ voting rights. |
• | our entry into a €35 billion syndicated term loan facility divided into three tranches with different maturities, subsequently reduced to €30 billion, which contains various covenants and undertakings on our part, including a limit on our consolidated net borrowings as of June 30 and December 31 of any given year equal to 6 times our consolidated EBITDA for the 12-month period ending on that date, and a limit on the financial indebtedness of our subsidiaries equal to 20% of the gross total assets of our Group, | |
• | renewal of our medium-term notes program with an increase of the principal amount we may issue under it from €10 billion to €25 billion, | |
• | one or more bond issuances for an aggregate amount of €5 billion, in euros or other currencies, to be placed with institutional investors by December 31, 2007. |
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• | Enel Viesgo Generación S.L., Electra de Viesgo Distribución S.L., Viesgo Energia S.L. and Enel Viesgo Servicios, | |
• | all of the assets owned by Endesa in Italy, France, Poland and Turkey, | |
• | certain thermal power plants owned by Endesa in Spain with an aggregate installed capacity of 1,475 MW (equal to approximately 2% of the total installed capacity of Spain), | |
• | a combined-cycle gas-turbine power plant with 800 MW of installed capacity currently under development, and | |
• | over 450 MW of nuclear installed capacity to be provided pursuant to a10-year supply agreement . |
2004 | 2005 | 2006 | ||||||||||
Net installed capacity (GW) in Italy at year end | 42.0 | 42.2 | 40.5 | |||||||||
Net electricity production in Italy (TWh) | 125.9 | 112.1 | 103.9 | |||||||||
Electricity sales to end users in Italy (TWh)(1) | 157.8 | 148.2 | 142.7 | |||||||||
Electricity sales on the regulated market in Italy (TWh) | 137.0 | 129.7 | 120.4 | |||||||||
Electricity sales on the free market in Italy (TWh) | 20.8 | 18.5 | 22.3 | |||||||||
Total electricity distributed in Italy (TWh)(2) | 261.2 | 259.3 | 263.4 | |||||||||
Natural gas sales to end users in Italy (billions of cubic meters) | 5.2 | 5.1 | 4.5 | |||||||||
Natural gas sales customers in Italy at year end (millions) | 2.0 | 2.1 | 2.3 |
(1) | Excluding sales to resellers. | |
(2) | Including electricity distributed to resellers. |
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• | government measures intended to limit the use of natural gas in response to the natural gas shortages experienced in the first quarter of 2006, thus reducing the production from our gas-turbine plants, | |
• | greater flexibility of our coal-fired power plants to respond to market demand, and | |
• | down-time in the latter part of 2006 at two of our units to enable environmental upgrading. |
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• | consolidate our leadership in the Italian electricity market despite the challenges posed by the market’s liberalization, which is expected to be completed by July 2007, | |
• | reduce our per-customer costs through investments that will enhance the efficiency of the services we provide, without sacrificing their quality, | |
• | expand our activities in Europe and increase our presence in the field of power generation from renewable sources in the rest of the world through investments and acquisitions, and | |
• | consolidate our lead in the use of advanced and environmentally-friendly technologies in the generation and distribution of electricity. |
• | continue its program to convert certain of our thermal generation plants to CCGT plants capable of generating approximately 5,000 MW. To date, the Domestic Generation and Energy Management Division |
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has completed the conversion of approximately 4,600 MW and plans to continue the CCGT conversion program at the Termini Imerese power plant, |
• | upgrade additional plants to run on lower-cost fuels, such as coal, while still respecting environmental norms, | |
• | consolidate its position in the field of renewable energy, including through an investment program expected to total approximately €1.65 billion from 2007 through 2011. This program includes plans for the maintenance, refurbishment and construction of wind, hydroelectric and geothermal generation plants in Italy that we expect will result in 400 MW of additional net installed capacity, | |
• | reduce CO2 emissions through our integrated investment strategy, which contemplates the conversion of old oil-fired plants into CCGT and high-efficiency coal plants, and the enhancement of our renewable generation capacity, as well as procurement of CO2 credits by participating in emission reduction projects under the terms of the Kyoto Protocol (Clean Development Mechanism and Joint Implementation projects), | |
• | continually seek to achieve operating excellence by increasing the efficiency and availability of its plants and respecting the environment and the health and safety of its employees, | |
• | continue its efforts to reduce its operating and maintenance expenses until it attains international best-practice levels; and | |
• | optimize its fuel procurement activities, through a diversification of suppliers and supply channels. |
• | continue our program to reduce operating costs by seeking to streamline our administrative processes and to increase our use of technology to support our activities, | |
• | optimize our investment expenditures by seeking to tighten the financial criteria by which we evaluate our investments, | |
• | continue to improve our performance with respect to the targets set by the Energy Authority for quality and continuity of service in those geographic areas where these targets have not yet been achieved, and to maintain the quality and continuity of service where they have been achieved or exceeded, and | |
• | complete the rollout of our “Telemanagement” digital metering program in Italy by the end of 2007, in order to: |
• | reduce costs associated with physical measurement of consumption andon-site maintenance of meters by our personnel, as these tasks would be accomplished remotely, | |
• | measure the electricity consumption of our customers more accurately, | |
• | improve our response times in providing technical assistance to our customers and provide higher quality service, and | |
• | offer our customers tailored tariff plans that promote the use of electricity in off-peak periods and provide customers with opportunities to save money. |
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• | Slovakia. We are interested in the Slovakian electricity market due to its strong interconnection with other Central European markets. We already have a strong presence in the Slovakian electricity market through SE, and we will monitor further opportunities that may arise. We also plan to upgrade SE’s existing nuclear plants and to invest in renewable resources. We intend to build two additional nuclear units for SE by 2013. | |
• | France. We took our first step into the French market in 2005, when we signed a non-binding memorandum of understanding with EDF regarding investments in the French electricity market and, in particular, the European pressurized nuclear reactor project. In July 2006, we also acquired Erelis S.a.s., a company promoting wind energy projects with a project portfolio amounting to 500 MW (now Enel Erelis). |
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• | Romania. We are already present in Romania through Enel Electrica Banat (formerly Electrica Banat) and Enel Electrica Dobrogea (formerly Electrica Dobrogea), two distribution companies in which we acquired a 51% stake in 2005, and in which we are introducing management know-how and standards that we believe are in line with Western European best practices. Moreover, upon completion of our acquisition of Muntenia Sud in the second half of 2007, through which we expect to serve approximately 2.5 million customers, we would become a leading operator in electricity distribution and supply in Romania. | |
• | Bulgaria. In Bulgaria, we have increased our stake in Maritza East III to 73% and have signed a memorandum of understanding with our partner Nek for a preliminary study on the feasibility of an upgrade of the Maritza plant to increase its aggregate net installed capacity by 640 MW. | |
• | Other regions. We are exploring potential opportunities in generation and power distribution. |
Average Annual | ||||||||||||||||||||||||
Growth Rate | ||||||||||||||||||||||||
2002 | 2003 | 2004 | 2005 | 2006(1) | 2001-2006 | |||||||||||||||||||
Growth in real GDP(1) | 0.4 | % | 0.3 | % | 1.2 | % | 0.0 | % | 1.9 | % | 0.76 | % | ||||||||||||
Growth in electricity demand(2) | 1.9 | % | 3.2 | % | 1.5 | % | 1.3 | % | 2.2 | % | 2.08 | % |
(1) | National Institute of Statistics (Istituto Nazionale di Statistica). | |
(2) | Terna (data for the years before 2006 were provided by the GRTN). Data for 2006 are provisional. |
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Per Capita | ||||||||||||
Residential | Residential | |||||||||||
Inhabitants | Consumption | Consumption | ||||||||||
(In millions) | (TWh) | (KWh per person) | ||||||||||
France | 60.8 | 150.2 | 2,472 | |||||||||
United Kingdom | 60.0 | 120.0 | 2,000 | |||||||||
Germany | 82.6 | 140.8 | 1,705 | |||||||||
Spain | 43.4 | 60.6 | 1,397 | |||||||||
Italy | 57.6 | 68.0 | 1,180 | |||||||||
European Union(25) | 459.5 | 783.3 | 1,705 |
• | electricity generation, primarily through our wholly-owned subsidiary Enel Produzione, the division’s lead company and our generating company in Italy (in 2005 Enel Green Power was merged into Enel Produzione), | |
• | the purchase of fuel for all of our generation operations, which is carried out by Enel Trade, | |
• | the sale of electricity to wholesalers, which is carried out by Enel Trade, | |
• | the sale of natural gas to gas distribution companies, which is carried out by Enel Trade, | |
• | fuel trading, which is carried out by Enel Trade, |
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• | commodity risk management for all Group companies in Italy and abroad, which is carried out by Enel Trade, | |
• | emission trading, which is carried out by Enel Trade, | |
• | engineering, procurement and construction activities for all Group companies, a task that this division assumed from Service and Other Activities on January 1, 2006, and | |
• | research and development, mainly through Enel Produzione. |
• | improve the efficiency and capacity of our core energy operations, particularly by improving the efficiency of our generation plants and distribution networks, | |
• | reduce the environmental impact of our operations, particularly of electricity generation, by developing alternative fuels and innovative technologies, including hydrogen and high temperature solar technologies, and | |
• | expand and make more innovative the services we offer. |
• | thermal plants (which burn fossil fuels), | |
• | hydroelectric plants, and | |
• | geothermal plants, wind farms and other facilities that generate electricity from renewable resources. |
2004 | 2005 | 2006(4) | ||||||||||
(In GWh) | (In GWh) | (In GWh) | ||||||||||
Thermal | 246,125 | 253,072 | 263,252 | |||||||||
Hydroelectric | 49,908 | 42,929 | 43,022 | |||||||||
Geothermal and other renewable | 7,288 | 7,671 | 8,742 | |||||||||
Total gross electricity production in Italy | 303,321 | 303,672 | 315,016 | |||||||||
Power used by auxiliary installations(1) | (13,299 | ) | (13,064 | ) | (13,290 | ) | ||||||
Total net electricity production in Italy | 290,022 | 290,608 | 301,726 | |||||||||
Net electricity imports(2) | 45,635 | 49,155 | 44,718 | |||||||||
Total pumped storage consumption(3) | (10,300 | ) | (9,319 | ) | (8,648 | ) | ||||||
Total electricity demand in Italy | 325,357 | 330,444 | 337,796 | |||||||||
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(1) | Refers to the electricity consumed by auxiliary installations of generating plants. | |
(2) | Imports consist of electricity purchased from foreign producers on the spot market or under annual or long-term contracts. | |
(3) | Refers to the use of electricity by pumped-storage hydroelectric plants to pump water to elevated areas for use at a later time to generate electricity. | |
(4) | Data for 2006 are provisional. |
At December 31, 2006 | For Year Ended, December 31, 2006 | |||||||||||||||||||
Net | Weighted | Percentage | Forced | |||||||||||||||||
Installed | Average Age | Net | of Our Net | Outage | ||||||||||||||||
Capacity | of Plant(1) | Production | Production | Factor(2) | ||||||||||||||||
(GW) | (Years) | (GWh) | (Percent) | |||||||||||||||||
Thermal | 25.1 | 19 | 73,842 | 71.1 | 2.3 | |||||||||||||||
Hydroelectric | 14.4 | 44 | 24,475 | 23.6 | 2.9 | |||||||||||||||
Geothermal and other renewable | 1.0 | 8 | 5,593 | 5.4 | 1.5 | |||||||||||||||
Total | 40.5 | 103,910 | 100.0 | |||||||||||||||||
(1) | The weighted average age of the plants does not take into account refurbishments or upgrades after initial construction, but does reflect the effects of the refurbishing of geothermal plants, the conversion of thermal plants into CCGT plants and the conversion of one coal unit to clean coal technology that we completed in 2005. | |
(2) | The forced outage factor represents the amount of electricity that was not produced during the period because of unplanned outages, expressed as a percentage of the maximum theoretical amount of electricity that could have been produced during the period. |
2004 | 2005 | 2006 | ||||||||||||||||||||||
Net | Net | Net | ||||||||||||||||||||||
Electricity | Percentage | Electricity | Percentage | Electricity | Percentage | |||||||||||||||||||
Produced | of Total | Produced | of Total | Produced | of Total | |||||||||||||||||||
(TWh) | (TWh) | (TWh) | ||||||||||||||||||||||
Thermal: | ||||||||||||||||||||||||
Natural gas | 40.6 | 32.3 | 37.8 | 33.7 | 32.4 | 31.2 | ||||||||||||||||||
Coal and orimulsion(1) | 30.7 | 24.4 | 30.0 | 26.8 | 27.9 | 26.8 | ||||||||||||||||||
Oil | 20.5 | 16.3 | 14.0 | 12.5 | 13.5 | 13.0 | ||||||||||||||||||
Total thermal | 91.8 | 73.0 | 81.8 | 73.0 | 73.8 | 71.0 | ||||||||||||||||||
Hydroelectric | 28.7 | 22.8 | 24.9 | 22.2 | 24.5 | 23.6 | ||||||||||||||||||
Geothermal | 5.1 | 4.1 | 5.0 | 4.5 | 5.2 | 5.0 | ||||||||||||||||||
Wind and solar | 0.24 | 0.2 | 0.37 | 0.3 | 0.4 | 0.4 | ||||||||||||||||||
Total | 125.9 | 100.0 | 112.1 | 100.0 | 103.9 | 100.0 | ||||||||||||||||||
(1) | We do not currently generate any electricity using orimulsion. |
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• | Single fuel units use either natural gas, petroleum products or coal, | |
• | Dual fuel units use petroleum products and either natural gas or coal, and | |
• | Triple fuel units use petroleum products, coal and natural gas. |
• | converting three units at our fuel-oil plant at Torrevaldaliga Nord (accounting for approximately 1,900 MW), a process that is in progress and that we expect to complete between 2008 and 2009, and | |
• | subject to receipt of required permits, converting an additional three units to clean coal technology (accounting for approximately an additional 1,900 MW). |
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• | Pondage or reservoir plants, in which the altitude difference through which water must fall to drive the generating turbines results from the creation of a reservoir. Pondage plants are those for which it takes up to 400 hours to fill the reservoir from empty based on normal water flow, while reservoir plants are those in which it takes longer than 400 hours. |
• | At December 31, 2006, we had pondage plants in Italy with an aggregate net installed capacity equal to approximately 19.8% of our net installed hydroelectric generation capacity in Italy at that date, which generated approximately 24.3% of our net hydroelectric production in Italy during 2006. | |
• | At December 31, 2006, we had reservoir plants in Italy with an aggregate net installed capacity equal to approximately 16.7% of our net installed hydroelectric generation capacity in Italy at that date, which generated approximately 24.8% of our net hydroelectric production in Italy during 2006. |
• | Pumped storage plants, in which water is pumped up to storage units to create the required altitude difference through which water must fall to drive the generating turbines. |
• | At December 31, 2006, we had pumped storage plants in Italy with an aggregate net installed capacity equal to approximately 52.0% of our net installed hydroelectric generation capacity in Italy at that date, which generated approximately 25.5% of our net hydroelectric production in Italy during 2006. |
• | Run-of-river plants, in which the natural flow of a river is used to drive the generating turbines. |
• | At December 31, 2006, we had run-of-river plants in Italy with an aggregate net installed capacity equal to approximately 11.5% of our net installed hydroelectric generating capacity in Italy at that date, which generated approximately 25.4% of our net hydroelectric production in Italy during 2006. |
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• | 31 geothermal power plants, which generate energy from naturally occurring subterranean heat sources, with an aggregate net installed capacity of approximately 671 MW, and which generated approximately 5,195 GWh in 2006, | |
• | 19 wind farms, which use the natural flow of the wind to drive the generating turbines, with an aggregate net installed capacity of approximately 305 MW, and which generated approximately 398 GWh in 2006, and | |
• | 4 solar photovoltaic power plants, which use solar energy to generate steam that is then used to drive the turbines, with an aggregate net installed capacity of approximately 3 MW, and which generated approximately 0.5 GWh in 2006. |
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Year Ended | ||||||||||||
December 31, | ||||||||||||
2004 | 2005 | 2006 | ||||||||||
(In millions of tons) | ||||||||||||
Domestic suppliers(1) | 1.0 | 0.9 | 0.7 | |||||||||
Foreign suppliers(2) | 3.8 | 2.7 | 3.0 | |||||||||
Total fuel oil purchased | 4.8 | 3.6 | 3.7 | |||||||||
(1) | Domestic suppliers are suppliers whose headquarters are in Italy, including the Italian energy group Eni S.p.A. | |
(2) | Foreign suppliers are suppliers and refiners outside of Italy and traders of primarily non-Italian sources of oil. |
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Year Ended | ||||||||||||
December 31, | ||||||||||||
2004 | 2005 | 2006 | ||||||||||
(In millions of tons) | ||||||||||||
Low sulfur oil | 3.0 | 2.3 | 2.2 | |||||||||
Mid sulfur oil | 1.6 | 1.0 | 1.3 | |||||||||
High sulfur oil | 0.2 | 0.3 | 0.2 | |||||||||
Total | 4.8 | 3.6 | 3.7 | |||||||||
• | approximately 41% from Sonatrach, the Algerian gas producer, | |
• | approximately 26% from Eni, the main Italian gas supplier and transporter, | |
• | approximately 27% of the natural gas we purchased in 2006 pursuant to our gas contract with NLNG, as described below: |
• | In 1992, we entered into a20-year take-or-pay contract with NLNG, a Nigerian joint venture, for the supply of 3.5 billion cubic meters of liquefied natural gas per year, commencing in October 1999. However, due to environmental concerns, a once-planned Italian regasification facility has never been constructed. As a result, we are unable to import liquefied natural gas, and instead, in 1997, entered into a swap agreement with Gaz de France and related transportation arrangements with Eni whereby Gaz de France takes the liquefied natural gas supplied by NLNG under the contract and provides us with an equivalent volume of non-liquefied natural gas. Under current regulations, we expect to continue to receive reimbursements for part of our stranded costs incurred in connection with the NLNG contract until 2009. Please see “— Regulatory Matters — Electricity Regulation — Stranded Costs” for additional information on reimbursements of our stranded costs. |
• | approximately 4% from Edison S.p.A., an Italian gas and electricity company, and | |
• | approximately 2% on the Italian and international spot markets. |
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2004 | 2005 | 2006 | ||||||||||
(TWh) | ||||||||||||
Electricity sold to intra-group companies | 8.1 | 8.9 | 20.2 | |||||||||
Electricity sold to third parties in Italy(1) | 18.9 | 16.0 | 18.1 | |||||||||
Electricity sold to third parties abroad(2) | 7.6 | 23.8 | 44.6 | |||||||||
Total electricity sold | 34.6 | 48.7 | 82.8 | |||||||||
(1) | Refers to sales in Italy to wholesalers and to customers with consumption higher than 100 GWh (until April 1, 2006) and sales on the Italian Power Exchange. | |
(2) | Refers to sales on other European power exchanges, in particular, Powernext in France and EEX in Germany, and sales in the over-the-counter markets. |
2004 | 2005 | 2006 | ||||||||||
(TWh) | ||||||||||||
Electricity purchased from intra-group companies | 21.1 | 18.1 | 29.7 | |||||||||
Electricity purchased from third parties in Italy | 5.2 | 4.7 | 6.8 | |||||||||
Electricity purchased from third parties abroad | 8.7 | 26.1 | 46.4 | |||||||||
Total electricity purchased | 35.0 | 48.9 | 82.9 | |||||||||
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• | Enel Distribuzione, which distributes electricity in Italy, | |
• | Deval, a subsidiary in which we own a 51% interest, which distributes and sells electricity in the Italian region of Valle d’Aosta, | |
• | Enel Rete Gas, which distributes natural gas in Italy, and | |
• | Enel Sole, which offers public lighting services in Italy. |
Year Ended December 31, | ||||||||||||
2004 | 2005 | 2006 | ||||||||||
(In GWh) | ||||||||||||
Distributed to free market:(1) | ||||||||||||
Through high voltage lines | 45,083 | 46,212 | 46,016 | |||||||||
Through medium voltage lines | 63,372 | 67,060 | 73,518 | |||||||||
Through low voltage lines | 5,236 | 8,098 | 15,520 | |||||||||
Total distributed to free market | 113,691 | 121,370 | 134,654 | |||||||||
Distributed to the regulated market:(1) | ||||||||||||
Through high voltage lines | 4,827 | 5,319 | 4,819 | |||||||||
Through medium voltage lines | 23,966 | 20,247 | 15,646 | |||||||||
Through low voltage lines | 108,168 | 104,111 | 99,920 | |||||||||
Total distributed to the regulated market | 136,961 | 129,677 | 120,384 | |||||||||
Total electricity distributed | 250,652 | 215,047 | 255,038 | |||||||||
(1) | Excluding sales to resellers, which do not account for a material portion of our sales. |
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At December 31, | ||||||||||||
2004 | 2005 | 2006 | ||||||||||
Employees | 32,595 | 29,299 | 27,474 |
Underground | Insulated | Bare | Number of | Transformer | ||||||||||||||||||||
Type | Lines | Aerial Lines | Aerial Lines | Total Lines | Substations | Capacity | ||||||||||||||||||
(km) | (km) | (km) | (km) | (MVA) | ||||||||||||||||||||
Primary: | ||||||||||||||||||||||||
High voltage lines(40-150 kV) | 491 | — | 18,313 | 18,804 | n.a. | n.a. | ||||||||||||||||||
Primary substations | n.a. | n.a. | n.a. | n.a. | 2,407 | 95,959 | ||||||||||||||||||
Secondary: | ||||||||||||||||||||||||
Medium voltage lines (1-30 kV) | 127,552 | 8,300 | 200,666 | 336,517 | n.a. | n.a. | ||||||||||||||||||
Low voltage lines | 232,075 | 388,474 | 120,431 | 740,979 | n.a. | n.a. | ||||||||||||||||||
Secondary substations | n.a. | n.a. | n.a. | n.a. | 413,887 | 70,475 |
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• | reduce costs associated with physical measurement of consumption andon-site maintenance of meters by our personnel, as these tasks will be accomplished remotely, | |
• | measure more accurately the electricity consumption of our customers, | |
• | improve our response times in providing technical assistance to our customers, and | |
• | offer our customers diversified tariff plans that promote the use of electricity in off-peak periods. |
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December 31, | December 31, | |||||||
2005 | 2006 | |||||||
Number of municipalities served | 1,205 | 1,243 | ||||||
Length of distribution network (in kilometers) | 29,869 | 31,113 | ||||||
Total Number of end users connected to network | 1,983,741 | 2,023,193 | ||||||
As percentage of total natural gas customers in Italy(1) | 8 | % | 12 | % |
(1) | Source: Anigas, the Italian association of gas distribution companies. |
2005 | 2006 | |||||||
Gas distributed on behalf of companies of the Enel Group (millions of cubic meters) | 3.614 | 3.252 | ||||||
Gas distributed on behalf of companies that are not par of the Enel Group (millions of cubic meters) | 0.333 | 0.412 | ||||||
Total natural gas distributed (millions of cubic meters) | 3.947 | 3.664 | ||||||
• | in 2000, the Colombo Gas Group, which served approximately 76.000 customers, | |
• | in 2001, So.ge.gas and Agas, which together served a total amount of approximately 247.000 customers, | |
• | in 2002, Camuzzi Gazometri (subsequently renamed Enel Rete Gas), which served approximately 1.2 million customers. In acquiring Camuzzi Gazometri, we acquired both significant gas distribution assets and Camuzzi Gazometri’s waste management operations for total consideration of approximately €1 billion. In February 2004, we sold Camuzzi’s waste management operations, the Aimeri Group, to Green Holding for approximately €14 million, | |
• | in January 2004, the gas distribution company Sicilmetano and the gas sales company Sicilmetano Energy, which together served approximately 37,000 customers in Sicily, for approximately €40 million, | |
• | in September 2004, the gas distribution company Ottogas Rete and the gas sales company Ottogas Vendita, which together serve approximately 36,000 customers in the provinces of Naples and Salerno, for approximately €31.5 million, | |
• | in December 2004, the gas distribution company Italgestioni and the gas sales company Italgestioni Gas, which together serve approximately 34,000 customers in 83 municipalities in the provinces of Calabria and Naples, for approximately €32 million, |
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• | in October 2005, the gas distribution company Metanodotti Padani and the gas sales company Easygas, which together serve approximately 19,000 customers in the northern Italian provinces of Rovigo, Padova, Trento, Mantova, Ferrara and Modena, for approximately €23 million, | |
• | in January 2006, the gas distribution company Simeo, which serves approximately 24,000 customers in Sicily, for approximately €37 million, and | |
• | in July 2006, the gas distribution company Metansicula and the gas sales company Metansicula Vendita, which together serve approximately 12,000 customers in Sicily, for approximately €13 million. |
• | Enel Distribuzione, which sells electricity on Italy’s regulated market, | |
• | Enel Energia, which sells electricity on the Italian free market and sells natural gas to end users, | |
• | Metansicula Vendita, which sells natural gas to end users in Sicily, and | |
• | Enel.si, which offers electricity systems-related services and “beyond-the-meter” products and services, such as consulting and sales of electricity equipment. |
Year Ended December 31, | ||||||||||||
2004 | 2005 | 2006 | ||||||||||
(In GWh) | ||||||||||||
Electricity sold in free market(1) | 20,840 | 18,484 | 22,267 | |||||||||
Electricity sold in the regulated market(1) | 136,961 | 129,677 | 120,385 | |||||||||
Total electricity sold | 157,801 | 148,161 | 142,652 | |||||||||
(1) | Excluding sales to resellers, which do not account for a material portion of our sales. |
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• | in the period before July 1, 2007, all customers who do not meet the consumption threshold for participation in the free market, which we refer to as Non-Eligible Customers, and Eligible Customers that choose not to participate in the free market, and | |
• | after July 1, 2007, all customers who choose not to participate in the free market. |
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2004 | 2005 | 2006 | ||||||||||
Natural gas sold to retail customers (in millions of cubic meters) | 2,783 | 3,021 | 2,973 | |||||||||
Natural gas sold to business customers (in millions of cubic meters) | 2,403 | 2,068 | 1,572 | |||||||||
Total natural gas sold (in millions of cubic meters) | 5,186 | 5,089 | 4,545 | |||||||||
Number of retail customers | 1,963,577 | 2,140,865 | 2,329,184 | |||||||||
Number of business customers | 2,038 | 2,129 | 1,867 | |||||||||
Total number of customers | 1,965,615 | 2,142,994 | 2,331,051 | |||||||||
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• | Slovenské elektrárne (“SE”), the principal power generation company in Slovakia: |
• | On April 28, 2006, we purchased a 66% interest in SE, which has an estimated market share of more than 80% in the Slovakian power generation market, for approximately €840 million and entered into a shareholders’ agreement with the state-owned entity National Property Fund, the remaining shareholder of SE. | |
• | SE has total net installed capacity of 6,442 MW, of which 38% is nuclear-powered, 36% is hydroelectric-powered and 26% is powered by conventional thermal sources. The net production of SE in 2006 amounted to 15,618 GWh. | |
• | This acquisition marks our re-entry into the field of nuclear power generation; we have not owned any nuclear power plants since November 2000, and we have not produced electricity from nuclear power plants since 1988. | |
• | SE owned, prior to our acquisition, six nuclear power units with net installed capacity of 400 MW each, which we believe were equipped with internationally accepted technology. Prior to the closing, certain conditions were fulfilled, including: |
• | the approval by the Slovakian government of the strategic investment plan we prepared for SE for the2006-2013 period, | |
• | the transfer to state-owned companies of the assets and liabilities (including spent nuclear fuel and the radioactive waste) of a nuclear power plant built in 1970 and operational since 1978 that is in the process of being decommissioned, | |
• | the disposal of a hydroelectric plant, and | |
• | the approval by the Slovakian government of legislation on a new fund for the decommissioning of nuclear installations in Slovakia and new rules governing the Slovakian electricity market. |
• | Enel Viesgo Generación, an electricity generation company in Spain: |
• | In January 2002, we acquired from Endesa S.A. the Spanish company Electra de Viesgo S.L. (“Viesgo”), which owned Viesgo Generación (currently Enel Viesgo Generación) as well as certain distribution |
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companies, for total consideration of €2,070 million, including €1,920 million in cash and the assumption of €150 million in debt. |
• | Enel Viesgo Generación operates 6 thermal plants and 12 hydroelectric plants in Spain, which together have a total net installed capacity of approximately 2,199 MW, and, in 2006, had a net production of 5,363 GWh. |
• | Enel Unión Fenosa Renovables S.A. (“EUFR”), a company active in the field of renewable energy in Spain, in which we currently own a 50% interest: |
• | In December 2003, we acquired from Unión Fenosa Generación S.A. 80% of the share capital of Unión Fenosa Energías Especiales (now EUFR), for €178 million. We granted Unión Fenosa Generación S.A. an option to repurchase 30% of EUFR’s capital stock before the end of 2007. In May 2006, Unión Fenosa Generación S.A. exercised this option and repurchased 30% of EUFR for approximately €82 million. As a result, Unión Fenosa Generación SA and we each now hold 50% of EUFR. | |
• | EUFR’s assets include plants and projects for the generation of electricity from renewable resources, primarily wind and hydroelectric facilities. EUFR has 457 MW of net installed capacity currently in operation, and more than 229 MW in development that we expect to be in operation by the end of 2007. EUFR’s net production in 2006 was 1,508 GWh. |
• | Maritza East III, a generating company in Bulgaria: |
• | In March 2003, we acquired from Entergy Power Bulgaria Ltd. (“Entergy”), through our subsidiary Enel Generation Holding BV, 60% of the share capital of Maritza East III Power Holding BV, which in turn holds 73% of Bulgarian generation company Maritza East III Power Company A.D., now Enel Maritza East 3 A.D. (“Maritza East III”), for €73.5 million. In June 2006, we purchased from Entergy the remaining 40% stake in Maritza East III Power Holding BV and 100% of Maritza O&M Holding Netherlands BV, a Dutch company holding 73% of Maritza East 3 Operating Company A.D., now Enel Operations Bulgaria A.D. (a company responsible for the maintenance of Maritza East III), for total consideration of €47.5 million. | |
• | Maritza East III, which has 560 MW of net installed capacity and had a net production of 3,111 GWh in 2006, is working on the refurbishment, environmental upgrade and management of its lignite-fired generation plant located on the border with Greece. The total financial outlay of Maritza East III for the project, which is expected to result in an increase in Maritza East III’s net installed capacity to 794 MW, is estimated to be approximately €570 million, to be funded through project financing, cash flow from operations and equity. | |
• | In October 2006, we signed a memorandum of understanding with the Bulgarian state-owned company Nek for a preliminary study of the feasibility of an upgrade of Maritza East III to increase its aggregate net installed capacity by 640 MW. |
• | Enel North America Inc., which is active in power generation from renewable sources in North America: |
• | At December 31, 2006, Enel North America Inc. operated 65 power plants in the United States and two in Canada with an aggregate net installed capacity of 402 MW and a net production of approximately 1,372 GWh in 2006. | |
• | In April 2005, Enel North America Inc. acquired full control of the 25 MW Sheldon Springs hydroelectric project located on the Missisquoi River in Sheldon, Vermont (in which it had previously owned a 1% stake). | |
• | On February 9, 2006, Enel North America Inc. acquired an additional 36% interest in St. Felicien Cogeneration Limited Partnership (“St. Felicien”), a 21.4 MW biomass project in Quebec (Canada), thereby increasing its stake in this company to 96%. |
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• | In September 2006, Enel North America Inc. entered into an agreement with TradeWind Energy LLC, a U.S. wind power development company, for the development of wind projects in the Midwest and possibly other regions of the United States. | |
• | In October 2006, Enel North America Inc. entered into an agreement with Windkraft Nord USA, acquiring the rights for the development of the 63 MW Snyder Wind Project to be developed in Scurry County, Texas. | |
• | In June 2007, Enel North America Inc. acquired full control of AMP Resources, LLC from AMP Capital Partners and another minor shareholder. The acquisition consists of a currently-operating geothermal project and four other projects in the advanced stages of development for a capacity of approximately 150 MW that Enel North America Inc. will complete in the next four years. |
• | Enel Latin America, which is active in power generation from renewable sources in Central and South America: |
• | At December 31, 2006, Enel Latin America operated two hydroelectric plants and a wind plant in Costa Rica, two hydroelectric plants in Chile, three hydroelectric plants in Guatemala, 20 mini-hydroelectric plants in Brasil and 1 hydroelectric plant in Panama, which together had aggregate net installed capacity of 471 MW and net production of 1,297 GWh in 2006. | |
• | In June 2006, we entered into an agreement with the Rede group for the acquisition in two tranches of 11 companies that own concessions to operate hydroelectric plants in Brazil with a total installed capacity of 98 MW. In October 2006, Enel Brasil Partecipações, a Brazilian subsidiary of Enel Latin America, acquired 10 of these companies, which operate 20 mini-hydro plants, for total consideration of approximately 464 million Brazilian real (approximately €168 million). The acquisition of the remaining company, which operates two mini-hydro plants, is expected in the second half of 2007. | |
• | In August 2006, we acquired, through our Dutch subsidiary Enel Investment Holding, 100% of Hydro Quebec International Latin America Ltd. (now Enel Panama Ltd.) from Hydro Quebec International Inc. and Fonds de Solidarité des Travailleurs du Québec for $150 million (equal to approximately €118 million). As a result of this transaction, Enel acquired 24.55% of EGE Fortuna S.A., a Panama hydro-generation company with total installed capacity of 300 MW. We subsequently increased our stake in EGE Fortuna S.A. (now Enel Fortuna S.A.) to 49%, when we acquired from Globeleq in February 2007, again through our Dutch subsidiary Enel Investment Holding, 100% of Globeleq Holdings Fortuna S.A., a company incorporated in Panama, for consideration of $161.3 million (approximately €124.5 million). |
• | Erelis S.a.s. (now Enel Erelis), a French company operating in the development of wind plants, which we acquired in July 2006 for €14 million. |
• | we will have a 12.5% stake in EDF’s EPR project, | |
• | we will bear our proportional share of the costs associated with the project, including investment, operating and fuel costs, as well as our share of budgeted reactor decommissioning costs and the corresponding share of the back-end fuel and waste disposal costs, |
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• | EDF will be the operator of the power plant and will bear any related nuclear civil liability, and | |
• | we will receive a share of the generation capacity and output proportional to our initial stake in the project, which may be increased, so long as EDF retains a majority interest. |
• | In December 2006, we entered into a joint venture agreement with the Turkish construction company Enka to explore electricity generation, distribution and sales projects in Turkey, including the participation in the bidding process for the acquisition of three state-owned electricity distribution companies. | |
• | In March 2007, we entered into a joint venture agreement with the Belgian steel company Duferco for the construction of two power plants in Belgium with net installed capacity of 420 MW and 65 MW, respectively. | |
• | In 2007, we acquired from the Copelouzos and the International Constructional group wind farms in Greece with aggregate installed capacity of 127 MW, of which 43 MW are still under construction. | |
• | In June 2007, we won an auction to acquire for approximately $1.5 billion (approximately €1.1 billion) a 25.03% stake in JCS Fifth Generation Company of the Wholesale Electricity Market or OGK-5, one of six thermal wholesale generation companies in Russia, which has four thermal power plants located in various regions of the country, with an aggregate installed capacity of approximately 8,700 MW. Later that same month, we increased our stake in OGK-5 by 4.96%, bringing our total stake in that company to 29.99%. |
Enel | Enel | Total at | ||||||||||||||||||||||||||
Slovenske | North | Latin | Maritza | December 31, | ||||||||||||||||||||||||
Elektrame | America | America | Viesgo | East III | EUFR | 2006 | ||||||||||||||||||||||
(MW) | ||||||||||||||||||||||||||||
Thermal | 1,653 | — | — | 1,527 | 560 | — | 3,740 | |||||||||||||||||||||
Hydroelectric | 2,329 | 313 | 447 | 672 | — | 11 | 3,772 | |||||||||||||||||||||
Wind | — | 67 | 24 | — | — | 192 | 283 | |||||||||||||||||||||
Biomass and Biogas | — | 22 | — | — | — | — | 22 | |||||||||||||||||||||
Cogeneration | — | — | — | — | — | 24 | 24 | |||||||||||||||||||||
Nuclear | 2,460 | — | — | — | — | — | 2,460 | |||||||||||||||||||||
Total | 6,442 | 402 | 471 | 2,199 | 560 | 228 | 10,301 |
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• | In Spain, we carry out our international electricity distribution and sales activities through our wholly-owned subsidiaries Electra de Viesgo Distribución SL and Enel Viesgo Energia SL: |
• | In accordance with EU law, electricity sales in Spain are also divided between a free and a regulated market. Please see “— Regulatory Matters — Electricity Regulation” for a discussion of relevant EU law. | |
• | In 2006, our sales of electricity in Spain amounted to 4,617 GWh (compared to 4,861 GWh in 2005), of which 3,968 GWh were sold by Electra de Viesgo Distribución SL to the regulated market (compared to 3,576 GWh in 2005) and 649 GWh by Enel Viesgo Energia SL to the free market (compared to 1,285 GWh in 2005). The decrease in sales at Enel Viesgo Energia SL was mainly due to an interruption in sales of electricity in the high voltage segment from January to September. | |
• | Electra de Viesgo Distribución SL owns 29,989 kilometers of distribution network, and it distributed 5,311 GWh of electricity in 2006 (compared with 5,196 GWh in 2005) to 638,000 customers in the Spanish regulated market (625,000 customers in 2005). |
• | In Romania, we carry out our international electricity distribution and sales activities through Enel Electrica Banat S.A, which operates in western Romania, and Enel Electrica Dobrogea S.A., which operates in eastern Romania: |
• | On April 28, 2005, Enel Distribuzione acquired a 51% interest in each of Electrica Banat S.A (now Enel Electrica Banat S.A.) and Electrica Dobrogea S.A. (now Enel Electrica Dobrogea S.A.), purchasing approximately 25% of each of these companies’ share capital from Electrica S.A., a Romanian state-owned company, and simultaneously subscribing to a capital increase of approximately 26% in each of these companies for aggregate consideration of €131 million (including price adjustments). | |
• | Enel Electrica Banat S.A. and Enel Electrica Dobrogea S.A. own an aggregate of 80,100 kilometers of distribution network and, in 2006, distributed 7,259 GWh of electricity in the Romanian regulated market to 1,438,200 customers. | |
• | In 2006, Enel Electrica Banat S.A. and Enel Electrica Dobrogea S.A sold an aggregate of 5,194 GWh of electricity, mostly in the regulated market. |
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2004 | 2005 | 2006 | ||||||||||
(TWh) | ||||||||||||
Electricity sales on the regulated market(1) | 3.709 | 6.766 | 8.411 | |||||||||
Electricity sales on the free market(1) | 0.749 | 1.327 | 9.044 | |||||||||
Total electricity sales(1) | 4.458 | 8.093 | 17.455 | |||||||||
Electricity transported on our distribution networks(2) | 4.952 | 9.651 | 15.570 |
(1) | Excluding sales to resellers, which do not account for a material portion of our sales. | |
(2) | Excluding electricity distributed to resellers, which do not account for a material portion of our distribution. |
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• | the introduction on April 1, 2004, of trading on the Italian power exchange, | |
• | an increase in bilateral contracts between our competitors and final customers, | |
• | regulations limiting each operator’s access to international electricity sources to a maximum percentage of available interconnection capacity, and | |
• | the development of new interconnection lines that will increase the volume of electricity that may be imported into Italy. |
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2006 | Percentage of Total | Percentage of | ||||||||||
Production(1) | Italian Output | Demand | ||||||||||
(GWh) | ||||||||||||
Enel | 103,910 | 34 | % | 31 | % | |||||||
Former Gencos | 61,458 | 20 | % | 18 | % | |||||||
Edison(2) | 39,498 | 13 | % | 12 | % | |||||||
EniPower | 24,820 | 8 | % | 7 | % | |||||||
Main municipal electricity companies(2) | 15,000 | 5 | % | 4 | % | |||||||
Other independent power producers | 57,040 | 19 | % | 17 | % | |||||||
Total production in Italy | 301,726 | 100 | % | — | ||||||||
Pumped storage consumption(3) | (8,648 | ) | — | — | ||||||||
Net imports | 44,718 | — | 13 | % | ||||||||
Total demand in Italy | 337,796 | — | 100 | % | ||||||||
(1) | Electricity production, net of power used by generating and auxiliary installations. | |
(2) | Excluding stakes in former Gencos. | |
(3) | Refers to the use of electricity by pumped-storage hydroelectric plants to pump water to elevated areas for use at a later time to generate electricity. |
As of December 31, | ||||||||
2005 | 2006 | |||||||
(GW) | ||||||||
Enel | 42.2 | 40.5 | ||||||
Former Gencos | 17.9 | 18.2 | ||||||
Eni | 4.3 | 4.5 | ||||||
Edison(1) | 6.9 | 7.7 | ||||||
Main municipal electricity companies(1) | 4.0 | 4.5 | ||||||
Other independent power producers | 10.2 | 12.1 | ||||||
Total net installed capacity in Italy | 85.5 | 89.8 | ||||||
(1) | Excluding stakes in former Gencos. |
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• | setting and adjusting tariffs on the basis of general criteria established by law, | |
• | advising the Ministry of Economic Development on the structuring and administration of licensing and authorization regimes for the energy sector, | |
• | ensuring the quality of services provided to customers, | |
• | overseeing the separation of utility companies into distinct units for accounting and management purposes, | |
• | promoting competition, and | |
• | otherwise protecting the interests of consumers, including the authority to mediate disputes between utilities and consumers, and to impose sanctions for violations of regulations. |
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• | liberalized, as of April 1, 1999, the generation, import and export of electricity, | |
• | provided that consumers, or Eligible Customers, meeting certain consumption thresholds, which have been progressively reduced, may negotiate supply agreements directly with any domestic or foreign producer, wholesaler or distributor of electricity, while other, “Non-Eligible Customers” must continue to purchase electricity from the distributor serving the area in which they are located and pay regulated prices determined by the Energy Authority, | |
• | provided that after January 1, 2003, no electricity company may produce or import more than 50% of the total of imported and domestically produced electricity in Italy, which limit resulted in our sale of the Gencos, | |
• | provided for the establishment of the Single Buyer, a central purchaser of electricity from producers on behalf of all Non-Eligible Customers, | |
• | provided for the creation of the Italian power exchange, a virtual marketplace in which producers, importers, wholesalers, the GRTN, other Eligible Customers and the Single Buyer buy and sell electricity at prices determined through a competitive bidding process, | |
• | provided for the creation of a Market Operator to manage the Italian power exchange, | |
• | provided for the separation of management and operation of the national electricity transmission grid, which was to be licensed to an independent transmission system operator, the GRTN, from ownership of the grid assets, which were retained by existing owners, primarily Terna, and | |
• | established a new licensing regime for electricity distribution and provided incentives for the consolidation of electricity distribution networks within each municipality. |
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• | Operating costs of generation (for electricity prices on the regulated market), transmission and distribution activities, including procurement costs, and amortization and depreciation. In order for operators to be able to recover particular costs, the costs must be both actually incurred by them and recognized by the Energy Authority, | |
• | An appropriate return on invested capital, including both equity and debt financing, and | |
• | The costs associated with system charges. |
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• | low-voltage domestic consumers (residential customers), | |
• | low-voltage public lighting, | |
• | other low-voltage end users, | |
• | medium-voltage public lighting, | |
• | other medium-voltage end users, and | |
• | high-voltage end users. |
• | Hydroelectric or geothermal generation, since these plants do not incur fuel costs, and | |
• | The resale of electricity imported under long-term contracts in effect as of the date of the entry into force of the first Electricity Directive on February 19, 1997, which was frequently cheaper than electricity generated in Italy. |
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• | Charges concerning the electricity system, established by the Ministry of Economic Development, that consist of: |
• | a nuclear surcharge, covering part of the costs incurred by So.g.i.n., the company to which we transferred our discontinued Italian nuclear operations, in connection with the dismantling of nuclear plants and decommissioning of nuclear fuels; this surcharge is designed to cover substantially all of such costs when added to the funds that we transferred to So.g.i.n., | |
• | a surcharge that benefits producers from renewable resources, | |
• | special surcharges covering the cost of supplying electricity at mandated discounts to certain customers (primarily the Italian state-owned railway company and Acciai Speciali Terni S.p.A., both of which transferred electricity assets to us as part of the nationalization of the Italian electricity industry in 1962), | |
• | research and development surcharges, covering related costs, and | |
• | certain stranded costs that have not yet been recovered. Please see “— Stranded Costs” below for a discussion of these costs. |
• | Other general interest charges established by the Energy Authority to adjust or refine the operation of the tariff mechanism, which include adjustments to cover potential differences between distributors’ costs as recognized under the current tariff structure and actual tariff revenues. | |
• | Incentives for the enhancement of the quality of service. | |
• | Charges recovered through upward adjustments to the price caps, as established by the Energy Authority, which cover: |
• | costs deriving from unforeseeable events, changes in the regulatory framework or new obligations for universal service, | |
• | costs deriving from demand-side management initiatives intended to promote a more efficient use of resources by electricity customers, including information campaigns, and | |
• | additional recognized costs incurred in connection with the offer of value-added services on top of basic options. |
• | undertook for reasons of public policy, | |
• | undertook at a time when the electricity markets were not yet open to competition, and | |
• | could have been recovered in a monopoly regime but cannot be recovered under a regime of competitive electricity pricing. |
• | they minimize the impact of those costs (and, hence, the amount of the refund) on their future operations, and |
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• | they submit an industrial plan demonstrating the long-term profitability of the activity related to the stranded costs. |
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• | A state tax for residential uses (of €0.0047/kWh) and for other uses (of €0.0031/kWh excluding users with consumption over 1.2 GWh per month), | |
• | Additional local taxes that vary from €0.0093/kWh up to a maximum of €0.0204/kWh, and | |
• | Value-added tax of 20% for all users with the exception of residential and industrial customers (who are taxed at a rate of 10%). |
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• | Switching fuel, | |
• | Converting existing oil-fired thermal power plants into gas-fired CCGT turbines or high-efficiency coal-fired plants, | |
• | Increasing renewable energy capacity, and | |
• | Sourcing CO2 credits through the development of Clean Development Mechanism (CDM) and Joint Implemetation (JI) projects in the energy sector (in particular geothermal), investing in carbon funds and purchasing emission reductions through bilateral contracting. |
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Percentage | ||||||||
Year | Metric Tons | Change | ||||||
(In thousands) | ||||||||
2001 | 213 | (11 | ) | |||||
2002 | 187 | (21 | ) | |||||
2003 | 101 | (58 | ) | |||||
2004 | 94 | (61 | ) | |||||
2005 | 73 | (69 | ) | |||||
2006 | 69 | (71 | ) |
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Percentage | ||||||||
Year | Metric Tons | Change | ||||||
(In thousands) | ||||||||
2001 | 71 | (8 | ) | |||||
2002 | 71 | (9 | ) | |||||
2003 | 62 | (20 | ) | |||||
2004 | 56 | (28 | ) | |||||
2005 | 49 | (37 | ) | |||||
2006 | 43 | (44 | ) |
• | electric transformers and other equipment which contains PCBs above 500 parts per million must be decommissioned or decontaminated by 2009, and | |
• | transformers which contain PCBs below the limit set out above can be used until the end of its operational life. |
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• | re-using routes of previous power lines wherever possible, | |
• | using towers for high voltage lines whose design is aimed at reducing the environmental and aesthetic impact in non-urban areas of particular landscape value, | |
• | acting to reduce the impact of lines in environmentally sensitive or protected areas, | |
• | increasing use of underground cables in urban areas where possible, | |
• | for medium-voltage lines, placing underground cables in urban areas and aerial cables with low environmental impact in other areas with specific environmental value, and | |
• | using aerial insulated cables or underground cables in low voltage networks (at present, we have built approximately two-thirds of our network in this way). |
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ITEM 5. | OPERATING AND FINANCIAL REVIEW AND PROSPECTS |
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• | a “generation cost component,” reflecting fuel costs, and | |
• | the application of global price-cap reductions to transmission and distribution transport charges. |
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• | August 2004 decree on stranded costs. Stranded costs are current costs deriving from contractual commitments or investment decisions that electricity companies undertook for reasons of public policy, at a time when the electricity markets were not yet open to competition, and could have been recovered in a monopoly regime but cannot be recovered under a regime of competitive electricity pricing. Please see “Item 4. Information on the Company — Regulatory Matters — Electricity Regulation” for more information on stranded costs. In August 2004, the MEF and the Ministry of Productive Activities issued a joint decree that determined the overall amount of stranded costs we are entitled to recover. On December 1, 2004, following the European Commission’s approval of the decree, we became entitled to recover approximately €513 million on account of stranded costs related to our generation plants for the period2000-2003, as well as our stranded costs related to the Nigerian LNG contract, which were determined to be €555 million in respect of the2000-2003 period and approximately €910 million in respect of the2004-2009 period (€151 million of which related to 2004). As a result, in 2004 we recorded as “other revenues” a total of €1,219 million arising in connection with stranded costs, the amount we became entitled to receive in respect of 2004 and prior years under the August 2004 decree. Of this total, the €513 million related to our generation plants and the €151 million related to the Nigerian LNG contract for 2004 were recorded by our Domestic Generation and Energy Management segment, and the €555 million related to the Nigerian LNG contract in respect of the2000-2003 period were recorded by our Corporate segment. In 2005, our Domestic Generation and Energy Management segment recorded €158 million for stranded costs related to our Nigerian LNG contract. The aggregate amount of payments in consideration of stranded costs we received under the August 2004 decree was €361 million as of December 31, 2005, €1,230 million as of December 31, 2006, and €1,296 million as of March 31, 2007. As of March 31, 2007, we accrued a residual credit of €285 million, and €410 million will become due in the period from2007-2009. | |
• | Start of operation of the Italian power exchange and the Single Buyer. On April 1, 2004, the Italian power exchange for the spot trading of electricity started operations and the Single Buyer became responsible for purchasing all of the electricity to be supplied to the regulated market. Please see “Item 4. Information on the Company — Regulatory Matters — Electricity Regulation” for a detailed discussion of the Italian power exchange, the Single Buyer and related developments in the Italian electricity market. As a result of this development, since April 1, 2004, our Domestic Generation and Energy Management segment sells the electricity it produces that is destined for the regulated market to the Single Buyer, and our Domestic Sales |
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(previously Sales, Infrastructure and Networks) segment purchases the electricity that it distributes on the regulated market from the Single Buyer. These sales and purchases are recorded as operating revenues and operating expenses, respectively. Before April 1, 2004, our Domestic Generation and Energy Management segment sold electricity for distribution on the regulated market directly to our Sales, Infrastructure and Networks segment, and the revenues and costs arising from these sales were eliminated from, and therefore not recorded in, our consolidated financial statements. As a result, both our operating revenues and operating expenses have increased substantially on a consolidated basis since April 1, 2004. Sales to the Single Buyer are now included in the line item “Sales to regulatory entities, sales on the free market and sales on foreign markets” in the results presented below. For prior periods, this line item was referred to as “Sales to Eligible Customers, sales to the GRTN and sales on foreign markets,” as the Single Buyer was not fully operational. Purchases from the Single Buyer are recorded in the operating expense line item “Purchased Power.” |
• | Capacity payments. In order to address a current deficit in Italian generation capacity relative to rising electricity demand, the regulatory framework provides incentives to power generators both to build new capacity as well as to maintain their existing plants in good working order and available to cover sudden variations in electricity demand. Effective March 1, 2004, the Energy Authority established a provisional system of payments to remunerate producers that make generation capacity available to the electricity system at times of peak demand, known as “capacity payments.” Capacity payments to a given producer comprise both an amount due for capacity available on “critical” days (set by the GRTN and now by Terna) and a further amount payable when pool market prices fall below specified thresholds, as an extra incentive. This provisional system has been in place since March 2004 and during all of 2005 and 2006. | |
• | Increased estimates of the useful lives of certain generation assets. Effective January 1, 2005, following an independent appraisal, we increased our estimates of the useful lives of certain assets related to power generation plants. As a consequence, the amount of depreciation expense we recorded in 2005 with respect to these assets was lower than the amount recorded for the same assets in 2004 by €100 million. |
• | the acquisition, on October 6, 2006, through Enel Brasil Partecipações, a subsidiary of Enel Latin America, of a 100% stake in ten companies of the Rede Group that own twenty mini-hydro-electric plants, | |
• | the acquisition, on August 1, 2006, of a 100% stake in Hydro Quebec Latin America (now Enel Panama), which, together with Globeleq (a private equity fund), exercises de facto joint control over Fortuna, a Panamanian hydro-electric generation company. As a result, Fortuna is consolidated on a proportionate basis, | |
• | the acquisition, on July 13, 2006, of a 100% stake in Erelis, a company that develops wind farms in France, | |
• | the acquisition, on June 21, 2006, of a 49.5% interest in Res Holdings, which holds a 100% stake in the Russian firm RusEnergoSbyt (energy trading and sales). We now exercise joint control over the company together with the other shareholders; as a result, the company is consolidated on a proportionate basis, | |
• | the acquisition, on June 14, 2006, of a 100% interest in Maritza O&M Holding Netherlands, a holding company that owns 73% of Enel Operations Bulgaria (formerly Maritza East 3 Operating Company), which is responsible for the maintenance of the Maritza East III plant, | |
• | the acquisition from third parties of the remaining 40% interest in Maritza East III Power Holding on June 14, 2006. Following this transaction, we now hold a 73% stake in Enel Maritza East 3 (formerly Maritza East III Power Company), a Bulgarian generation company, | |
• | the sale of 30% of Enel Unión Fenosa Renovables on May 30, 2006. Following this sale, our interest in the company fell to 50%, with the Group exercising joint control over the company together with the other shareholder. As a result, the company is being consolidated on a proportionate basis as of that date, |
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• | the acquisition of a 66% interest in Slovenské elektrárne, on April 28, 2006, | |
• | the disposal of a controlling stake in Terna as of September 15, 2005, | |
• | the disposal of a controlling stake in Wind as of August 11, 2005, | |
• | the acquisition of Enel Electrica Banat and Enel Electrica Dobrogea as of April 28, 2005, | |
• | the acquisition of Italgestioni and Italgestioni Gas (together, the “Italgestioni Group”), which are companies active in the distribution and sale of natural gas to end users in the provinces of Calabria and Naples, as of December 14, 2004, | |
• | the acquisition of Ottogas Rete and Ottogas Vendita (together, the “Ottogas Group”), which are companies active in the distribution and sale of natural gas to end users in the area of Naples and Salerno, as of September 15, 2004, and | |
• | the disposal of NewReal (a real estate company) as of July 14, 2004. |
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Year Ended December 31, | ||||||||||||
2004 | 2005 | 2006 | ||||||||||
Operating revenues | 100.0 | % | 100.0 | % | 100.0 | % | ||||||
Income from equity exchange transactions | — | — | 0.7 | |||||||||
Operating expenses | ||||||||||||
Personnel | (10.4 | ) | (8.2 | ) | (8.3 | ) | ||||||
Fuel for thermal generation | (11.6 | ) | (11.6 | ) | (10.6 | ) | ||||||
Purchased power | (33.5 | ) | (42.4 | ) | (44.4 | ) | ||||||
Depreciation, amortization and impairment losses | (7.1 | ) | (6.5 | ) | (6.4 | ) | ||||||
Other operating expenses | (18.4 | ) | (15.7 | ) | (14.3 | ) | ||||||
Total operating expenses | (81.0 | ) | (84.4 | ) | (84.0 | ) | ||||||
Net income/(charges) from commodity risk management | (0.1 | ) | 0.8 | (1.6 | ) | |||||||
Operating income | 18.9 | 16.4 | 15.1 | |||||||||
Financial income/(expense) and income/(expense) from investments | (2.7 | ) | (2.1 | ) | (1.7 | ) | ||||||
Income/(expense) from investments accounted for using the equity method | (0.1 | ) | (0.1 | ) | — | |||||||
Income before taxes | 16.1 | 14.2 | 13.4 | |||||||||
Income taxes | (6.8 | ) | (5.7 | ) | (5.4 | ) | ||||||
Income from continuing operations | 9.3 | 8.5 | 8.0 | |||||||||
Income from discontinued operations | (0.5 | ) | 3.8 | — | ||||||||
Income (before minority interests) | 8.8 | 12.3 | 8.0 | |||||||||
Net Income | 8.5 | % | 11.5 | % | 7.9 | % |
Year Ended December 31, | ||||||||||||
2004 | 2005 | 2006 | ||||||||||
Operating revenues | 17.5 | 9.6 | — | |||||||||
Operating expenses | (21.1 | ) | (7.9 | ) | — | |||||||
Operating income (loss) | (3.6 | ) | 1.7 | — | ||||||||
Net financial expense | (1.5 | ) | (0.7 | ) | — | |||||||
Income taxes | (2.0 | ) | 0.6 | — | ||||||||
Net income (loss) before capital gains | (3.1 | ) | 0.4 | — | ||||||||
Gains on disposal of assets | 2.6 | 3.3 | — | |||||||||
Income from discontinued operations | (0.5 | ) | 3.7 | — |
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Year Ended December 31, | ||||||||
2005 | 2006 | |||||||
(In millions of euro) | ||||||||
Electricity sales and transport: | ||||||||
Sales and transport to final customers on the free and regulated markets | 16,821 | 18,745 | ||||||
Sales to regulatory entities and resellers(1) | 9,403 | 10,446 | ||||||
Sales and transport in foreign markets | 2,671 | 5,016 | ||||||
Equalization Fund contributions | 113 | 24 | ||||||
Total revenues from electricity sales and transport | 29,008 | 34,231 | ||||||
Gas sales to end users | 1,556 | 1,695 | ||||||
Fees for customer connections, inspections and repositioning services | 656 | 617 | ||||||
Other revenues(2) | 2,567 | 1,970 | ||||||
Total operating revenues | 33,787 | 38,513 |
(1) | “Sales to regulatory entities and resellers” includes primarily sales to Terna, the Single Buyer and the Market Operator. | |
(2) | “Other revenues” mainly includes our revenues from sales of fuel (including natural gas) to third parties, engineering and contracting activities, and non-recurring items such as bonus payments and reimbursements. |
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• | the fact that in 2005 we recorded revenues of €338 million related to services provided to GRTN (now theGestore dei Servizi Elettricior GSE) for the period2002-2004, | |
• | a €152 million decrease in revenues for contract work in progress due mainly to our decision not to enter into new engineering and contracting arrangements with third parties, either domestically or abroad, and | |
• | a decrease of €33 million in revenues from the sale of fuel for trading, due to a €81 million decrease in sales of fuels other than natural gas that was partially offset by a €48 million increase in gas sales. |
Year Ended December 31, | ||||||||
2005 | 2006 | |||||||
(In millions of euro) | ||||||||
Domestic Sales | 19,487 | 21,108 | ||||||
Domestic Generation and Energy Management | 12,995 | 15,661 | ||||||
Domestic Infrastructure and Networks | 5,532 | 5,707 | ||||||
International | 1,858 | 3,068 | ||||||
Parent Company | 1,118 | 1,178 | ||||||
Services and other activities | 1,741 | 1,161 | ||||||
Eliminations | (8,944 | ) | (9,370 | ) | ||||
Total | 33,787 | 38,513 |
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Year Ended December 31, | ||||||||
2005 | 2006 | |||||||
(In millions of euro) | ||||||||
Operating expenses: | ||||||||
Personnel | 2,762 | 3,210 | ||||||
Fuel for thermal generation | 3,910 | 4,086 | ||||||
Fuel for trading and gas for resale to end users | 1,604 | 1,628 | ||||||
Purchased power | 14,321 | 17,082 | ||||||
Other operating expenses: | ||||||||
Services and rentals | 3,057 | 3,400 | ||||||
Materials and supplies | 798 | 750 | ||||||
Other | 911 | 713 | ||||||
Capitalized expenses | (1,049 | ) | (989 | ) | ||||
Total | 26,314 | 29,880 |
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Year Ended December 31, | ||||||||
2005 | 2006 | |||||||
(In millions of euro) | ||||||||
Domestic Sales | 19,309 | 20,937 | ||||||
Domestic Generation and Energy Management | 9,914 | 11,807 | ||||||
Domestic Infrastructure and Networks | 2,134 | 2,289 | ||||||
International | 1,359 | 2,241 | ||||||
Parent Company | 1,037 | 997 | ||||||
Services and other activities | 1,426 | 982 | ||||||
Eliminations | (8,865 | ) | (9,373 | ) | ||||
Total | 26,314 | 29,880 |
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Year Ended December 31, | ||||||||
2005 | 2006 | |||||||
(In millions of euro) | ||||||||
Domestic Sales | 140 | 173 | ||||||
Domestic Generation and Energy Management | 1,009 | 952 | ||||||
Domestic Infrastructure and Networks | 770 | 829 | ||||||
International | 178 | 399 | ||||||
Parent Company | 14 | 17 | ||||||
Services and other activities | 96 | 93 | ||||||
Total | 2,207 | 2,463 |
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Year Ended December 31, | ||||||||
2005 | 2006 | |||||||
(In millions of euro) | ||||||||
Domestic Sales | (26 | ) | 4 | |||||
Domestic Generation and Energy Management | 326 | (705 | ) | |||||
International | (14 | ) | 91 | |||||
Parent Company | (14 | ) | (4 | ) | ||||
Total | 272 | (614 | ) |
Year Ended December 31, | ||||||||
2005 | 2006 | |||||||
(In millions of euro) | ||||||||
Domestic Sales | 12 | 2 | ||||||
Domestic Generation and Energy Management | 2,398 | 2,197 | ||||||
Domestic Infrastructure and Networks | 2,628 | 2,589 | ||||||
International | 307 | 519 | ||||||
Parent Company | 53 | 423 | ||||||
Services and other activities | 219 | 86 | ||||||
Eliminations | (79 | ) | 3 | |||||
Total | 5,538 | 5,819 |
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Year Ended December 31, | ||||||||
2005 | 2006 | |||||||
(In millions of euro) | ||||||||
Current taxes | 1,398 | 1,657 | ||||||
Income taxes from prior years | 14 | (5 | ) | |||||
Deferred tax assets | 277 | 47 | ||||||
Deferred tax liabilities | 245 | 368 | ||||||
Total | 1,934 | 2,067 |
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Year Ended December 31, | ||||||||
2004 | 2005 | |||||||
(In millions of euro) | ||||||||
Electricity sales and transport: | ||||||||
Sales and transport to final customers on the free and regulated markets | 16,783 | 16,821 | ||||||
Sales to regulatory entities and resellers(1) | 7,052 | 9,403 | ||||||
Sales and transport in foreign markets | 1,246 | 2,671 | ||||||
Equalization Fund contributions | 17 | 113 | ||||||
Total revenues from electricity sales and transport | 25,098 | 29,008 | ||||||
Gas sales to end users | 1,374 | 1,556 | ||||||
Fees for customer connections, inspections and repositioning services | 657 | 656 | ||||||
Other revenues(2) | 3,898 | 2,567 | ||||||
Total operating revenues | 31,027 | 33,787 |
(1) | “Sales to regulatory entities and resellers” includes primarily sales to Terna, the Single Buyer and the Market Operator (since April 1, 2004). | |
(2) | “Other revenues” mainly includes our revenues from sales of fuel (including natural gas) to third parties, engineering and contracting activities, and non-recurring items such as bonus payments and reimbursements. |
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Year Ended December 31, | ||||||||
2004 | 2005 | |||||||
(In millions of euro) | ||||||||
Domestic Sales | 19,045 | 19,487 | ||||||
Domestic Generation and Energy Management | 12,281 | 12,995 | ||||||
Domestic Infrastructure and Networks | 5,611 | 5,532 | ||||||
International | 1,030 | 1,858 | ||||||
Parent Company | 1,708 | 1,118 | ||||||
Services and other activities | 1,797 | 1,741 | ||||||
Eliminations | (10,445 | ) | (8,944 | ) | ||||
Total | 31,027 | 33,787 |
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• | a €624 million, or 7.5%, increase in revenues earned by Enel Produzione from electricity sales (including revenues from dispatching services), | |
• | a €587 million, or 41.8%, increase in revenues from electricity sales by Enel Trade, primarily in connection with trading activities in the international market, | |
• | the recognition in 2005 of €338 million related to services provided to the GRTN (now theGestore dei Servizi Elettricior GSE) and Terna for the period2002-2004, | |
• | a €170 million, or 17.9%, increase in revenues from sales of natural gas to our Domestic Sales (formerly Sales, Infrastructure and Networks) segment, and | |
• | the fact that in 2005 we recorded €100 million relating to the reimbursement of certain charges incurred in 2002 and 2003 for the purchase of green certificates. |
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Year Ended December 31, | ||||||||
2004 | 2005 | |||||||
(In millions of euro) | ||||||||
Operating expenses: | ||||||||
Personnel | 3,224 | 2,762 | ||||||
Fuel for thermal generation | 3,598 | 3,910 | ||||||
Fuel for trading and gas for resale to end users | 1,795 | 1,604 | ||||||
Purchased power | 10,380 | 14,321 | ||||||
Other operating expenses: | ||||||||
Services and rentals | 3,106 | 3,057 | ||||||
Materials and supplies | 1,027 | 798 | ||||||
Other | 783 | 911 | ||||||
Capitalized expense | (973 | ) | (1,049 | ) | ||||
Total | 22,940 | 26,314 |
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Year Ended December 31, | ||||||||
2004 | 2005 | |||||||
(In millions of euro) | ||||||||
Domestic Sales | 18,658 | 19,309 | ||||||
Domestic Generation and Energy Management | 8,658 | 9,914 | ||||||
Domestic Infrastructure and Networks | 2,482 | 2,134 | ||||||
International | 736 | 1,359 | ||||||
Parent Company | 1,049 | 1,037 | ||||||
Services and other activities | 1,583 | 1,426 | ||||||
Eliminations | (10,226 | ) | (8,865 | ) | ||||
Total | 22,940 | 26,314 |
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Year Ended December 31, | ||||||||
2004 | 2005 | |||||||
(In millions of euro) | ||||||||
Domestic Sales | 88 | 140 | ||||||
Domestic Generation and Energy Management | 1,128 | 1,009 | ||||||
Domestic Infrastructure and Networks | 721 | 770 | ||||||
International | 150 | 178 | ||||||
Parent Company | 5 | 14 | ||||||
Services and other activities | 109 | 96 | ||||||
Total | 2,201 | 2,207 |
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Year Ended December 31, | ||||||||
2004 | 2005 | |||||||
(In millions of euro) | ||||||||
Domestic Sales | (1 | ) | (26 | ) | ||||
Domestic Generation and Energy Management | (8 | ) | 326 | |||||
International | — | (14 | ) | |||||
Parent Company | (7 | ) | (14 | ) | ||||
Total | (16 | ) | 272 |
Year Ended December 31, | ||||||||
2004 | 2005 | |||||||
(In millions of euro) | ||||||||
Domestic Sales | 298 | 12 | ||||||
Domestic Generation and Energy Management | 2,487 | 2,398 | ||||||
Domestic Infrastructure and Networks | 2,408 | 2,628 | ||||||
International | 144 | 307 | ||||||
Parent Company | 647 | 53 | ||||||
Services and other activities | 105 | 219 | ||||||
Eliminations | (219 | ) | (79 | ) | ||||
Total | 5,870 | 5,538 |
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Year Ended December 31, | ||||||||
2004 | 2005 | |||||||
(In millions of euro) | ||||||||
Current taxes | 1,328 | 1,398 | ||||||
Difference on estimated income taxes from prior years | (14 | ) | 14 | |||||
Deferred tax assets | 459 | 277 | ||||||
Deferred tax liabilities | 343 | 245 | ||||||
Total | 2,116 | 1,934 |
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• | Minority interest, | |
• | Customers’ connection fees, | |
• | Revaluation of fixed assets, related depreciation and adjustment for gain/loss on disposal, | |
• | Capitalized interest and related depreciation, | |
• | Early retirement program, | |
• | Employee benefit obligations, | |
• | Goodwill impairment and subsequent disposal of affiliates, | |
• | Business combinations, goodwill and other intangible assets, | |
• | Negative goodwill and related adjustments, | |
• | Deferred taxes on equity reserves, | |
• | Asset retirement obligations, | |
• | Gains on sale of real estate business, | |
• | Investment in equity securities — unlisted equity investments, | |
• | Transfer of financial assets, | |
• | Onerous contracts, | |
• | Other differences, and | |
• | Tax effect on reconciling items. |
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• | payments at scheduled maturities and pre-payments before scheduled maturities of certain long-term financings held by Slovenské elektrárne with a total principal amount of €630 million, | |
• | payments at scheduled maturities of certain bonds issued by Enel with a total principal amount of €487 million, | |
• | pre-payments before scheduled maturities of certain long-term financings held by Maritza East III with a total principal amount of €163 million, and | |
• | repayments of certain 36 month revolving credit lines held by Enel with a total principal amount of €100 million. |
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At December 31, | ||||||||
2005 | 2006 | |||||||
(In millions of euro) | ||||||||
Cash at banks and marketable securities (note 14(e)) | (508 | ) | (572 | ) | ||||
Factoring receivables (note 14(d)) | (374 | ) | (211 | ) | ||||
Other finance receivables | (3 | ) | (10 | ) | ||||
Total | (885 | ) | (793 | ) | ||||
Short-term debt (note 16(a)): | ||||||||
Bank loans | ||||||||
Use of revolving credit lines | 0 | 6 | ||||||
Other short-term bank debt | 970 | 536 | ||||||
Total bank loans | 970 | 542 | ||||||
Commercial paper | 275 | 531 | ||||||
Other short-term financial loans | 116 | 13 | ||||||
Total short-term debt | 1,361 | 1,086 | ||||||
Net short-term debt | 476 | 293 | ||||||
Long-term debt (including current maturities) (note 17(a)): | ||||||||
Bank loans | 3,181 | 3,910 | ||||||
Bonds | 8,530 | 8,434 | ||||||
Other loans | 191 | 173 | ||||||
Total Long-Term Debt (including current maturities) | 11,902 | 12,517 | ||||||
Long-term receivables | (66 | ) | (1,120 | ) | ||||
Net Long-Term Debt (including current maturities) | 11,836 | 11,397 | ||||||
Net Financial Indebtedness | 12,312 | 11,690 |
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Long-Term | Short-Term | |||||||||||
Rating Agency | Debt | Debt | Outlook | |||||||||
Standard & Poor’s | A | A-1 | Negative Credit Watch | |||||||||
Moody’s Investors Service | A-1 | P-1 | Negative Credit Watch |
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• | the acquisition through Enineftgaz (a consortium in which Enel has a 40% interest and Eni 60% interest) from Yukos of a set of gas assets, including OAO Arcticgaz, ZAO Urengoil, OAO Neftegaztechnologia and a 20% stake in OAO Gazprom Neft for a total cost to us of €852 million in April 2007, and | |
• | the distribution, made on June 21, 2007, of an ordinary dividend equal to €0.29 per share, amounting in the aggregate to approximately €1,795 million; and an interim dividend on 2006 results that we expect to pay in November 2007. |
• | a €35 billion syndicated term loan facility divided into three tranches with different maturities, subsequently reduced to €30 billion, which contains various covenants and undertakings on our part, including a limit on our consolidated net borrowings as of June 30 and December 31 of any given year equal to 6 times our consolidated EBITDA for the 12-month period ending on that date, and a limit on the financial indebtedness of our subsidiaries equal to 20% of the gross total assets of our Group, | |
• | the renewal of the medium term notes program with an increase in the principle amount from €10 billion to €25 billion, and | |
• | bond issuances (in euros or other currencies) in an aggregate amount of €5 billion, to be placed with institutional investors by December 31, 2007. |
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Payments Due by Period | ||||||||||||||||||||
Less Than | More Than | |||||||||||||||||||
Contractual Obligations | Total | 1 Year | 1-3 Years | 3-5 Years | 5 Years | |||||||||||||||
(In millions of euro) | ||||||||||||||||||||
Long-term debt (including current maturities) | 12,517 | 323 | 2,150 | 2,393 | 7,651 | |||||||||||||||
Interest payments | 4,933 | 559 | 1,038 | 857 | 2,479 | |||||||||||||||
Derivatives settlement payments | 96 | 18 | 40 | 10 | 28 | |||||||||||||||
Capital (Finance) Lease Obligations(1) | — | — | — | — | — | |||||||||||||||
Operating leases | 1,586 | 223 | 451 | 440 | 472 | |||||||||||||||
Purchase obligations | 37,616 | 6,899 | 6,127 | 5,496 | 19,094 | |||||||||||||||
Other long-term obligations | 0 | 0 | 0 | 0 | 0 | |||||||||||||||
Total | 56,748 | 8,022 | 9,806 | 9,196 | 29,724 |
(1) | We do not have capital (finance) lease obligations. |
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• | Commitments to suppliers of fuel. We have entered into various fuel supply contracts, primarily for the purchase of fuel oil and natural gas, in respect of which we will be required to pay a total €33,024 million. Our aggregate expenditures related to these commitments are expected to total €13,930 million for the period from January 1, 2007 through December 31, 2011. Please see “Item 4. Information on the Company — Business — The Enel Group — Domestic Generation and Energy Management — Fuel” for information about our purchases of fuel. | |
• | Commitments to suppliers of electricity. We also have unconditional purchase obligations for electric power in respect of which we will be required to pay a total of €4,592 million, totally expected for the period from January 1, 2007 through December 31, 2011. |
• | Approximately €6,316 million relating to our Italian generation businesses, of which approximately €1,650 million relates to generation from renewable resources, | |
• | Approximately €5,781 million relating to our international business, of which €4,651 million is expected to be allocated to generation operations and €1,124 million to distribution and sales operations, | |
• | Approximately €6,923 million relating to our electricity and natural gas distribution businesses, primarily investments in tangible and intangible assets, including approximately €2,652 million in developing new customer connections in our electricity business, and | |
• | Approximately €452 million in developing our natural gas distribution networks. |
ITEM 6. | DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES |
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Year Initially | ||||||
Name | Position | Appointed | ||||
Piero Gnudi | Chairman | 2002 | ||||
Fulvio Conti | Director, General Manager (direttore generale), Chief Executive Officer | 2005 | ||||
Giulio Ballio | Director | 2005 | ||||
Augusto Fantozzi | Director | 2005 | ||||
Alessandro Luciano | Director | 2005 | ||||
Fernando Napolitano | Director | 2002 | ||||
Francesco Taranto | Director | 2000 | ||||
Gianfranco Tosi | Director | 2002 | ||||
Francesco Valsecchi | Director | 2005 |
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Year Appointed | ||||||||||||||
Year Joined | to Current | |||||||||||||
Name | Age | Management Position | the Group | Position | ||||||||||
Andrea Brentan | 58 | Business Development and M&A Unit of International Division | 2002 | 2005 | ||||||||||
Alessandro Bufacchi | 60 | Information and Communication Technology | 2000 | 2000 | ||||||||||
Antonio Cardani | 57 | Audit | 2000 | 2000 | ||||||||||
Salvatore Cardillo | 57 | Legal Affairs | 2000 | 2000 | ||||||||||
Massimo Cioffi | 46 | Human Resources | 1999 | (2) | 2006 | |||||||||
Gianluca Comin | 44 | Communication | 2002 | 2002 | ||||||||||
Luigi Ferraris | 45 | Chief Financial Officer in charge of Accounting, Planning and Control | 1999 | 2005 | ||||||||||
Sandro Fontecedro | 62 | Head of Domestic Generation and Energy Management Division | 1970 | 2003 | ||||||||||
Livio Gallo | 56 | Head of Domestic Infrastructure and Networks Division | 1999 | 2005 | ||||||||||
Claudio Machetti | 48 | Chief Financial Officer in charge of Finance | 2000 | 2005 | ||||||||||
Gianfilippo Mancini | 41 | Energy Management Unit of Domestic Generation and Energy Management Division | 1997 | 2005 | ||||||||||
Simone Mori | 42 | Regulatory Affairs and Corporate Strategy | 1990 | 2007 | ||||||||||
Claudio Sartorelli | 61 | Corporate Affairs | 1970 | 1996 | ||||||||||
Francesco Starace | 51 | Head of Domestic Sales Division | 2000 | 2005 | ||||||||||
Carlo Tamburi | 48 | Procurement and Services | 2003 | 2005 |
(2) | Mr. Cioffi joined Enel Group in 1999. In December 2003, he was appointed head of personnel and organization of Terna. He continued to serve in Terna following our deconsolidation of this company in 2005. In July 2006, Mr. Cioffi re-joined Enel Group, where he now serves as executive vice president of human resources. |
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Year Initially | ||||||
Name | Position | Appointed | ||||
Former members of the board of statutory auditors | ||||||
Eugenio Pinto | Chairman | 2005 | ||||
Carlo Conte | Auditor | 2004 | ||||
Franco Fontana | Auditor | 2001 | ||||
Giancarlo Giordano | Alternate Auditor | 2004 | ||||
Paolo Sbordoni | Alternate Auditor | 2004 | ||||
Current members of the board of statutory auditors | ||||||
Franco Fontana | Chairman | 2001 | ||||
Carlo Conte | Auditor | 2004 | ||||
Gennaro Mariconda | Auditor | 2007 | ||||
Giancarlo Giordano | Alternate Auditor | 2004 | ||||
Paolo Sbordoni | Alternate Auditor | 2004 |
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Bonuses and | ||||||||||||||||||
Base | Other | Non-Monetary | Other | |||||||||||||||
Name | Positions(s) Held | Compensation | Incentives | Benefits | Compensation | |||||||||||||
(In euros) | ||||||||||||||||||
Current directors | ||||||||||||||||||
Piero Gnudi | Chairman | 735,764.00 | (2 | ) | 11,779.68 | (1) | ||||||||||||
Fulvio Conti | Chief Executive Officer, General Manager, Director | 600,000.00 | (3 | ) | 701,678.52 | (4) | ||||||||||||
Giulio Ballio | Director | 117,000.00 | ||||||||||||||||
Augusto Fantozzi | Director | 116,427.00 | ||||||||||||||||
Alessandro Luciano | Director | 117,000.00 | ||||||||||||||||
Fernando Napolitano | Director | 117,250.00 | ||||||||||||||||
Francesco Taranto | Director | 122,500.00 | 18,273.97 | |||||||||||||||
Gianfranco Tosi | Director | 117,500.00 | ||||||||||||||||
Francesco Valsecchi | Director | 117,000.00 | ||||||||||||||||
Total compensation of Directors | 2,160,441.00 | 11,779.68 | 719,952.49 | |||||||||||||||
Former statutory auditors | ||||||||||||||||||
Eugenio Pinto | Chairman | 85,000.000 | ||||||||||||||||
Carlo Conte | Statutory Auditor | 70,500.00 | (5) | |||||||||||||||
Franco Fontana | Statutory Auditor | 70,500.00 | ||||||||||||||||
Total compensation of Statutory Auditors | 226,000.00 | |||||||||||||||||
Executives with strategic positions(6) | 7,428,332.98 | |||||||||||||||||
Total compensation paid | 2,386,441.00 | 11,779.68 | 8,148,285.47 |
For all positions held at Group companies other than Enel, the compensation of Piero Gnudi and Fulvio Conti has either been renounced by them or paid to Enel and included in their base compensation. | ||
(1) | Insurance policies. | |
(2) | The variable part of the base compensation relating to fiscal year 2006 for a maximum amount of €210,000 will be resolved upon by the board of directors and paid in the second half of 2007. | |
(3) | The variable part of the base compensation relating to fiscal year 2006 for a maximum amount of €600,000 will be resolved upon by the board of directors and paid in the second half of 2007. | |
(4) | Base compensation for services rendered as general manager in 2006. The variable part of the base compensation relating to fiscal year 2006 will be resolved upon by the board of directors and paid in the second half of 2007. | |
(5) | Compensation paid to the MEF (in the amount of €55,000.00) pursuant to the directive of Council of Ministers — Public Office Department (Dipartimento della Funzione Pubblica) of March 1, 2000. | |
(6) | During the 2006 fiscal year, there were fifteen executives with strategic positions, namely the heads of each department of the Parent Company Enel S.p.A. and of the division of the Enel Group, the head of Business |
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Development in the International Division and the head of Business Energy Management in the Domestic Generation and Energy Management Division. |
• | In April 2001, 621,280 options to purchase the same number of Enel’s ordinary shares, under the 2001 stock option plan. Of these options, 56% vested and, consequently, 347,916 options were exercisable starting in 2004. These options expired on December 31, 2005. The exercise price for these options was €7.272. During the period between June 1, 2005, and June 16, 2005, Mr. Conti exercised all of the vested options and sold 332,916 of the resulting shares on the market, | |
• | In March 2002, a further 902,500 options to purchase the same number of Enel’s ordinary shares, under the 2002 stock option plan. All of these options vested and, consequently, 30% of the options were exercisable starting in 2003, an additional 30% starting in 2004 and the remaining 40% starting in 2005. These options expire on December 31, 2007. The exercise price for these options is €6.426. During the period between May 24, 2004, and June 11, 2004, Mr. Conti exercised 250,000 of these options and sold the resulting shares on the market. Subsequently, during the period between November 12, 2004, and December 2, 2004, Mr. Conti exercised a further 175,000 of these options, and between February 3, 2005, and February 23, 2005, a further 141,500 of these options and sold all of the resulting shares on the market. As of May 25, 2007, Mr. Conti has not exercised any of the remaining 336,000 options, | |
• | In April 2003, a further 992,800 options to purchase the same number of Enel’s ordinary shares, under the 2003 stock option plan. All of these options vested and, consequently, 30% of the options are exercisable starting from 2004, an additional 30% starting from 2005 and the remaining 40% starting from 2006. These options expire on December 31, 2008. The exercise price for these options is €5.240. During the period between May 24, 2004, and June 11, 2004, Mr. Conti exercised 297,840 of these options and sold the resulting shares on the market. Subsequently, during the period between February 3, 2005, and February 23, 2005, Mr. Conti exercised a further 200,000 of these options and sold the resulting shares on the market. As of May 25, 2007, Mr.Conti has not exercised any of the remaining 494,960 options, | |
• | In March 2004, a further 600,000 options to purchase the same number of Enel’s ordinary shares, under the 2004 stock option plan. All of these options vested and, consequently, 15% of the options may be exercised starting from 2005, another 15% starting from 2006, an additional 30% starting from 2007 and the remaining 40% starting from 2008. These options expire on December 31, 2009. The exercise price for these options is €6.242. As of May 25, 2007, Mr. Conti has not exercised any of these options, and |
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• | In March 2005, a further 600,000 options to purchase the same number of Enel’s ordinary shares, under the 2005 stock option plan. Given that the conditions precedent provided for in the 2005 stock option plan were not satisfied, none of these options vested and all automatically lapsed. |
Number of | ||||
Ordinary Shares | ||||
Held as of | ||||
Name of Director or Statutory Auditor | May 25, 2007 | |||
Piero Gnudi | 70,524 | (1) | ||
Fulvio Conti | 41,399 | (2) | ||
Francesco Taranto | 10,000 | |||
Giulio Ballio | 1,700 | (3) | ||
Gennaro Mariconda | 12,600 | (4) | ||
Giancarlo Giordano | 524 | |||
All other directors and statutory auditors | 0 | |||
Total | 136,747 |
(1) | 46,000 of which are held by a company controlled by Mr. Gnudi and 24,262 by Mr. Gnudi’s wife. | |
(2) | 762 of which are held by Mr. Conti’s wife. | |
(3) | All of these shares are held by Mr. Ballio’s wife. | |
(4) | 6,300 of which are held by Mr. Mariconda’s wife. |
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2005 | 2006 | |||||||||||||||
Number of | Number of | |||||||||||||||
Employees | Division | Employees | Division | |||||||||||||
Domestic Generation and Energy Management | 9,769 | 18.9 | % | 9,522 | 16 | % | ||||||||||
Domestic Infrastructure and Networks | 25,769 | 49.58 | % | 24,701 | 42 | % | ||||||||||
Domestic Sales | 5,994 | 11.6 | % | 5,176 | 9 | % | ||||||||||
Services and Other Activities | 4,562 | 8.8 | % | 4,539 | 8 | % | ||||||||||
Holding Company | 569 | 1.1 | % | 652 | 1 | % | ||||||||||
Total Italy | 46,663 | 90 | % | 44,590 | 76 | % | ||||||||||
International Division | 5,115 | 10 | % | 13,958 | 24 | % | ||||||||||
Total Enel Group | 51,778 | 58,548 |
Estimated Number of | ||||
Potential Retirees | ||||
2007 | 1,700 | |||
2008 | 2,000 | |||
2009 | 1,000 | |||
2010 | 1,500 | |||
2011 | 1,000 |
As of December 31, | ||||||||||||||||||||||||
2001 | 2002 | 2003 | 2004 | 2005 | 2006 | |||||||||||||||||||
Employees (other than managers) | 71,802 | 70,313 | 63,985 | 61,193 | 51,216 | 57,856 | ||||||||||||||||||
Managers | 859 | 891 | 785 | 705 | 562 | 691 | ||||||||||||||||||
Total | 72,661 | 71,204 | 64,770 | 61,898 | 51,778 | 58,548 | ||||||||||||||||||
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ITEM 7. | MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS |
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• | The material acquisition of Enel’s shares by third parties; | |
• | Material shareholders’ agreements; | |
• | Major corporate changes; and | |
• | The appointment of one non-voting director. |
• | Special rules concerning appointments of directors and statutory auditors in order to ensure that minority shareholders are represented; and | |
• | Limitations on the maximum number of shares that a shareholder, or group of shareholders, other than the MEF (or other entities controlled by the Italian state), may hold. |
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ITEM 8. | FINANCIAL INFORMATION |
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2002 | 2003 | 2004 | 2005 | 2006 | ||||||||||||||||
Dividends per ordinary share (in euros)(1) | € | 0.36 | € | 0.36 | € | 0.69 | € | 0.63 | € | 0.49 | ||||||||||
Dividends per ordinary share (in U.S. dollars)(2) | $ | 0.38 | $ | 0.45 | $ | 0.87 | $ | 0.78 | $ | 0.66 |
(1) | The amount of the aggregate dividend for each of 2002, 2003, 2004, 2005 and 2006 was equal to approximately 109%, 87%, 162%, 100% and 100% of our consolidated net income for the relevant year, respectively (with the amounts used for 2004, 2005 and 2006 being under IFRS-EU). | |
(2) | We have translated the historical dividend per share amounts into U.S. dollars using the noon buying rate for euro in effect on the respective payment dates. The noon buying rate for euro may differ from the rate that may be used by the Depositary for the ADSs in order to convert euro into U.S. dollars for purposes of making payments to holders of ADSs. |
• | our financial performance, | |
• | cash and capital requirements, | |
• | any restrictions in financing agreements, and | |
• | prevailing business conditions. |
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• | a €35 billion syndicated term loan facility divided into three tranches with different maturities, subsequently reduced to €30 billion, which contains various covenants and undertakings on our part, including a limit on our consolidated net borrowing as of June 30 and December 31 of any given year equal to 6 times our consolidated EBITDA for the 12-month period ending on that date, and a limit on the financial indebtedness of our subsidiaries equal to 20% of the gross total assets of our Group, | |
• | renewal of the medium term notes programme with an increase from €10 billion to €25 billion, and | |
• | one or more bond issuances for an aggregate amount of €5 billion, in euros or other currencies, to be placed with institutional investors by December 31, 2007. |
ITEM 9. | THE OFFER AND LISTING |
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ADSs | ||||||||
High | Low | |||||||
(In dollars) | ||||||||
2002 | 30.31 | 22.60 | ||||||
2003 | 35.85 | 26.58 | ||||||
2004 | 49.44 | 34.35 | ||||||
2005 | ||||||||
First Quarter | 49.95 | 46.23 | ||||||
Second Quarter | 48.76 | 42.24 | ||||||
Third Quarter | 45.58 | 41.57 | ||||||
Fourth Quarter | 42.81 | 38.42 | ||||||
2006 | ||||||||
First Quarter | 42.98 | 40.35 | ||||||
Second Quarter | 45.66 | 40.79 | ||||||
Third Quarter | 45.74 | 42.02 | ||||||
Fourth Quarter | 52.03 | 44.85 | ||||||
December 2006-May 2007 | ||||||||
December 2006 | 52.03 | 50.87 | ||||||
January 2007 | 53.35 | 49.65 | ||||||
February 2007 | 55.10 | 51.00 | ||||||
March 2007 | 53.93 | 51.39 | ||||||
April 2007 | 57.66 | 54.58 | ||||||
May 2007 | 57.30 | 55.76 |
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Ordinary Shares | ||||||||
High | Low | |||||||
(In euros) | ||||||||
2002 | 8.051 | 5.650 | ||||||
2003 | 6.765 | 4.490 | ||||||
2004 | 7.2456 | 5.464 | ||||||
2005 | ||||||||
First Quarter | 7.485 | 6.889 | ||||||
Second Quarter | 7.53 | 6.977 | ||||||
Third Quarter | 7.30 | 6.845 | ||||||
Fourth Quarter | 7.147 | 6.499 | ||||||
2006 | ||||||||
First Quarter | 7.189 | 6.675 | ||||||
Second Quarter | 7.120 | 6.540 | ||||||
Third Quarter | 7.211 | 6.640 | ||||||
Fourth Quarter | 7.889 | 7.147 | ||||||
December 2006-May 2007 | ||||||||
December 2006 | 7.888 | 7.602 | ||||||
January 2007 | 8.122 | 7.658 | ||||||
February 2007 | 8.387 | 7.907 | ||||||
March 2007 | 8.147 | 7.802 | ||||||
April 2007 | 8.436 | 8.104 | ||||||
May 2007 | 8.54 | 8.304 |
ITEM 10. | ADDITIONAL INFORMATION |
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No. of | Total Options | |||||||||||||||||||
Year of Grant | Grantees | Granted | Options Exercised | Strike Price € | Expiration | |||||||||||||||
2002 | 383 | (1) | 41,748,500 | 36,265,100 | 6.426 | (2) | December 31, 2007 | |||||||||||||
2003 | 549 | (3) | 47,624,005 | 42,519,374 | 5.240 | December 31, 2008 | ||||||||||||||
2004 | 640 | (3) | 38,527,550 | 23,988,503 | 6.242 | December 31, 2009 | ||||||||||||||
2005 | 448 | (3) | 28,757,000 | (4) | — | 7.273 | December 31, 2010 | |||||||||||||
2006 | 471 | (5) | 31,790,000 | (6) | — | 6.842 | December 31, 2012 |
(1) | Including Enel’s former chief executive officers, Mr. Tató and Mr. Scaroni, each in his capacity as general manager (direttore generale), as well as Enel’s current chief executive officer, Mr. Conti, in his capacity as chief financial officer. | |
(2) | The strike price for the options granted to Enel’s former chief executive officer, Mr. Scaroni, was determined with regard to the reference price of Enel’s shares on Telematico on the date of his appointment as general manager (direttore generale), and was therefore set at €6.480. | |
(3) | Including Enel’s former chief executive officer, Mr. Scaroni, in his capacity as general manager (direttore generale) as well as Enel’s current chief executive officer, Mr. Conti, in his capacity as chief financial officer. | |
(4) | The conditions for the exercise of options under the 2005 plan were not satisfied; therefore, none of the options granted thereunder became exercisable. | |
(5) | Including Enel’s current chief executive officer, Mr. Conti, in his capacity as general manager (direttore generale). | |
(6) | The satisfaction of the conditions precedent for the exercise of options under the 2006 plan has not been verified yet by the board of directors, since the conditions concern two-year and three-year period objectives. |
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• | an Italian or EU bank, | |
• | a non-EU bank authorized by the Bank of Italy to operate in the Italian market, | |
• | Società di Intermediazione Mobiliare, or SIM, | |
• | an EU investment company, | |
• | a non-EU investment company authorized by CONSOB to provide investment services in Italy, | |
• | an Italian asset management company, | |
• | a stock broker, | |
• | the company which has issued the shares, | |
• | the controlling shareholder of the company which has issued the shares, | |
• | the Bank of Italy, | |
• | an EU or non-EU entity operating a centralized clearing system, | |
• | a financial intermediary operating a clearing system governed by art. 69 (2) and 70 of the TUF, | |
• | a financial intermediary registered on the list kept by the Bank of Italy under art. 107 of Legislative Decree No. 385 of September 1, 1993, | |
• | Poste Italiane S.p.A. (the Italian Post Office company), | |
• | Cassa Depositi e Prestiti, | |
• | the MEF, and |
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• | the managers of foreign clearing, settlement and guarantee systems for financial instruments, provided that they are subject to supervision equivalent to that provided by Italian law. |
• | Controlling entities and directly or indirectly controlled entities of the holder, as well as entities controlled by the same controlling entity, and | |
• | Affiliated personal entities of the holder, including spouses and other closely related personal relatives. |
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• | our entry into a €35 billion syndicated term loan facility divided into three tranches with different maturities, subsequently reduced to €30 billion, which contains various covenants and undertakings on our part, including a limit on our consolidated net borrowing as of June 30 and December 31 of any given year equal to 6 times our consolidated EBITDA for the 12-month period ending on that date, and a limit on the financial indebtedness of our subsidiaries equal to 20% of the gross total assets of our Group, and |
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• | renewal of our medium-term notes program with an increase of the principal amount we may issue under it from €10 billion to €25 billion. |
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ITEM 11. | QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK |
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• | forward exchange contracts with a notional amount of €875 million used to hedge the foreign exchange risk related to fuel purchases or electricity imports (€1,357 million as of December 31, 2005), | |
• | forward exchange contracts with a notional amount of €377 million used to hedge the foreign exchange risk related to the repayment of the commercial paper we issued in foreign currency (€35 million as of December 31, 2005), | |
• | forward exchange contracts with a notional amount of €192 million used to hedge expected cash flows in currencies other than the euro (€212 million as of December 31, 2005), and | |
• | options with a notional amount of €80 million (€73 million as of December 31, 2005) and forward exchange contracts with a notional amount of €50 million (€194 million as of December 31, 2005) used to hedge any residual foreign exchange risk on an aggregate basis. |
Notional | Fair Value | Fair Value Assets | Fair Value Liabilities | |||||||||||||||||||||||||||||
Dec. 31, | Dec. 31, | Dec. 31, | Dec. 31, | Dec. 31, | Dec. 31, | Dec. 31, | Dec. 31, | |||||||||||||||||||||||||
2006 | 2005 | 2006 | 2005 | 2006 | 2005 | 2006 | 2005 | |||||||||||||||||||||||||
(In millions of euro) | ||||||||||||||||||||||||||||||||
Cash flow hedge derivatives: | ||||||||||||||||||||||||||||||||
Forwards | 26 | 21 | — | — | — | — | — | — | ||||||||||||||||||||||||
Trading derivatives: | ||||||||||||||||||||||||||||||||
Forwards | 1,468 | 1,777 | (22 | ) | (6 | ) | 2 | 9 | (24 | ) | (15 | ) | ||||||||||||||||||||
Options | 80 | 73 | — | — | — | — | — | — | ||||||||||||||||||||||||
Total forwards | 1,494 | 1,798 | (22 | ) | (6 | ) | 2 | 9 | (24 | ) | (15 | ) | ||||||||||||||||||||
Total options | 80 | 73 | — | — | — | — | — | — | ||||||||||||||||||||||||
Total Exchange Rate | ||||||||||||||||||||||||||||||||
Derivatives | 1,574 | 1,871 | (22 | ) | (6 | ) | 2 | 9 | (24 | ) | (15 | ) | ||||||||||||||||||||
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2007(1) | ||||
(In millions of euro) | ||||
Current rates as of December 31, 2006 | (23 | ) | ||
10% depreciation of the euro | 110 | |||
10% appreciation of the euro | (130 | ) |
(1) | Our current exchange rate derivatives all mature by December 31, 2007. |
Notional | Fair Value | Fair Value Assets | Fair Value Liabilities | |||||||||||||||||||||||||||||
Dec. 31, | Dec. 31, | Dec. 31, | Dec. 31, | Dec. 31, | Dec. 31, | Dec. 31, | Dec. 31, | |||||||||||||||||||||||||
2006 | 2005 | 2006 | 2005 | 2006 | 2005 | 2006 | 2005 | |||||||||||||||||||||||||
(In millions of euro) | ||||||||||||||||||||||||||||||||
Cash flow hedge derivatives: | ||||||||||||||||||||||||||||||||
Interest rate swaps | 4,823 | 4,196 | (79 | ) | (261 | ) | 37 | 11 | (116 | ) | (272 | ) | ||||||||||||||||||||
Interest rate collars | 3 | 62 | — | — | — | — | — | — | ||||||||||||||||||||||||
Swaptions | — | 69 | — | — | — | — | — | — | ||||||||||||||||||||||||
Trading derivatives: | ||||||||||||||||||||||||||||||||
Interest rate swaps | 309 | 670 | (26 | ) | (54 | ) | — | 1 | (26 | ) | (55 | ) | ||||||||||||||||||||
Interest rate collars | 42 | — | — | — | — | — | — | — | ||||||||||||||||||||||||
Total interest rate swaps | 5,132 | 4,866 | (105 | ) | (315 | ) | 37 | 12 | (142 | ) | (327 | ) | ||||||||||||||||||||
Total interest rate collars | 45 | 62 | — | — | — | — | — | — | ||||||||||||||||||||||||
Total swaptions | — | 69 | — | — | — | — | — | — | ||||||||||||||||||||||||
Total Interest | ||||||||||||||||||||||||||||||||
Rate Derivatives | 5,177 | 4,997 | (105 | ) | (315 | ) | 37 | 12 | (142 | ) | (327 | ) | ||||||||||||||||||||
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2007 | 2008 | 2009 | 2010 | 2011 | Beyond | |||||||||||||||||||
(In millions of euro) | ||||||||||||||||||||||||
Current rates at Dec. 31, 2006 | (18 | ) | (35 | ) | (5 | ) | (5 | ) | (5 | ) | (28 | ) | ||||||||||||
Current rates decreased by 10% | (28 | ) | (49 | ) | (17 | ) | (16 | ) | (15 | ) | (66 | ) | ||||||||||||
Current rates increased by 10% | (8 | ) | (20 | ) | 7 | 6 | 5 | 11 |
2007 | 2008 | 2009 | 2010 | 2011 | Beyond | |||||||||||||||||||
(In millions of euro) | ||||||||||||||||||||||||
Current rates at Dec. 31, 2006 | (6 | ) | (5 | ) | (5 | ) | (3 | ) | (2 | ) | (9 | ) | ||||||||||||
Current rates decreased by 10% | (7 | ) | (6 | ) | (6 | ) | (3 | ) | (3 | ) | (10 | ) | ||||||||||||
Current rates increased by 10% | (5 | ) | (4 | ) | (4 | ) | (2 | ) | (2 | ) | (7 | ) |
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Notional | Fair Value | Fair Value Asset | Fair Value Liability | |||||||||||||||||||||||||||||
Dec. 31, | Dec. 31, | Dec. 31, | Dec. 31, | Dec. 31, | Dec. 31, | Dec. 31, | Dec. 31, | |||||||||||||||||||||||||
2006 | 2005 | 2006 | 2005 | 2006 | 2005 | 2006 | 2005 | |||||||||||||||||||||||||
(In millions of euro) | ||||||||||||||||||||||||||||||||
Cash flow hedge derivatives: | ||||||||||||||||||||||||||||||||
Two-way contracts for differences | 1,034 | 1,372 | 48 | 57 | 48 | 57 | — | — | ||||||||||||||||||||||||
Trading derivatives: | �� | |||||||||||||||||||||||||||||||
One-way contracts for differences | 3,219 | 6,266 | (123 | ) | 43 | — | 43 | (123 | ) | — | ||||||||||||||||||||||
swaps on oil-based commodities | 581 | 613 | (7 | ) | (13 | ) | 9 | 11 | (16 | ) | (24 | ) | ||||||||||||||||||||
futures on oil-based commodities | 252 | 291 | (2 | ) | 16 | 2 | 17 | (4 | ) | (1 | ) | |||||||||||||||||||||
swaps on gas transport fees | 16 | 18 | (8 | ) | (12 | ) | — | — | (8 | ) | (12 | ) | ||||||||||||||||||||
other derivatives on energy | 57 | 107 | (6 | ) | (1 | ) | 1 | 397 | (7 | ) | (398 | ) | ||||||||||||||||||||
embedded derivatives | 1,012 | — | (482 | ) | — | 58 | — | (540 | ) | — | ||||||||||||||||||||||
options on other commodities | — | 9 | — | 2 | — | 2 | — | — | ||||||||||||||||||||||||
Total Commodity Derivatives | 6,171 | 8,676 | (580 | ) | 92 | 118 | 527 | (698 | ) | (435 | ) | |||||||||||||||||||||
2007 | ||||
(In millions of euro) | ||||
Current prices at Dec. 31, 2006 | 48 | |||
10% decrease | 111 | |||
10% increase | (14 | ) |
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Commodity | 10-Year Swap Rate | Total for 2007 | ||||||||||
(In millions of euro) | ||||||||||||
Current prices at Dec. 31, 2006 | (9 | ) | (8 | ) | (17 | ) | ||||||
10% decrease | (19 | ) | (8 | ) | (27 | ) | ||||||
10% increase | 1 | (8 | ) | (7 | ) |
2007 | ||||
(In millions of euro) | ||||
Current prices at Dec. 31, 2006 | (123 | ) | ||
10% decrease | (80 | ) | ||
10% increase | (167 | ) |
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SKK/USD | ||||||||||||
Aluminum | Exchange | |||||||||||
US Inflation | Spot Price | Rate | ||||||||||
(In millions of euro) | ||||||||||||
Current prices at Dec. 31, 2006 | 58 | 58 | 58 | |||||||||
10% decrease | 52 | 32 | 53 | |||||||||
10% increase | 57 | 82 | 64 |
SKK/USD Exchange Rate | ||||
(In millions of euro) | ||||
Current prices at Dec. 31, 2006 | (304 | ) | ||
10% decrease | (333 | ) | ||
10% increase | (275 | ) |
Gas Price | ||||
(In millions of Euro) | ||||
Current prices at Dec. 31, 2006 | (236 | ) | ||
10% decrease | (233 | ) | ||
10% increase | (240 | ) |
ITEM 12. | DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES |
ITEM 13. | DEFAULTS, DIVIDENDS, AVERAGES AND DELINQUENCIES |
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ITEM 14. | MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND PROCEEDS |
ITEM 15. | CONTROLS AND PROCEDURES |
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ITEM 16. | [RESERVED] |
ITEM 16A. | AUDIT COMMITTEE FINANCIAL EXPERT |
ITEM 16B. | CODE OF ETHICS |
ITEM 16C. | PRINCIPAL ACCOUNTANT FEES AND SERVICES |
Year Ended | ||||||||
December 31, | ||||||||
2005 | 2006 | |||||||
(In millions | ||||||||
of euro) | ||||||||
Audit fees | 4.1 | 8.4 | ||||||
Audit-related fees | 2.0 | 0.5 | ||||||
Tax fees | 0.0 | 0.0 | ||||||
Other fees | 0.0 | 0.0 | ||||||
Total fees | 6.1 | 8.9 |
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ITEM 16D. | EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES |
ITEM 16E. | PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS |
ITEM 17. | FINANCIAL STATEMENTS |
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ITEM 18. | FINANCIAL STATEMENTS |
Report of Independent Registered Public Accounting Firm | F-1 | |||
Consolidated Statements of Income for the years ended December 31, 2006, 2005 and 2004 | F-2 | |||
Consolidated Balance Sheets as of December 31, 2006 and 2005 | F-3 | |||
Consolidated Statements of Changes in Shareholders’ Equity for the years ended December 31, 2006, 2005 and 2004 | F-5 | |||
Consolidated Statements of Cash Flows for the years ended December 31, 2006, 2005 and 2004 | F-6 | |||
Notes to Consolidated Financial Statements | F-7 | |||
Report of Independent Registered Public Accounting Firm | F-108 |
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ITEM 19. | EXHIBITS |
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F-1
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2006 | 2005 | 2004 | 2006 | |||||||||||||||||
Note | (millions of euro) | (millions | ||||||||||||||||||
of U.S | ||||||||||||||||||||
dollars) | ||||||||||||||||||||
Operating Revenues | ||||||||||||||||||||
Revenues from sales and services | 6.a | 37,497 | 32,370 | 29,147 | 49,485 | |||||||||||||||
Other revenues | 6.b | 1,016 | 1,417 | 1,880 | 1,341 | |||||||||||||||
38,513 | 33,787 | 31,027 | 50,826 | |||||||||||||||||
Income from equity exchange transaction | 7 | 263 | — | — | 347 | |||||||||||||||
Operating expenses: | ||||||||||||||||||||
Raw materials and consumables | 8.a | 23,469 | 20,633 | 16,800 | 30,972 | |||||||||||||||
Services and rentals | 8.b | 3,477 | 3,057 | 3,106 | 4,589 | |||||||||||||||
Personnel | 8.c | 3,210 | 2,762 | 3,224 | 4,236 | |||||||||||||||
Depreciation, amortization and impairment losses | 8.d | 2,463 | 2,207 | 2,201 | 3,250 | |||||||||||||||
Other operating expenses | 8.e | 713 | 911 | 783 | 941 | |||||||||||||||
Capitalized expenses | 8.f | (989 | ) | (1,049 | ) | (973 | ) | (1,305 | ) | |||||||||||
32,343 | 28,521 | 25,141 | 42,683 | |||||||||||||||||
Net income/(charges) from commodity risk management | 9 | (614 | ) | 272 | (16 | ) | (810 | ) | ||||||||||||
Operating income | 5,819 | 5,538 | 5,870 | 7,679 | ||||||||||||||||
Financial income | 10 | 513 | 230 | 365 | 677 | |||||||||||||||
Financial expense | 10 | (1,160 | ) | (944 | ) | (1,192 | ) | (1,530 | ) | |||||||||||
Loss from investments accounted for using the equity method | 11 | (4 | ) | (30 | ) | (25 | ) | (5 | ) | |||||||||||
Income before taxes | 5,168 | 4,794 | 5,018 | 6,821 | ||||||||||||||||
Income taxes | 12 | 2,067 | 1,934 | 2,116 | 2,728 | |||||||||||||||
Income from continuing operations | 3,101 | 2,860 | 2,902 | 4,093 | ||||||||||||||||
Income (loss) from discontinued operations, net of tax | 13 | — | 1,272 | (155 | ) | — | ||||||||||||||
Income for the year (shareholders of Parent Company and minority interests) | 3,101 | 4,132 | 2,747 | 4,093 | ||||||||||||||||
Attributable to minority interests | 65 | 237 | 116 | 86 | ||||||||||||||||
Attributable to shareholders of Parent Company | 3,036 | 3,895 | 2,631 | 4,007 | ||||||||||||||||
Earnings per share (euro) | 0.50 | 0.67 | 0.45 | 0.66 | ||||||||||||||||
Diluted earnings per share (euro) | 0.50 | * | 0.67 | * | 0.45 | * | 0.66 | |||||||||||||
Earnings from continuing operations per share (euro) | 0.50 | 0.46 | 0.48 | 0.54 | ||||||||||||||||
Diluted earnings from continuing operations per share (euro) | 0.50 | * | 0.46 | * | 0.48 | * | 0.54 | |||||||||||||
Earnings from discontinued operations per share (euro) | 0.00 | 0.21 | (0.03 | ) | ||||||||||||||||
Diluted earnings from discontinued operations per share (euro) | 0.00 | 0.21 | * | (0.03 | )* |
(*) | Calculated on the basis of the average number of ordinary shares in the year (6,169,511,965 in 2006, 6,142,108,113 in 2005, 6,083,948,691 in 2004) adjusted for the diluting effect of outstanding stock options (65 million in 2006, 29 million in 2005, 102 million in 2004). Earnings and diluted earnings per share, calculated on the basis of options exercised to date, do not change with respect to the figures calculated as above. |
F-2
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2006 | 2005 | 2006 | ||||||||||||||
Note | (millions of euro) | (millions | ||||||||||||||
of U.S. | ||||||||||||||||
dollars) | ||||||||||||||||
ASSETS | ||||||||||||||||
Current assets | 14 | |||||||||||||||
Inventories | 14.a | 1,209 | 884 | 1,596 | ||||||||||||
Trade receivables, net | 14.b | 7,958 | 8,316 | 10,502 | ||||||||||||
Tax receivables | 14.c | 431 | 789 | 569 | ||||||||||||
Current financial assets | 14.d | 402 | 569 | 531 | ||||||||||||
Cash and cash equivalents | 14.e | 547 | 476 | 722 | ||||||||||||
Other current assets | 14.f | 2,453 | 1,712 | 3,236 | ||||||||||||
13,000 | 12,746 | 17,156 | ||||||||||||||
Non-current assets | 15 | |||||||||||||||
Property, plant and equipment, net | 15.a | 34,846 | 30,188 | 45,986 | ||||||||||||
Intangible assets, net | 15.b | 2,982 | 2,182 | 3,935 | ||||||||||||
Deferred tax assets | 15.c | 1,554 | 1,778 | 2,051 | ||||||||||||
Investments accounted for using the equity method | 15.d | 56 | 1,797 | 74 | ||||||||||||
Non-current financial assets | 15.e | 1,494 | 836 | 1,972 | ||||||||||||
Other non-current assets | 15.f | 568 | 975 | 750 | ||||||||||||
41,500 | 37,756 | 54,768 | ||||||||||||||
TOTAL ASSETS | 54,500 | 50,502 | 71,924 | |||||||||||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||||||||||
Current liabilities | 16 | |||||||||||||||
Short-term loans | 16.a | 1,086 | 1,361 | 1,433 | ||||||||||||
Current portion of long-term loans | 17.a | 323 | 935 | 426 | ||||||||||||
Trade payables | 16.b | 6,188 | 6,610 | 8,166 | ||||||||||||
Income tax payable | 189 | 28 | 249 | |||||||||||||
Current financial liabilities | 16.c | 941 | 294 | 1,242 | ||||||||||||
Other current liabilities | 16.d | 4,106 | 3,390 | 5,419 | ||||||||||||
12,833 | 12,618 | 16,935 | ||||||||||||||
Non-current liabilities | ||||||||||||||||
Long-term loans | 17.a | 12,194 | 10,967 | 16,092 | ||||||||||||
Post-employment and other employee benefits | 17.b | 2,633 | 2,662 | 3,475 | ||||||||||||
Provisions for risks and charges | 17.c | 4,151 | 1,267 | 5,478 | ||||||||||||
Deferred tax liabilities | 17.d | 2,504 | 2,464 | 3,305 | ||||||||||||
Non-current financial liabilities | 17.e | 116 | 262 | 153 | ||||||||||||
Other non-current liabilities | 17.f | 1,044 | 846 | 1,378 | ||||||||||||
22,642 | 18,468 | 29,881 | ||||||||||||||
TOTAL LIABILITIES | 35,475 | 31,086 | 46,816 | |||||||||||||
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2006 | 2005 | 2006 | ||||||||||||||
Note | (millions of euro) | (millions | ||||||||||||||
of U.S. | ||||||||||||||||
dollars) | ||||||||||||||||
Equity attributable to the shareholders of the Parent Company | 18 | |||||||||||||||
Share capital | 6,176 | 6,157 | 8,150 | |||||||||||||
Other reserves | 4,386 | 4,249 | 5,788 | |||||||||||||
Reserve from measurement of financial instruments | 163 | 2 | 215 | |||||||||||||
Retained earnings | 5,934 | 5,923 | 7,831 | |||||||||||||
Net income for the year* | 1,801 | 2,726 | 2,378 | |||||||||||||
18,460 | 19,057 | 24,362 | ||||||||||||||
Equity attributable to minority interests | 565 | 359 | 746 | |||||||||||||
TOTAL SHAREHOLDERS’ EQUITY | 19,025 | 19,416 | 25,108 | |||||||||||||
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | 54,500 | 50,502 | 71,924 |
(*) | Net of interim dividend equal to €1,235 million (€1,169 million for 2005) |
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Share Capital and Reserves Attributable to the Shareholders of the Parent Company | ||||||||||||||||||||||||||||||||||||||||||||
Translation | ||||||||||||||||||||||||||||||||||||||||||||
of Financial | Equity | |||||||||||||||||||||||||||||||||||||||||||
Statements | Reserve from | Net | Attributable to | Equity | ||||||||||||||||||||||||||||||||||||||||
Share | in Currencies | Measurement | Income | the Shareholders | Attributable | |||||||||||||||||||||||||||||||||||||||
Share | Premium | Legal | Other | Retained | Other Than | of Financial | for the | of the Parent | to Minority | Shareholders’ | ||||||||||||||||||||||||||||||||||
Capital | Reserve | Reserve | Reserves | Earnings | Euro | Instruments | Year | Company | Interests | Equity | ||||||||||||||||||||||||||||||||||
(millions of euro) | ||||||||||||||||||||||||||||||||||||||||||||
Millions of euro | ||||||||||||||||||||||||||||||||||||||||||||
January 1, 2004(1) | 6,063 | — | 1,453 | 2,255 | 7,342 | 18 | (200 | ) | 2,509 | 19,440 | 181 | 19,621 | ||||||||||||||||||||||||||||||||
Exercise of stock options | 41 | 208 | — | — | (8 | ) | — | — | — | 241 | — | 241 | ||||||||||||||||||||||||||||||||
Changes in scope of consolidation | — | — | — | — | (105 | ) | — | — | — | (105 | ) | 816 | 711 | |||||||||||||||||||||||||||||||
Allocation of income | — | — | — | — | 314 | — | — | (314 | ) | — | — | — | ||||||||||||||||||||||||||||||||
Dividends | — | — | — | — | — | — | — | (2,195 | ) | (2,195 | ) | — | (2,195 | ) | ||||||||||||||||||||||||||||||
Interim dividends | — | — | — | — | — | — | — | (2,014 | ) | (2,014 | ) | — | (2,014 | ) | ||||||||||||||||||||||||||||||
Net income for the year recognized in equity | — | — | — | — | — | (16 | ) | (29 | ) | — | (45 | ) | — | (45 | ) | |||||||||||||||||||||||||||||
Net income for the year recognized in income statement | — | — | — | — | — | — | — | 2,631 | 2,631 | 116 | 2,747 | |||||||||||||||||||||||||||||||||
December 31, 2004 | 6,104 | 208 | 1,453 | 2,255 | 7,543 | 2 | (229 | ) | 617 | 17,953 | 1,113 | 19,066 | ||||||||||||||||||||||||||||||||
Exercise of stock options | 53 | 303 | — | — | (17 | ) | — | — | — | 339 | — | 339 | ||||||||||||||||||||||||||||||||
Other changes | — | — | — | (10 | ) | (6 | ) | — | — | — | (16 | ) | (7 | ) | (23 | ) | ||||||||||||||||||||||||||||
Change in scope of consolidation | — | — | — | — | — | — | — | — | — | (892 | ) | (892 | ) | |||||||||||||||||||||||||||||||
Dividends | — | — | — | — | (1,597 | ) | — | — | (617 | ) | (2,214 | ) | (89 | ) | (2,303 | ) | ||||||||||||||||||||||||||||
2005 interim dividend | — | — | — | — | — | — | — | (1,169 | ) | (1,169 | ) | — | (1,169 | ) | ||||||||||||||||||||||||||||||
Net income for the year recognized in equity | — | — | — | — | — | 38 | 231 | — | 269 | (3 | ) | 266 | ||||||||||||||||||||||||||||||||
Net income for the year recognized in income statement | — | — | — | — | — | 3,895 | 3,895 | 237 | 4,132 | |||||||||||||||||||||||||||||||||||
December 31, 2005 | 6,157 | 511 | 1,453 | 2,245 | 5,923 | 40 | 2 | 2,726 | 19,057 | 359 | 19,416 | |||||||||||||||||||||||||||||||||
Exercise of stock options | 19 | 96 | — | (7 | ) | — | — | — | — | 108 | — | 108 | ||||||||||||||||||||||||||||||||
Stock option charges | — | — | — | 7 | — | — | — | — | 7 | — | 7 | |||||||||||||||||||||||||||||||||
Change in scope of consolidation | — | — | — | — | — | — | — | — | — | 118 | 118 | |||||||||||||||||||||||||||||||||
Transfer of net income from the previous year | — | — | — | — | 2,726 | — | — | (2,726 | ) | — | — | — | ||||||||||||||||||||||||||||||||
Dividends | — | — | — | — | (2,715 | ) | — | — | — | (2,715 | ) | (9 | ) | (2,724 | ) | |||||||||||||||||||||||||||||
2006 interim dividend | — | — | — | — | — | — | — | (1,235 | )(2) | (1,235 | ) | — | (1,235 | ) | ||||||||||||||||||||||||||||||
Net income for the year recognized in equity | — | — | — | — | — | 41 | 161 | — | 202 | 32 | 234 | |||||||||||||||||||||||||||||||||
Net income for the year recognized in income statement | — | — | — | — | — | — | — | 3,036 | 3,036 | 65 | 3,101 | |||||||||||||||||||||||||||||||||
December 31, 2006 | 6,176 | 607 | 1,453 | 2,245 | 5,934 | 81 | 163 | 1,801 | 18,460 | 565 | 19,025 | |||||||||||||||||||||||||||||||||
Millions of U.S. dollars | ||||||||||||||||||||||||||||||||||||||||||||
December 31, 2006 | 8,150 | 801 | 1,918 | 2,963 | 7,831 | 107 | 215 | 2,377 | 24,362 | 746 | 25,108 |
(1) | Reclassification from retained earnings to other reserves for an amount of €40 million | |
(2) | Authorized by the Board of Directors on September 6, 2006 with the ex dividend date set at November 20, 2006 and payment as from November 23, 2006. |
F-5
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2006 | 2005 | 2004 | 2006 | |||||||||||||||||
Note | (millions of euro) | (millions | ||||||||||||||||||
of U.S. | ||||||||||||||||||||
dollars) | ||||||||||||||||||||
Income for the year (shareholders of the Parent Company and minority interests) | 3,101 | 4,132 | 2,747 | 4,092 | ||||||||||||||||
Adjustments for: | ||||||||||||||||||||
Amortization and impairment losses of intangible assets | 15.b | 193 | 308 | 491 | 255 | |||||||||||||||
Depreciation and impairment losses of property, plant and equipment | 15.a | 2,160 | 2,561 | 2,994 | 2,851 | |||||||||||||||
Exchange rate gains and losses (including cash and cash equivalents) | (87 | ) | 22 | (1 | ) | (115 | ) | |||||||||||||
Provisions | 820 | 781 | 1,042 | 1,082 | ||||||||||||||||
Financial (income)/expense, net | 515 | 808 | 1,001 | 680 | ||||||||||||||||
Income taxes | 12 | 2,067 | 2,147 | 1,498 | 2,728 | |||||||||||||||
(Gains)/losses and other non-monetary items | (407 | ) | (1,295 | ) | 1,081 | (537 | ) | |||||||||||||
Cash flow from operating activities before changes in net current assets | 8,362 | 9,464 | 10,853 | 11,036 | ||||||||||||||||
Increase/(decrease) in provisions | (749 | ) | (814 | ) | (1,078 | ) | (988 | ) | ||||||||||||
(Increase)/decrease in inventories | (109 | ) | 125 | (39 | ) | (144 | ) | |||||||||||||
(Increase)/decrease in trade receivables | 449 | (1,919 | ) | (768 | ) | 593 | ||||||||||||||
(Increase)/decrease in other assets/liabilities | 776 | 250 | (1,546 | ) | 1,024 | |||||||||||||||
Increase/(decrease) in trade payables | (497 | ) | 1,265 | 819 | (656 | ) | ||||||||||||||
Interest income and other financial income received | 312 | 202 | 341 | 412 | ||||||||||||||||
Interest expense and other financial expense paid | (847 | ) | (1,065 | ) | (1,473 | ) | (1,118 | ) | ||||||||||||
Income taxes paid | (941 | ) | (1,815 | ) | (2,274 | ) | (1,242 | ) | ||||||||||||
Cash flows from operating activities(a) | 6,756 | 5,693 | 4,835 | 8,917 | ||||||||||||||||
— of which: discontinued operations | 730 | 731 | ||||||||||||||||||
Investments in property, plant and equipment | 15.a | (2,759 | ) | (3,037 | ) | (3,538 | ) | (3,641 | ) | |||||||||||
Investments in intangible assets | 15.b | (204 | ) | (220 | ) | (296 | ) | (269 | ) | |||||||||||
Investments in entities (or business units) less cash and cash equivalents acquired | (1,082 | ) | (524 | ) | (126 | ) | (1,428 | ) | ||||||||||||
Disposals of entities (or business units) less cash and cash equivalents sold | 1,518 | 4,652 | 1,941 | 2,003 | ||||||||||||||||
(Increase)/decrease in other investing activities | 153 | 221 | 66 | 202 | ||||||||||||||||
Cash flows from investing activities(b) | (2,374 | ) | 1,092 | (1,953 | ) | (3,133 | ) | |||||||||||||
— of which: discontinued operations | (439 | ) | (1,121 | ) | ||||||||||||||||
Financial debt (new borrowing) | 17.a | 1,524 | 1,759 | 3,986 | 2,011 | |||||||||||||||
Financial debt (repayments and other changes) | (1,995 | ) | (5,283 | ) | (2,947 | ) | (2,633 | ) | ||||||||||||
Dividends paid | 18 | (3,959 | ) | (3,472 | ) | (4,256 | ) | (5,225 | ) | |||||||||||
Increase in share capital and reserves due to the exercise of stock options | 18 | 108 | 339 | 241 | 143 | |||||||||||||||
Capital contributed by minority shareholders | — | 3 | 10 | |||||||||||||||||
Cash flows from financing activities(c) | (4,322 | ) | (6,654 | ) | (2,966 | ) | (5,704 | ) | ||||||||||||
— of which: discontinued operations | (11 | ) | 443 | |||||||||||||||||
Impact of exchange rate fluctuations on cash and cash equivalents(d) | 4 | 14 | (5 | ) | 5 | |||||||||||||||
Increase/(decrease) in cash and cash equivalents (a+b+c+d) | 64 | 145 | (2,167 | ) | 85 | |||||||||||||||
— of which: discontinued operations | 280 | 53 | ||||||||||||||||||
Cash and cash equivalents at beginning of the year | 508 | 363 | 452 | 670 | ||||||||||||||||
— of which: discontinued operations | 133 | 80 | ||||||||||||||||||
Cash and cash equivalents at the end of the year | 572 | (1) | 508 | 363 | 755 | |||||||||||||||
— of which: discontinued operations | — | 133 |
(1) | Of which short-term securities equal to €25 million at December 31, 2006. |
F-6
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(1) | GENERAL |
F-7
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(2) | SUMMARY OF SIGNIFICANT ACCOUNTING AND REPORTING POLICIES |
F-8
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F-9
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F-10
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F-11
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Enel Unión Fenosa | ||||||||||||
Fortuna | Renovables(1) | RusEnergoSbyt | ||||||||||
at Dec. 31, 2006 | ||||||||||||
(millions of euro) | ||||||||||||
Percentage consolidation | 49.9 | % | 50.0 | % | 49.5 | % | ||||||
Current assets | 26 | 52 | 17 | |||||||||
Non-current assets | 154 | 234 | — | |||||||||
Current liabilities | 14 | 44 | 10 | |||||||||
Non-current liabilities | 47 | 182 | — | |||||||||
Revenues | 18 | 53 | 202 | |||||||||
Costs | 15 | 31 | 196 |
(1) | Includes amounts for companies over which Enel Unión Fenosa Renovables exercises joint control. |
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F-13
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Useful life | ||||
Civil buildings | 40 years | |||
Hydroelectric power plants(1) | 40 years | |||
Thermal power plants(1) | 40 years | |||
Nuclear power plants | 40 years | |||
Geothermal power plants | 20 years | |||
Alternative energy power plants | 20 years | |||
Transport lines | 40 years | |||
Transformation plant | 32-42 years | |||
Medium- and low-voltage distribution networks | 30-40 years | |||
Gas distribution networks and meters | 25-50 years | |||
Telecommunications systems and networks | 5.5-20 years | |||
Industrial and commercial equipment | 4 years |
(1) | Excluding assets to be relinquished at end of concession, which are depreciated over the duration of the concession if shorter than useful life. |
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F-15
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F-16
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F-17
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F-18
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• | revenues from the sale of goods are recognized when the significant risks and rewards of ownership are transferred to the buyer and their amount can be reliably determined and collected; | |
• | revenues from the sale and transport of electricity and gas refer to the quantities provided during the period, even if these have not yet been invoiced, and are determined using estimates as well as the fixed meter reading figures. Where applicable, this revenue is based on the rates and related restrictions established by law, the Authority for Electricity and Gas and the corresponding foreign authorities during the applicable period; | |
• | revenues from the rendering of services are recognized in line with the stage of completion of the services. Where it is not possible to reliably determine the value of the revenues, they are recognized in the amount of the costs that it is considered will be recovered; | |
• | connection fees related to the distribution of electricity are treated independently of any other service connected with the provision of electricity and therefore are recorded in a single amount upon completion of the connection service. |
• | revenues for the telecommunications sector from traffic, interconnections, and roaming are recorded according to the usage by customers and telephone operators calculated on an accrual basis. Such revenues include the amount relating to the access to and use of the Company’s network by customers and other domestic and international telephone operators. Revenues from the sale of rechargeable telephone cards are |
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recorded solely for the amount corresponding to prepaid traffic effectively used by customers during the year. The prepaid traffic not yet used as of balance sheet date is recognized as “deferred income”. Revenues from the sale of mobile and fixed telephones and related accessories are recorded at the time of the transfer of ownership. |
• | “IFRS 7 — Financial instruments: disclosure”: this standard supplements the standards for the recognition, measurement and presentation in the financial statements of financial assets and liabilities dealt with under |
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IAS 32 “Financial instruments: disclosure and presentation” and under IAS 39 “Financial instruments: recognition and measurement” and supersedes IAS 30 “Disclosures in the financial statements of banks and similar financial institutions”. IFRS 7 requires additional disclosure of the significance of financial instruments for a company’s financial performance and position, as well as a description of management’s objectives, policies and processes for managing risks associated with financial instruments. This standard has already been adopted by the European Commission and takes effect starting as of the financial statements for periods beginning on or after January 1, 2007. Enel is assessing any impact this new standard may have in terms of disclosure in its consolidated financial statements. |
• | “IFRIC 8 — Scope of IFRS 2”: this interpretation clarifies whether IFRS 2 applies to arrangements where entities cannot specifically identify a portion or the entirety of the goods or services received. The issue addressed in this interpretation provides that, in the case in which the identifiable consideration received is less than the fair value of the equity instruments granted or liability incurred, the unidentifiable good/services received (or to be received) shall be valued, at the date of granting, at an amount equal to the difference between the fair value of the share-based payment and the fair value of the goods/services received (or to be received). The application of this interpretation, which has already been adopted by the European Commission, takes effect starting as of the financial statements for periods beginning on or after May 1, 2006. The Company is in the process of evaluating the impact of this standard on its consolidated financial statements. | |
• | “IFRIC 9 — Reassessment of embedded derivatives”: this interpretation establishes that the company shall assess whether embedded derivatives are to be recognized separately from the host contract at the time the company becomes party to the contract. Subsequent reassessment of the terms of the contract for separate recognition is prohibited, unless there is a change in the underlying contract that significantly modifies the related cash flows. Enel believes that the application of this interpretation, which has already been adopted by the European Commission and takes effect starting as of the financial statements for periods beginning on or after June 1, 2006, will not have a material impact on its consolidated financial statements. |
• | Amendment of IAS 19 “Employee benefits”: the primary changes concern the option for the alternative treatment of actuarial gains and losses. Enel, which currently applies the corridor approach, has elected to not adopt the option introduced by this amendment. The amendment is effective as of January 1, 2006. | |
• | “IFRIC 4 — Determining whether an arrangement contains a lease”: the interpretation establishes the guidelines for identifying whether, in substance, a contract constitutes a lease as defined by IAS 17. The amendment is effective as of January 1, 2006. Specifically, in determining whether a contract is, or contains, a lease, the company must look to the substance of the arrangement and verify whether the contract: (a) explicitly or implicitly provides for the use of a specific asset or assets without which one of the parties to the contract would not be able to fulfill its contractual obligations; (b) transfers the right to use such assets. The application of this standard had no significant impact on Enel’s consolidated financial statements. | |
• | “IFRIC 5 — Rights to interests arising from decommissioning, restoration and environmental funds”, effective as of January 1, 2006. This interpretation establishes the criteria for recognizing and measuring contributions to funds established to decommission assets that have the following characteristics: (a) the fund assets are owned and managed by a legal entity that is distinct from the company; (b) the company contributing to the fund has a limited right of access to fund assets. The contributor separately recognizes its obligation to pay the decommissioning costs and its interest in the fund. The interest shall be measured at the lower of: (a) the amount of the decommission obligation recognized; and (b) the contributor’s share of the fair value of the net assets of the fund attributable to contributors. Changes in the carrying amount of this right to receive a reimbursement other than contributions to, and payments from, the fund shall be recognized in the income statement of the period in which the changes occur. In the case in which the |
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interest in the fund is such as to allow the company to exercise control, considerable influence or joint control of the fund, the interest in the fund is recognized, respectively, as an interest in a subsidiary, associate or joint venture. The application of this standard had no effect on Enel’s consolidated financial statements. |
(3) | RISK MANAGEMENT |
• | cash flow hedges, mainly related to hedging the risk of changes in the cash flows associated with a number of long-term floating-rate loans and certain contracts entered into by Enel in order to stabilize revenues from the sale of electricity on the Italian Power Exchange (two-way contracts for differences); | |
• | trading derivatives, related to hedging interest and exchange rate risk and commodity risk but which do not qualify for recognition under IAS 39 as hedges of specific assets, liabilities, commitments or future transactions. |
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Notional Value | ||||||||
2006 | 2005 | |||||||
(millions of euro) | ||||||||
Interest rate swaps | 5,132 | 4,866 | ||||||
Interest rate collars | 45 | 62 | ||||||
Swaptions | — | 69 | ||||||
Total | 5,177 | 4,997 |
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Notional | Fair Value | Fair Value Assets | Fair Value Liabilities | |||||||||||||||||||||||||||||
Dec. 31, | Dec. 31, | Dec. 31, | Dec. 31, | Dec. 31, | Dec. 31, | Dec. 31, | Dec. 31, | |||||||||||||||||||||||||
2006 | 2005 | 2006 | 2005 | 2006 | 2005 | 2006 | 2005 | |||||||||||||||||||||||||
(millions of euro) | ||||||||||||||||||||||||||||||||
Cash flow hedge derivatives: | ||||||||||||||||||||||||||||||||
Interest rate swaps | 4,823 | 4,196 | (79 | ) | (261 | ) | 37 | 11 | (116 | ) | (272 | ) | ||||||||||||||||||||
Interest rate collars | 3 | 62 | — | — | — | — | — | — | ||||||||||||||||||||||||
Swaptions | — | 69 | — | — | — | — | — | — | ||||||||||||||||||||||||
Trading derivatives: | ||||||||||||||||||||||||||||||||
Interest rate swaps | 309 | 670 | (26 | ) | (54 | ) | — | 1 | (26 | ) | (55 | ) | ||||||||||||||||||||
Interest rate collars | 42 | — | — | — | — | — | — | — | ||||||||||||||||||||||||
Total interest rate swaps | 5,132 | 4,866 | (105 | ) | (315 | ) | 37 | 12 | (142 | ) | (327 | ) | ||||||||||||||||||||
Total interest rate collars | 45 | 62 | — | — | — | — | — | — | ||||||||||||||||||||||||
Total swaptions | — | 69 | — | — | — | — | — | — | ||||||||||||||||||||||||
TOTAL INTEREST RATE DERIVATIVES | 5,177 | 4,997 | (105 | ) | (315 | ) | 37 | 12 | (142 | ) | (327 | ) |
2007 | 2008 | 2009 | 2010 | 2011 | Beyond | |||||||||||||||||||
(millions of euro) | ||||||||||||||||||||||||
Current rates decreased by 10% | (28 | ) | (49 | ) | (17 | ) | (16 | ) | (15 | ) | (66 | ) | ||||||||||||
Current rates at Dec. 31, 2006 | (18 | ) | (35 | ) | (5 | ) | (5 | ) | (5 | ) | (28 | ) | ||||||||||||
Current rates increased by 10% | (8 | ) | (20 | ) | 7 | 6 | 5 | 11 |
2007 | 2008 | 2009 | 2010 | 2011 | Beyond | |||||||||||||||||||
(millions of euro) | ||||||||||||||||||||||||
Current rates decreased by 10% | (7 | ) | (6 | ) | (6 | ) | (3 | ) | (3 | ) | (10 | ) | ||||||||||||
Current rates at Dec. 31, 2006 | (6 | ) | (5 | ) | (5 | ) | (3 | ) | (2 | ) | (9 | ) | ||||||||||||
Current rates increased by 10% | (5 | ) | (4 | ) | (4 | ) | (2 | ) | (2 | ) | (7 | ) |
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Notional Value | ||||||||
2006 | 2005 | |||||||
(millions of euro) | ||||||||
Forward contracts hedging commodities | 875 | 1,357 | ||||||
Forward contracts hedging commercial paper | 377 | 35 | ||||||
Forward contracts hedging future cash flows | 192 | 212 | ||||||
Other forward contracts | 50 | 194 | ||||||
Options | 80 | 73 | ||||||
Total | 1,574 | 1,871 |
• | contracts with a notional value of €1,067 million used to hedge the exchange rate risk associated with purchases of fuel, imported electricity and expected cash flows in currencies other than the euro (€1,569 million at December 31, 2005); and | |
• | contracts with a notional value of €377 million used to hedge the exchange rate risk associated with redemptions of commercial paper issued in currencies other than the euro (€35 million at December 31, 2005). |
Notional | Fair Value | Fair Value Assets | Fair Value Liabilities | |||||||||||||||||||||||||||||
Dec. 31, | Dec. 31, | Dec. 31, | Dec. 31, | Dec. 31, | Dec. 31, | Dec. 31, | Dec. 31, | |||||||||||||||||||||||||
2006 | 2005 | 2006 | 2005 | 2006 | 2005 | 2006 | 2005 | |||||||||||||||||||||||||
(millions of euro) | ||||||||||||||||||||||||||||||||
Cash flow hedge derivatives: | ||||||||||||||||||||||||||||||||
- forwards | 26 | 21 | — | — | — | — | — | — | ||||||||||||||||||||||||
Trading derivatives: | ||||||||||||||||||||||||||||||||
- forwards | 1,468 | 1,777 | (22 | ) | (6 | ) | 2 | 9 | (24 | ) | (15 | ) | ||||||||||||||||||||
- options | 80 | 73 | — | — | — | — | — | — | ||||||||||||||||||||||||
Total forwards | 1,494 | 1,798 | (22 | ) | (6 | ) | 2 | 9 | (24 | ) | (15 | ) | ||||||||||||||||||||
Total options | 80 | 73 | — | — | — | — | — | — | ||||||||||||||||||||||||
TOTAL EXCHANGE RATE DERIVATIVES | 1,574 | 1,871 | (22 | ) | (6 | ) | 2 | 9 | (24 | ) | (15 | ) |
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2007 | 2008 | 2009 | 2010 | 2011 | Beyond | |||||||||||||||||||
(millions of euro) | ||||||||||||||||||||||||
10% depreciation of the euro | 110 | — | — | — | — | — | ||||||||||||||||||
Current exchange rates at December 31, 2006 | (23 | ) | — | — | — | — | — | |||||||||||||||||
10% appreciation of the euro | (130 | ) | — | — | — | — | — |
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Notional | Fair Value | Fair Value Asset | Fair Value Liability | |||||||||||||||||||||||||||||
Dec. 31, | Dec. 31, | Dec. 31, | Dec. 31, | Dec. 31, | Dec. 31, | Dec. 31, | Dec. 31, | |||||||||||||||||||||||||
2006 | 2005 | 2006 | 2005 | 2006 | 2005 | 2006 | 2005 | |||||||||||||||||||||||||
(millions of euro) | ||||||||||||||||||||||||||||||||
Cash flow hedge derivatives: | ||||||||||||||||||||||||||||||||
— Two-way contracts for differences | 1,034 | 1,372 | 48 | 57 | 48 | 57 | — | — | ||||||||||||||||||||||||
Trading derivatives: | ||||||||||||||||||||||||||||||||
— One-way contracts for differences | 3,219 | 6,266 | (123 | ) | 43 | — | 43 | (123 | ) | — | ||||||||||||||||||||||
— swaps on oil-based commodities | 581 | 613 | (7 | ) | (13 | ) | 9 | 11 | (16 | ) | (24 | ) | ||||||||||||||||||||
— futures on oil-based commodities | 252 | 291 | (2 | ) | 16 | 2 | 17 | (4 | ) | (1 | ) | |||||||||||||||||||||
— swaps on gas transmission fees | 16 | 18 | (8 | ) | (12 | ) | — | — | (8 | ) | (12 | ) | ||||||||||||||||||||
— other derivatives on energy | 57 | 107 | (6 | ) | (1 | ) | 1 | 397 | (7 | ) | (398 | ) | ||||||||||||||||||||
— embedded derivatives | 1,012 | — | (482 | ) | — | 58 | — | (540 | ) | — | ||||||||||||||||||||||
— options on other commodities | — | 9 | — | 2 | — | 2 | — | — | ||||||||||||||||||||||||
TOTAL COMMODITY DERIVATIVES | 6,171 | 8,676 | (580 | ) | 92 | 118 | 527 | (698 | ) | (435 | ) |
2007 | ||||
(millions of euro) | ||||
10% decrease | 111 | |||
Scenario at Dec. 31, 2006 | 48 | |||
10% increase | (14 | ) |
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Commodity | 10-year Swap Rate | Total for 2007 | ||||||||||
(millions of euro) | ||||||||||||
10% decrease | (19 | ) | (8 | ) | (27 | ) | ||||||
Scenario at Dec. 31, 2006 | (9 | ) | (8 | ) | (17 | ) | ||||||
10% increase | 1 | (8 | ) | (7 | ) |
2007 | ||||
(millions of euro) | ||||
10% decrease | (80 | ) | ||
Scenario at Dec. 31, 2006 | (123 | ) | ||
10% increase | (167 | ) |
Italy | Foreign | Total for 2007 | ||||||||||
(millions of euro) | ||||||||||||
10% decrease | (7 | ) | (3 | ) | (10 | ) | ||||||
Scenario at Dec. 31, 2006 | (3 | ) | (3 | ) | (6 | ) | ||||||
10% increase | — | (4 | ) | (4 | ) |
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(4) | CHANGES IN THE SCOPE OF CONSOLIDATION |
I. | 2004 |
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II. | 2005 |
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(Millions of euro) | ||||
Net assets acquired before fair value adjustments | (1,196 | ) | ||
Fair value adjustments: | ||||
Property, plant and equipment | 1,943 | |||
Net deferred tax liabilities | (373 | ) | ||
Financial liabilities | 29 | |||
Sundry provisions | (22 | ) | ||
Other | 48 | |||
Total adjustments | 1,625 | |||
Net assets acquired after fair value adjustments | 429 | |||
Enel% holding (66)% | 283 | |||
Value of the transaction(1) | 844 | |||
of which payment on account made in 2005 | (168 | ) | ||
Goodwill | 561 |
(1) | Including incidental expenses of €4 million. |
Book Values Before | Fair Values at | |||||||||||
April 28, | Fair Value | April 28, | ||||||||||
2006 | Adjustments | 2006 | ||||||||||
(millions of euro) | ||||||||||||
Property, plant and equipment | 1,928 | 1,943 | 3,871 | |||||||||
Intangible assets | 15 | 15 | ||||||||||
Inventories, trade and other receivables | 330 | (5 | ) | 325 | ||||||||
Cash and cash equivalents | 23 | 23 | ||||||||||
Other current and non-current assets | 911 | (397 | ) | 514 | ||||||||
Total assets | 3,207 | 1,541 | 4,748 | |||||||||
Shareholders’ equity | (789 | ) | 1,072 | 283 | ||||||||
Minority interests | (407 | ) | 553 | 146 | ||||||||
Total shareholders’ equity | (1,196 | ) | 1,625 | 429 | ||||||||
Trade and other payables | 258 | 258 | ||||||||||
Financial liabilities and Other current and non-current liabilities | 1,600 | (106 | ) | 1,494 | ||||||||
Sundry provisions | 2,545 | 22 | 2,567 | |||||||||
Total shareholders’ equity and liabilities | 3,207 | 1,541 | 4,748 |
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(Millions of euro) | ||||
Property, plant and equipment | 279 | |||
Intangible assets | 98 | |||
Trade receivables and inventories | 28 | |||
Cash and cash equivalents | 47 | |||
Other current and non-current assets | 16 | |||
Total assets | 468 | |||
Trade payables | (19 | ) | ||
Financial liabilities and Other current and non-current liabilities | (104 | ) | ||
Sundry and other provisions | (13 | ) | ||
Total liabilities | (136 | ) | ||
Net assets acquired | 332 | |||
Goodwill | 158 | |||
Negative goodwill | (30 | ) | ||
Value of the transaction(1) | 460 |
(1) | Including incidental expenses of €3 million. |
(5) | SEGMENT INFORMATION |
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Continuing Operations | ||||||||||||||||||||||||||||||||||||
Domestic | ||||||||||||||||||||||||||||||||||||
Generat. and | Domestic | Services | Eliminations | |||||||||||||||||||||||||||||||||
Domestic | Energy | Infrastruc. | Parent | and Other | and | |||||||||||||||||||||||||||||||
Sales | Manag. | and Networks | Internat. | Company | Activities | Adjustments | Total | Total | ||||||||||||||||||||||||||||
(millions of euro) | ||||||||||||||||||||||||||||||||||||
Revenues from third parties | 20,981 | 12,694 | 906 | 3,056 | 891 | 267 | (282 | ) | 38,513 | 38,513 | ||||||||||||||||||||||||||
Revenues from other segments | 127 | 2,967 | 4,801 | 12 | 287 | 894 | (9,088 | ) | — | — | ||||||||||||||||||||||||||
Total revenues | 21,108 | 15,661 | 5,707 | 3,068 | 1,178 | 1,161 | (9,370 | ) | 38,513 | 38,513 | ||||||||||||||||||||||||||
Net income/(charges) from commodity risk management | 4 | (705 | ) | — | 91 | (4 | ) | — | — | (614 | ) | (614 | ) | |||||||||||||||||||||||
Gross operating margin | 175 | 3,149 | 3,418 | 918 | 177 | 179 | 3 | 8,019 | 8,019 | |||||||||||||||||||||||||||
Income from equity exchange transaction | — | — | — | — | 263 | — | — | 263 | 263 | |||||||||||||||||||||||||||
Depreciation and amortization | 44 | 980 | 826 | 387 | 17 | 90 | — | 2,344 | 2,344 | |||||||||||||||||||||||||||
Impairment losses | 129 | (28 | ) | 3 | 12 | — | 3 | — | 119 | 119 | ||||||||||||||||||||||||||
Operating income | 2 | 2,197 | 2,589 | 519 | 423 | 86 | 3 | 5,819 | 5,819 | |||||||||||||||||||||||||||
Net financial income/(expense) and income/(expense) from equity investments accounted for using the equity method | — | — | — | — | — | — | — | (651 | ) | (651 | ) | |||||||||||||||||||||||||
Income taxes | — | — | — | — | — | — | — | 2,067 | 2,067 | |||||||||||||||||||||||||||
Net income (Group and minority interests) | — | — | — | — | — | — | — | 3,101 | 3,101 | |||||||||||||||||||||||||||
Operating assets | 6,948 | 16,752 | 16,875 | 10,008 | 1,013 | 1,771 | (3,352 | ) | 50,015 | 50,015 | ||||||||||||||||||||||||||
Operating liabilities | 6,272 | 4,019 | 4,042 | 4,037 | 1,275 | 1,128 | (2,884 | ) | 17,889 | 17,889 | ||||||||||||||||||||||||||
Capital expenditure | 56 | 897 | 1,459 | 467 | 13 | 71 | — | 2,963 | 2,963 |
(1) | Segment revenues include both revenues from third parties and revenue flows between the segments. A similar approach was taken for other income and costs for the year. |
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Continuing Operations | Discontinued Operations | |||||||||||||||||||||||||||||||||||||||||||||||||||
Domestic | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Generat. | Domestic | Services | Eliminations | Eliminations | ||||||||||||||||||||||||||||||||||||||||||||||||
Domestic | and Energy | Infrastruc. | Parent | and Other | and | Transm. | and | |||||||||||||||||||||||||||||||||||||||||||||
Sales | Manag. | and Networks | Internat. | Company | Activities | Adjustments | Total | Networks | TLC. | Adjustments | Total | Total | ||||||||||||||||||||||||||||||||||||||||
(millions of euro) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Revenues from third parties | 19,155 | 10,648 | 837 | 1,856 | 886 | 440 | (35 | ) | 33,787 | 711 | 2,604 | (62 | ) | 3,253 | 37,040 | |||||||||||||||||||||||||||||||||||||
Revenues from other segments | 332 | 2,347 | 4,695 | 2 | 232 | 1,301 | (8,909 | ) | — | 29 | 144 | (173 | ) | — | — | |||||||||||||||||||||||||||||||||||||
Total revenues | 19,487 | 12,995 | 5,532 | 1,858 | 1,118 | 1,741 | (8,944 | ) | 33,787 | 740 | 2,748 | (235 | ) | 3,253 | 37,040 | |||||||||||||||||||||||||||||||||||||
Net income/(charges) from commodity risk management | (26 | ) | 326 | — | (14 | ) | (14 | ) | — | — | 272 | — | — | — | — | 272 | ||||||||||||||||||||||||||||||||||||
Gross operating margin | 152 | 3,407 | 3,398 | 485 | 67 | 315 | (79 | ) | 7,745 | 524 | 903 | (1 | ) | 1,426 | 9,171 | |||||||||||||||||||||||||||||||||||||
Depreciation and amortization | 25 | 982 | 769 | 173 | 14 | 93 | — | 2,056 | 118 | 695 | — | 813 | 2,869 | |||||||||||||||||||||||||||||||||||||||
Impairment losses | 115 | 27 | 1 | 5 | — | 3 | — | 151 | — | 41 | — | 41 | 192 | |||||||||||||||||||||||||||||||||||||||
Operating income | 12 | 2,398 | 2,628 | 307 | 53 | 219 | (79 | ) | 5,538 | 406 | 167 | (1 | ) | 572 | 6,110 | |||||||||||||||||||||||||||||||||||||
Net financial income/(expense) and income/(expense) from equity investments accounted for using the equity method | — | — | — | — | — | — | — | (744 | ) | — | — | — | (240 | ) | (984 | ) | ||||||||||||||||||||||||||||||||||||
Income taxes | — | — | — | — | — | — | — | 1,934 | — | — | — | 213 | 2,147 | |||||||||||||||||||||||||||||||||||||||
Gains on disposal of assets | — | — | — | — | — | — | — | — | — | — | — | 1,153 | 1,153 | |||||||||||||||||||||||||||||||||||||||
Net income (Group and minority interests) | — | — | — | — | — | — | — | 2,860 | — | — | — | 1,272 | 4,132 | |||||||||||||||||||||||||||||||||||||||
Operating assets | 6,465 | 16,468 | 15,708 | 4,282 | 1,263 | 2,945 | (3,280 | ) | 43,851 | — | — | — | — | 43,851 | ||||||||||||||||||||||||||||||||||||||
Operating liabilities | 5,289 | 3,841 | 3,567 | 813 | 1,604 | 2,392 | (3,137 | ) | 14,369 | — | — | — | — | 14,369 | ||||||||||||||||||||||||||||||||||||||
Capital expenditure | 53 | 798 | 1,570 | 299 | 11 | 98 | — | 2,829 | 142 | 286 | — | 428 | 3,257 |
(1) | Segment revenues include both revenues from third parties and revenue flows between the segments. A similar approach was taken for other income and costs for the year. |
Continuing Operations | Discontinued Operations | |||||||||||||||||||||||||||||||||||||||||||||||||||
Domestic | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Generat. | Domestic | Services | Eliminations | Eliminations | ||||||||||||||||||||||||||||||||||||||||||||||||
Domestic | and Energy | Infrastruc. and | Parent | and Other | and | Transm. | and | |||||||||||||||||||||||||||||||||||||||||||||
Sales | Manag. | Networks | Internat. | Company | Activities | Adjustments | Total | Networks | TLC. | Adjustments | Total | Total | ||||||||||||||||||||||||||||||||||||||||
(millions of euro) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Total revenues | 19,045 | 12,281 | 5,611 | 1,030 | 1,708 | 1,797 | (10,445 | ) | 31,027 | 1,017 | 4,727 | (235 | ) | 5,439 | 36,466 | |||||||||||||||||||||||||||||||||||||
Net income/(charges) from commodity risk management | (1 | ) | (8 | ) | — | — | (7 | ) | — | — | (16 | ) | — | — | — | — | (16 | ) | ||||||||||||||||||||||||||||||||||
Gross operating margin | 386 | 3,615 | 3,129 | 294 | 652 | 214 | (219 | ) | 8,071 | 649 | 1,421 | 14 | 2,084 | 10,155 | ||||||||||||||||||||||||||||||||||||||
Depreciation, amortization and impairment losses | 88 | 1,128 | 721 | 150 | 5 | 109 | — | 2,201 | 159 | 3,037 | 6 | 3,202 | 5,403 | |||||||||||||||||||||||||||||||||||||||
Operating income | 298 | 2,487 | 2,408 | 144 | 647 | 105 | (219 | ) | 5,870 | 490 | (1,616 | ) | 8 | (1,118 | ) | 4,752 | ||||||||||||||||||||||||||||||||||||
Net financial income/(expense) and income/(expense) from equity investments accounted for using the equity method | — | — | — | — | — | — | — | (852 | ) | — | — | — | (467 | ) | (1,319 | ) | ||||||||||||||||||||||||||||||||||||
Income taxes | — | — | — | — | — | — | — | 2,116 | — | — | — | (618 | ) | 1,498 | ||||||||||||||||||||||||||||||||||||||
Gains on disposal of assets | — | — | — | — | — | — | — | — | — | — | — | 812 | 812 | |||||||||||||||||||||||||||||||||||||||
Net income (Group and minority interests) | — | — | — | — | — | — | — | 2,902 | — | — | — | (155 | ) | 2,747 | ||||||||||||||||||||||||||||||||||||||
Operating assets | 5,104 | 16,051 | 14,908 | 3,628 | 1,147 | 3,508 | (3,553 | ) | 40,793 | 4,585 | 12,940 | — | 17,525 | 58,318 | ||||||||||||||||||||||||||||||||||||||
Operating liabilities | 4,546 | 3,259 | 3,466 | 503 | 1,955 | 3,982 | (5,014 | ) | 12,697 | 571 | 2,181 | — | 2,752 | 15,449 | ||||||||||||||||||||||||||||||||||||||
Capital expenditure | 67 | 678 | 1,596 | 230 | 10 | 109 | — | 2,690 | 277 | 867 | — | 1,144 | 3,834 |
(1) | Segment revenues include both revenues from third parties and revenue flows between the segments. A similar approach was taken for other income and costs for the year. |
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At Dec. 31, 2006 | At Dec. 31, 2005 | At Dec. 31, 2004 | ||||||||||
(millions of euro) | ||||||||||||
Total assets | 54,500 | 50,502 | 65,378 | |||||||||
Financial assets and cash and cash equivalents | 2,107 | 3,203 | 746 | |||||||||
Tax assets | 2,378 | 3,448 | 6,314 | |||||||||
Segment assets | 50,015 | 43,851 | 58,318 | |||||||||
— of which: | ||||||||||||
Domestic Sales | 6,948 | 6,465 | 5,104 | |||||||||
Domestic Generation and Energy Management | 16,752 | 16,468 | 16,051 | |||||||||
Domestic Infrastructure and Networks | 16,875 | 15,708 | 14,908 | |||||||||
International | 10,008 | 4,282 | 3,628 | |||||||||
Parent Company | 1,013 | 1,263 | 1,147 | |||||||||
Services and Other Activities | 1,771 | 2,945 | 3,508 | |||||||||
Eliminations and adjustments | (3,352 | ) | (3,280 | ) | (3,553 | ) | ||||||
Telecommunications and Transmission Networks | — | — | 17,525 | |||||||||
Total liabilities | 35,475 | 31,086 | 46,312 | |||||||||
Financial liabilities and loans | 14,661 | 13,819 | 27,745 | |||||||||
Tax liabilities | 2,925 | 2,898 | 3,118 | |||||||||
Segment liabilities | 17,889 | 14,369 | 15,449 | |||||||||
— of which: | ||||||||||||
Domestic Sales | 6,272 | 5,289 | 4,546 | |||||||||
Domestic Generation and Energy Management | 4,019 | 3,841 | 3,259 | |||||||||
Domestic Infrastructure and Networks | 4,042 | 3,567 | 3,466 | |||||||||
International | 4,037 | 813 | 503 | |||||||||
Parent Company | 1,275 | 1,604 | 1,955 | |||||||||
Services and Other Activities | 1,128 | 2,392 | 3,982 | |||||||||
Eliminations and adjustments | (2,884 | ) | (3,137 | ) | (5,014 | ) | ||||||
Telecommunications and Transmission Networks | — | — | 2,752 |
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(6) | OPERATING REVENUES |
2006 | 2005 | 2004 | ||||||||||
(millions of euro) | ||||||||||||
Revenues from the sale and transport of electricity and contributions from Electricity Equalization Fund | 34,231 | 29,008 | 25,098 | |||||||||
Revenues from the sale and transport of natural gas to end-users | 1,695 | 1,556 | 1,374 | |||||||||
Revenues from fuel sales | 413 | 446 | 894 | |||||||||
Connection fees for the electricity and gas networks | 617 | 656 | 657 | |||||||||
Revenues for contract work in progress | 138 | 290 | 609 | |||||||||
Other sales and services | 403 | 414 | 515 | |||||||||
Total | 37,497 | 32,370 | 29,147 |
2006 | 2005 | 2004 | ||||||||||
(millions of euro) | ||||||||||||
Italy | 32,389 | 30,563 | 27,369 | |||||||||
Europe | 4,525 | 1,656 | 1,549 | |||||||||
Americas | 180 | 117 | 160 | |||||||||
Middle East | 22 | 27 | 56 | |||||||||
Other | 381 | 7 | 13 | |||||||||
Total | 37,497 | 32,370 | 29,147 |
2006 | 2005 | 2004 | ||||||||||
(millions of euro) | ||||||||||||
Prior-year regulatory items | — | 338 | — | |||||||||
Reimbursement of stranded costs | 154 | 158 | 1,219 | |||||||||
Gains on sale of equity investments | 90 | 131 | 13 | |||||||||
Gains on sale of property, plant and equipment | 22 | 45 | — | |||||||||
Bonus for service continuity | 194 | 115 | 250 | |||||||||
Other | 556 | 630 | 398 | |||||||||
Total | 1,016 | 1,417 | 1,880 |
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(7) | INCOME FROM EQUITY EXCHANGE TRANSACTION — €263 MILLION |
(8) | OPERATING EXPENSES |
2006 | 2005 | 2004 | ||||||||||
(millions of euro) | ||||||||||||
Electricity purchases | 17,082 | 14,321 | 10,380 | |||||||||
Fuel and gas | 5,637 | 5,514 | 5,393 | |||||||||
Materials | 750 | 798 | 1,027 | |||||||||
Total | 23,469 | 20,633 | 16,800 | |||||||||
— of which capitalized | (586 | ) | (665 | ) | (673 | ) |
2006 | 2005 | 2004 | ||||||||||
(millions of euro) | ||||||||||||
Electricity and gas wheeling | 1,342 | 1,048 | 1,068 | |||||||||
Maintenance and repairs | 444 | 395 | 347 | |||||||||
Telephone and postal | 289 | 260 | 318 | |||||||||
Communication services | 62 | 62 | 91 | |||||||||
Information technology services | 123 | 121 | 63 | |||||||||
Commissions | 81 | 66 | 55 | |||||||||
Leases and rentals | 425 | 387 | 349 | |||||||||
Other | 711 | 718 | 815 | |||||||||
Total | 3,477 | 3,057 | 3,106 |
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2006 | 2005 | 2004 | ||||||||||
(millions of euro) | ||||||||||||
Wages and salaries | 1,995 | 1,957 | 1,989 | |||||||||
Social security contributions | 568 | 529 | 537 | |||||||||
Termination benefits | 64 | 111 | 97 | |||||||||
Other costs | 583 | 165 | 601 | |||||||||
Total | 3,210 | 2,762 | 3,224 | |||||||||
— of which capitalized | (403 | ) | (384 | ) | (300 | ) |
Average number | Headcount | |||||||||||||||
2006 | 2005 | 2004 | at Dec. 31, 2006 | |||||||||||||
Senior managers | 692 | 618 | 581 | 691 | ||||||||||||
Middle managers | 4,678 | 4,144 | 4,024 | 4,900 | ||||||||||||
Office staff | 29,918 | 29,231 | 29,515 | 30,540 | ||||||||||||
Workers | 21,300 | 19,369 | 17,728 | 22,417 | ||||||||||||
Total continuing operations | 56,588 | 53,362 | 51,398 | 58,548 | ||||||||||||
Discontinued operations | — | 6,722 | 10,820 | — | ||||||||||||
TOTAL | 56,588 | 60,084 | 62,218 | 58,548 |
2006 | 2005 | 2004 | ||||||||||
(millions of euro) | ||||||||||||
Depreciation | 2,154 | 1,918 | 1,990 | |||||||||
Amortization | 190 | 138 | 121 | |||||||||
Impairment losses | 119 | 151 | 90 | |||||||||
Total | 2,463 | 2,207 | 2,201 |
2006 | 2005 | 2004 | ||||||||||
(millions of euro) | ||||||||||||
Provisions for risks and charges | 98 | 212 | 203 | |||||||||
Purchase of green certificates | 73 | 119 | 104 | |||||||||
Charges for CO2 emissions | 84 | 228 | — | |||||||||
Taxes and duties | 159 | 144 | 158 | |||||||||
Other | 299 | 208 | 318 | |||||||||
Total | 713 | 911 | 783 |
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2006 | 2005 | 2004 | ||||||||||
(millions of euro) | ||||||||||||
Personnel | (403 | ) | (384 | ) | (300 | ) | ||||||
Materials | (586 | ) | (665 | ) | (673 | ) | ||||||
Total | (989 | ) | (1,049 | ) | (973 | ) |
(9) | NET INCOME / (CHARGES) FROM COMMODITY RISK MANAGEMENT — €(614) MILLION |
2006 | 2005 | 2004 | ||||||||||
(millions of euro) | ||||||||||||
Income | ||||||||||||
Unrealized on contracts for differences | — | 43 | — | |||||||||
Unrealized on other contracts | 16 | 9 | 15 | |||||||||
Total unrealized income | 16 | 52 | 15 | |||||||||
Realized on contracts for differences | — | 289 | — | |||||||||
Realized on other contracts | 76 | 98 | 89 | |||||||||
Total realized income | 76 | 387 | 89 | |||||||||
Total income | 92 | 439 | 104 | |||||||||
Charges | ||||||||||||
Unrealized on contracts for differences | (103 | ) | — | — | ||||||||
Unrealized on other contracts | (42 | ) | (13 | ) | (36 | ) | ||||||
Total unrealized charges | (145 | ) | (13 | ) | (36 | ) | ||||||
Realized on contracts for differences | (519 | ) | — | — | ||||||||
Realized on other contracts | (42 | ) | (154 | ) | (84 | ) | ||||||
Total realized charges | (561 | ) | (154 | ) | (84 | ) | ||||||
Total charges | (706 | ) | (167 | ) | (120 | ) | ||||||
NET INCOME/(CHARGES) FROM COMMODITY RISK MANAGEMENT | (614 | ) | 272 | (16 | ) |
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(10) | FINANCIAL INCOME (EXPENSE) — €(647) MILLION |
2006 | 2005 | 2004 | ||||||||||
(millions of euro) | ||||||||||||
Financial income: | ||||||||||||
— interest and other income from non-current financial assets | 8 | 29 | 49 | |||||||||
— foreign exchange gains | 165 | 23 | 165 | |||||||||
— income from derivative instruments | 85 | 68 | 29 | |||||||||
— other income | 233 | 99 | 118 | |||||||||
— income from investments | 22 | 11 | 4 | |||||||||
Total | 513 | 230 | 365 | |||||||||
Financial expense: | ||||||||||||
— interest and other charges on financial debt | (635 | ) | (686 | ) | (771 | ) | ||||||
— foreign exchange losses | (82 | ) | (52 | ) | (143 | ) | ||||||
— expense on derivative instruments | (169 | ) | (94 | ) | (135 | ) | ||||||
— accretion of post-employment and other employee benefits | (108 | ) | (112 | ) | (134 | ) | ||||||
— accretion of other provisions | (159 | ) | — | — | ||||||||
— loss on investments | (7 | ) | — | (9 | ) | |||||||
Total | (1,160 | ) | (944 | ) | (1,192 | ) | ||||||
TOTAL | (647 | ) | (714 | ) | (827 | ) | ||||||
(11) | LOSS FROM INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD — €(4) MILLION |
2006 | 2005 | 2004 | ||||||||||
(millions of euro) | ||||||||||||
Income from associates | 4 | 7 | 8 | |||||||||
Loss on associates | (8 | ) | (37 | ) | (33 | ) | ||||||
Total | (4 | ) | (30 | ) | (25 | ) |
(12) | INCOME TAXES — €2,067 MILLION |
�� | ||||||||||||
2006 | 2005 | 2004 | ||||||||||
(millions of euro) | ||||||||||||
Current taxes | 1,657 | 1,398 | 1,328 | |||||||||
Income tax adjustments relating to prior years | (5 | ) | 14 | (14 | ) | |||||||
Deferred tax | 415 | 522 | 802 | |||||||||
Total | 2,067 | 1,934 | 2,116 |
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2006 | 2005 | 2004 | ||||||||||||||||||||||
(millions of euro) | ||||||||||||||||||||||||
Income before taxes | 5,168 | 4,794 | 5,018 | |||||||||||||||||||||
Theoretical tax due calculated as 33% of pre-tax income | 1,705 | 33.0 | % | 1,582 | 33.0 | % | 1,656 | 33.0 | % | |||||||||||||||
Permanent differences and minor items | 13 | 0.3 | % | (12 | ) | (0.3 | )% | 103 | 2.1 | % | ||||||||||||||
Difference on estimated income taxes from prior years | (5 | ) | (0.1 | )% | 14 | 0.3 | % | (14 | ) | (0.3 | )% | |||||||||||||
Regional tax at varying tax rates | 354 | 6.8 | % | 350 | 7.3 | % | 371 | 7.4 | % | |||||||||||||||
Total | 2,067 | 40.0 | % | 1,934 | 40.3 | % | 2,116 | 42.2 | % |
(13) | DISCONTINUED OPERATIONS — €0 MILLION |
2006 | 2005 | 2004 | ||||||||||
(millions of euro) | ||||||||||||
Operating income (loss) | — | 572 | (1,118 | ) | ||||||||
Net financial expense | — | (240 | ) | (467 | ) | |||||||
Income taxes | — | (213 | ) | 618 | ||||||||
Net income before capital gains | — | 119 | (967 | ) | ||||||||
Gains on disposal of assets | — | 1,153 | 812 | |||||||||
NET INCOME ON DISCONTINUED OPERATIONS, NET OF TAX | — | 1,272 | (155 | ) |
(14) | CURRENT ASSETS |
At Dec. 31, 2006 | At Dec. 31, 2005 | |||||||
(millions of euro) | ||||||||
Raw materials, consumables and supplies: | ||||||||
— fuel | 853 | 585 | ||||||
— materials, equipment and other inventories | 207 | 115 | ||||||
Total | 1,060 | 700 | ||||||
Buildings available for sale | 148 | 166 | ||||||
Advances | 1 | 18 | ||||||
TOTAL | 1,209 | 884 |
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At Dec. 31, 2006 | At Dec. 31, 2005 | |||||||
(millions of euro) | ||||||||
Customers: | ||||||||
— sale and transport of electricity | 6,809 | 6,850 | ||||||
— distribution and sale of natural gas | 712 | 611 | ||||||
— other activities | 387 | 506 | ||||||
Total | 7,908 | 7,967 | ||||||
Trade receivables due from associates | 7 | 290 | ||||||
Receivables for contract work in progress | 43 | 59 | ||||||
TOTAL | 7,958 | 8,316 |
(Millions of euro) | ||||
Balance at Jan 1, 2004 | 328 | |||
Accruals | 241 | |||
Utilization | (83 | ) | ||
Balance at Dec 31, 2004 | 486 | |||
Accruals | 188 | |||
Utilization | (29 | ) | ||
Changes in scope of consolidation | (305 | ) | ||
Other changes | 7 | |||
Balance at Dec. 31, 2005 | 347 | |||
Accruals | 110 | |||
Utilization | (129 | ) | ||
Other changes | (2 | ) | ||
Balance at Dec. 31, 2006 | 326 |
F-43
Table of Contents
At Dec. 31, 2006 | At Dec. 31, 2005 | |||||||
(millions of euro) | ||||||||
Receivables for factoring advances | 211 | 374 | ||||||
Derivative contracts | 120 | 115 | ||||||
Other securities | 25 | 28 | ||||||
Equity investments | — | 43 | ||||||
Other | 46 | 9 | ||||||
Total | 402 | 569 |
Notional Value | Fair Value | |||||||||||||||
At Dec. 31, 2006 | At Dec. 31, 2005 | At Dec. 31, 2006 | At Dec. 31, 2005 | |||||||||||||
(millions of euro) | ||||||||||||||||
Cash flow hedge derivatives: | ||||||||||||||||
— interest rates | — | 60 | — | — | ||||||||||||
— exchange rates | 25 | 1 | — | — | ||||||||||||
— commodities | 1,034 | 1,372 | 48 | 57 | ||||||||||||
Total | 1,059 | 1,433 | 48 | 57 | ||||||||||||
Trading derivatives: | ||||||||||||||||
— interest rates | 42 | 60 | — | 1 | ||||||||||||
— exchange rates | 208 | 703 | 2 | 9 | ||||||||||||
— commodities | 407 | 7,179 | 70 | 48 | ||||||||||||
Total | 657 | 7,942 | 72 | 58 | ||||||||||||
TOTAL | 1,716 | 9,375 | 120 | 115 |
• | two-way contracts for differences with a notional value of €1,034 million and a fair value of €48 million. These amounts refer both to the two-way contracts for differences with the Single Buyer for 2007 and the virtual power plant (VPP) contracts that Enel entered into with the counterparties selected through the auction of December 28, 2006. These contracts are also two-way contracts for differences; | |
• | commodity derivatives on fuels and on electricity, with a notional value of €407 million and a fair value of €12 million; | |
• | embedded derivatives related to an energy sale contract in Slovakia, with a fair value of €58 million. |
• | two-way contracts for differences, with a notional value of €1,372 million and a fair value of €57 million; | |
• | one-way contracts for differences, with a notional value of €6,266 million and a fair value of €43 million; | |
• | derivatives on fuels, energy and metals with a notional value of €913 million and a fair value of €5 million. |
F-44
Table of Contents
At Dec. 31, 2006 | At Dec. 31, 2005 | |||||||
(millions of euro) | ||||||||
Bank and post office deposits | 541 | 472 | ||||||
Cash and cash equivalents | 6 | 4 | ||||||
Total | 547 | 476 |
At Dec. 31, 2006 | At Dec. 31, 2005 | |||||||
(millions of euro) | ||||||||
Receivables due from Electricity Equalization Fund | 1,355 | 816 | ||||||
Receivables due from employees | 14 | 14 | ||||||
Receivables due from others | 975 | 801 | ||||||
Accrued operating income and prepaid expenses | 109 | 81 | ||||||
Total | 2,453 | 1,712 |
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Table of Contents
(15) | NON-CURRENT ASSETS |
Industrial | Assets Under | |||||||||||||||||||||||||||||||||||
and | Construction | |||||||||||||||||||||||||||||||||||
Plant and | Commercial | Other | Leased | Leasehold | and | |||||||||||||||||||||||||||||||
Land | Buildings | Machinery | Equipment | Assets | Assets | Improvements | Advances | Total | ||||||||||||||||||||||||||||
(millions of euro) | ||||||||||||||||||||||||||||||||||||
Cost | 351 | 6,684 | 75,753 | 494 | 1,117 | — | 279 | 2,073 | 86,751 | |||||||||||||||||||||||||||
Accumulated depreciation | — | (3,041 | ) | (45,630 | ) | (393 | ) | (794 | ) | — | (191 | ) | — | (50,049 | ) | |||||||||||||||||||||
Balance at Dec. 31, 2004 | 351 | 3,643 | 30,123 | 101 | 323 | — | 88 | 2,073 | 36,702 | |||||||||||||||||||||||||||
Investments | 1 | 64 | 1,743 | 16 | 56 | — | 13 | 1,144 | 3,037 | |||||||||||||||||||||||||||
Assets entering service | 2 | 48 | 766 | 1 | 15 | — | 10 | (842 | ) | — | ||||||||||||||||||||||||||
Depreciation(1) | — | (210 | ) | (2,191 | ) | (24 | ) | (101 | ) | — | (35 | ) | — | (2,561 | ) | |||||||||||||||||||||
Change in scope of consolidation | (16 | ) | (325 | ) | (6,329 | ) | (10 | ) | (119 | ) | — | (59 | ) | (600 | ) | (7,458 | ) | |||||||||||||||||||
Exchange rate gains/ (losses) | 1 | — | 245 | — | — | — | — | 1 | 247 | |||||||||||||||||||||||||||
Ordinary disposals and other changes | 52 | 133 | (211 | ) | (4 | ) | (23 | ) | — | 10 | 264 | 221 | ||||||||||||||||||||||||
Total changes | 40 | (290 | ) | (5,977 | ) | (21 | ) | (172 | ) | — | (61 | ) | (33 | ) | (6,514 | ) | ||||||||||||||||||||
Cost | 391 | 6,435 | 64,698 | 358 | 664 | — | 65 | 2,040 | 74,651 | |||||||||||||||||||||||||||
Accumulated depreciation | — | (3,082 | ) | (40,552 | ) | (278 | ) | (513 | ) | — | (38 | ) | — | (44,463 | ) | |||||||||||||||||||||
Balance at Dec. 31, 2005 | 391 | 3,353 | 24,146 | 80 | 151 | — | 27 | 2,040 | 30,188 | |||||||||||||||||||||||||||
Investments | 1 | 56 | 1,415 | 17 | 71 | — | 11 | 1,188 | 2,759 | |||||||||||||||||||||||||||
Assets entering service | 1 | 58 | 612 | — | 31 | — | 17 | (719 | ) | — | ||||||||||||||||||||||||||
Depreciation | — | (247 | ) | (1,790 | ) | (16 | ) | (67 | ) | (21 | ) | (13 | ) | — | (2,154 | ) | ||||||||||||||||||||
Impairment losses | — | — | (6 | ) | — | — | — | — | — | (6 | ) | |||||||||||||||||||||||||
Change in scope of consolidation | 12 | 1,106 | 2,257 | 19 | 1 | 225 | — | 357 | 3,977 | |||||||||||||||||||||||||||
Exchange rate gains/ (losses) | — | 94 | 147 | 3 | — | 18 | — | 33 | 295 | |||||||||||||||||||||||||||
Ordinary disposals and other changes | (16 | ) | (14 | ) | (163 | ) | (3 | ) | (7 | ) | 3 | — | (13 | ) | (213 | ) | ||||||||||||||||||||
Total changes | (2 | ) | 1,053 | 2,472 | 20 | 29 | 225 | 15 | 846 | 4,658 | ||||||||||||||||||||||||||
Cost | 389 | 8,021 | 69,355 | 404 | 673 | 292 | 119 | 2,886 | 82,139 | |||||||||||||||||||||||||||
Accumulated depreciation | — | (3,615 | ) | (42,737 | ) | (304 | ) | (493 | ) | (67 | ) | (77 | ) | — | (47,293 | ) | ||||||||||||||||||||
Balance at Dec. 31, 2006 | 389 | 4,406 | 26,618 | 100 | 180 | 225 | 42 | 2,886 | 34,846 | |||||||||||||||||||||||||||
(1) | Includes €643 million in respect of Telecommunication and Transmission Networks Divisions until date of deconsolidation. |
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Minimum Lease Payments | Present Value | |||||||
(millions of euro) | ||||||||
2007 | 14 | 11 | ||||||
2008-2012 | 31 | 14 | ||||||
After 2012 | 99 | 64 | ||||||
Total | 144 | 89 |
• | the acquisition of Slovenské elektrárne (up €3,871 million); | |
• | the acquisition of Enel Panama (up €159 million); | |
• | the acquisition of the Brazilian companies of the Rede Group (up €79 million); | |
• | the acquisition of companies in the Gas area (up €41 million); | |
• | the partial deconsolidation of Enel Unión Fenosa Renovables (down €156 million); | |
• | the sale of Carbones Colombianos del Cerrejón (down €17 million). |
F-47
Table of Contents
2006 | 2005 | |||||||
(millions of euro) | ||||||||
Property, plant and equipment, gross: | ||||||||
Generating Plant(1): | ||||||||
Hydroelectric | 9,209 | 8,361 | ||||||
Thermal | 18,960 | 18,014 | ||||||
Nuclear | 2,759 | — | ||||||
Geothermal and renewable sources | 2,174 | 2,432 | ||||||
Distribution Electricity Network | 37,811 | 37,330 | ||||||
Distribution Gas Network | 2,662 | 2,655 | ||||||
Land and Buildings(2) | 3,733 | 2,277 | ||||||
Other | 1,945 | 1,542 | ||||||
Construction in progress | 2,886 | 2,040 | ||||||
Total | 82,139 | 74,651 | ||||||
Accumulated Depreciation: | ||||||||
Generating Plant(1): | ||||||||
Hydroelectric | 4,608 | 3,939 | ||||||
Thermal | 11,836 | 11,493 | ||||||
Nuclear | 928 | — | ||||||
Geothermal and renewable sources | 1,538 | 1,233 | ||||||
Distribution Electricity Network | 24,984 | 25,048 | ||||||
Distribution Gas Network | 1,077 | 1,029 | ||||||
Land and Buildings(2) | 1,147 | 731 | ||||||
Other | 1,175 | 990 | ||||||
Total | 47,293 | 44,463 | ||||||
Property, plant and equipment, net: | ||||||||
Generating Plant(1): | ||||||||
Hydroelectric | 4,601 | 4,422 | ||||||
Thermal | 7,124 | 6,521 | ||||||
Nuclear | 1,831 | — | ||||||
Geothermal and renewable sources | 636 | 1,199 | ||||||
Distribution Electricity Network | 12,827 | 12,282 | ||||||
Distribution Gas Network | 1,585 | 1,626 | ||||||
Land and Buildings(2) | 2,586 | 1,546 | ||||||
Other | 770 | 552 | ||||||
Construction in progress | 2,886 | 2,040 | ||||||
Total | 34,846 | 30,188 | ||||||
(1) | The values also include industrial land and buildings. | |
(2) | The values include non-industrial buildings (offices, warehouses, parking facilities, etc.), buildings for civil use and non-appurtenant land. |
F-48
Table of Contents
2006 | 2005 | |||||||
(millions of euro) | ||||||||
Power plants: | ||||||||
— thermal | 766 | 570 | ||||||
— hydro | 157 | 206 | ||||||
— geothermal | 79 | 84 | ||||||
— nuclear | 57 | — | ||||||
— alternative energy resources | 115 | 130 | ||||||
Total power plants | 1,174 | 990 | ||||||
Transport lines and transformer stations | — | 133 | ||||||
Electricity distribution networks | 1,324 | 1,381 | ||||||
Gas distribution networks | 88 | 70 | ||||||
Telecommunication networks | — | 251 | ||||||
Land, buildings and other assets and equipment | 173 | 212 | ||||||
TOTAL | 2,759 | 3,037 |
Millions of euro | ||||
Balance as of January 1, 2005 | 88 | |||
Disposal of investment | (53 | ) | ||
Accretion expense | 2 | |||
Balance as of January 1, 2006 | 37 | |||
Change in the scope of consolidation | 2,198 | |||
Accretion expense | 175 | |||
Balance as of December 31, 2006 | 2,410 |
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Table of Contents
Industrial | Concessions, | |||||||||||||||||||||||||||
Patents | Licenses, | Assets Under | ||||||||||||||||||||||||||
Development | and Intellectual | Trademarks and | Development | |||||||||||||||||||||||||
Costs | Property Rights | Similar Rights | Other | and Advances | Goodwill | Total | ||||||||||||||||||||||
(millions of euro) | ||||||||||||||||||||||||||||
Balance at Dec. 31, 2004 | 6 | 411 | 2,526 | 245 | 174 | 6,709 | 10,071 | |||||||||||||||||||||
Investments | — | 72 | 36 | 12 | 97 | 3 | 220 | |||||||||||||||||||||
Assets entering service | — | 59 | — | 9 | (68 | ) | — | — | ||||||||||||||||||||
Exchange rate differences | — | — | 1 | 9 | — | 23 | 33 | |||||||||||||||||||||
Changes in scope of consolidation | — | (245 | ) | (2,410 | ) | 26 | (70 | ) | (5,120 | ) | (7,819 | ) | ||||||||||||||||
Amortization(1) | — | (149 | ) | (96 | ) | (63 | ) | — | — | (308 | ) | |||||||||||||||||
Other changes | (6 | ) | (15 | ) | 20 | 27 | (1 | ) | (40 | ) | (15 | ) | ||||||||||||||||
Total changes | (6 | ) | (278 | ) | (2,449 | ) | 20 | (42 | ) | (5,134 | ) | (7,889 | ) | |||||||||||||||
Balance at Dec. 31, 2005 | — | 133 | 77 | 265 | 132 | 1,575 | 2,182 | |||||||||||||||||||||
Investments | 5 | 51 | 15 | 35 | 98 | — | 204 | |||||||||||||||||||||
Assets entering service | — | 69 | — | 10 | (79 | ) | — | — | ||||||||||||||||||||
Exchange rate differences | — | 1 | — | (11 | ) | 1 | 29 | 20 | ||||||||||||||||||||
Changes in scope of consolidation | — | 8 | 12 | 77 | 9 | 670 | 776 | |||||||||||||||||||||
Amortization | (2 | ) | (94 | ) | (15 | ) | (79 | ) | — | — | (190 | ) | ||||||||||||||||
Impairment losses | — | — | — | — | — | (3 | ) | (3 | ) | |||||||||||||||||||
Other changes | 32 | (3 | ) | (2 | ) | (21 | ) | (13 | ) | — | (7 | ) | ||||||||||||||||
Total changes | 35 | 32 | 10 | 11 | 16 | 696 | 800 | |||||||||||||||||||||
Cost | 42 | 482 | 128 | 759 | 148 | 2,271 | 3,830 | |||||||||||||||||||||
Accumulated amortization | 7 | 317 | 41 | 483 | — | — | 848 | |||||||||||||||||||||
Balance at Dec. 31, 2006 | 35 | 165 | 87 | 276 | 148 | 2,271 | 2,982 | |||||||||||||||||||||
(1) | Includes €170 million in respect of Telecommunications and Transmission Networks Divisions until date of deconsolidation. |
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Changes in | ||||||||||||||||||||
Scope of | Exchange Rate | Impairment | ||||||||||||||||||
At Dec. 31, 2005 | Consolidation | Differences | Losses | At Dec. 31, 2006 | ||||||||||||||||
(millions of euro) | ||||||||||||||||||||
Enel Viesgo Generación | 657 | — | — | — | 657 | |||||||||||||||
Enel Rete Gas | 4 | 4 | ||||||||||||||||||
Enel Energia (formerly Enel Gas) | 579 | — | — | — | 579 | |||||||||||||||
Enel Unión Fenosa Renovables | 131 | (49 | ) | — | — | 82 | ||||||||||||||
Enel North America | 85 | — | (9 | ) | (1 | ) | 75 | |||||||||||||
Enel Latin America | 73 | — | (7 | ) | — | 66 | ||||||||||||||
Electra de Viesgo Distribución | 24 | — | — | — | 24 | |||||||||||||||
Enel Maritza East 3 (formerly Maritza East III Power Company) | 15 | — | — | — | 15 | |||||||||||||||
Wisco | 7 | — | — | (2 | ) | 5 | ||||||||||||||
Slovenské elektrárne | — | 561 | 48 | — | 609 | |||||||||||||||
RusEnergoSbyt | — | 80 | (1 | ) | — | 79 | ||||||||||||||
Enel Panama | — | 62 | (2 | ) | — | 60 | ||||||||||||||
Erelis | — | 14 | — | — | 14 | |||||||||||||||
Enel Operations Bulgaria (formerly Maritza East 3 Operating Company) | — | 2 | — | — | 2 | |||||||||||||||
Total | 1,575 | 670 | 29 | (3 | ) | 2,271 |
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At Dec. 31, 2006 | Discount Rate | Explicit Period of | ||||||||||||||||||||||
Amount | Tax Rate | Growth Rate(1) | WACC(2) | Ke(3) | Cash Flows | |||||||||||||||||||
(millions of euro) | ||||||||||||||||||||||||
Enel Viesgo Generación | 657 | 30 | % | no terminal value | 6.9 | % | 26 years | |||||||||||||||||
Electra de Viesgo Distribución | 24 | 30 | % | 1.0 | % | 6.0 | % | 11 years | ||||||||||||||||
Enel Rete Gas | 4 | 42 | % | 0 | % | 6.0 | % | 3 years | ||||||||||||||||
Enel Energia (formerly Enel Gas) | 579 | 38 | % | 0 | % | 7.1 | % | 5 years | ||||||||||||||||
Enel North America | 75 | 40.4 | % | 2.0 | % | 6.5 | % | 10 years | ||||||||||||||||
Enel Latin America | 66 | 28.2 | % | 2.0 | % | 9.9 | % | 10 years | ||||||||||||||||
Enel Unión Fenosa Renovables | 82 | 30 | % | no terminal value | 8.8 | % | 20 years | |||||||||||||||||
Enel Maritza East 3 (formerly | ||||||||||||||||||||||||
Maritza East III Power Company) | 15 | 10 | % | no terminal value | 11.4 | % | 18 years | |||||||||||||||||
Wisco | 5 | 40 | % | 0 | % | 8.0 | % | 11 years | ||||||||||||||||
Slovenské elektrárne | 609 | 19 | % | no terminal value | 8.5 | % | 34 years |
(1) | Perpetual growth rate of cash flows after explicit period. | |
(2) | WACC represents the weighted average cost of capital. | |
(3) | Ke is the opportunity cost for the shareholder for the investment in risk capital. |
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Increase / | Increase / | |||||||||||||||||||||||||||||||||||
(Decrease) | (Decrease) | |||||||||||||||||||||||||||||||||||
Taken to | Change in | Taken to | Changes in | |||||||||||||||||||||||||||||||||
At Dec. 31, | Income | Other | Scope of | At Dec. 31, | Income | Other | Scope of | At Dec. 31, | ||||||||||||||||||||||||||||
2004 | Statement | Changes | Consolidation | 2005 | Statement | Changes | Consolidation | 2006 | ||||||||||||||||||||||||||||
(millions of euro) | ||||||||||||||||||||||||||||||||||||
Nature of the temporary differences: | ||||||||||||||||||||||||||||||||||||
— impairment of property, plant and equipment and intangible assets | 83 | 5 | (1 | ) | (19 | ) | 68 | (9 | ) | (2 | ) | — | 57 | |||||||||||||||||||||||
— accruals to provisions for risks and charges and impairment losses with deferred deductibility | 995 | (251 | ) | 11 | (188 | ) | 567 | (192 | ) | — | 191 | 566 | ||||||||||||||||||||||||
— tax losses carried forward | 845 | (86 | ) | (2 | ) | (632 | ) | 125 | (60 | ) | — | — | 65 | |||||||||||||||||||||||
— measurement of financial assets | 164 | (11 | ) | 33 | (37 | ) | 149 | (61 | ) | (45 | ) | — | 43 | |||||||||||||||||||||||
— other items | 866 | 23 | 8 | (28 | ) | 869 | (46 | ) | — | — | 823 | |||||||||||||||||||||||||
Total | 2,953 | (320 | ) | 49 | (904 | ) | 1,778 | (368 | ) | (47 | ) | 191 | 1,554 |
At Dec. 31, | Capital | Income | Other | At Dec. 31, | ||||||||||||||||||||||||||||
2005 | % Holding | Increases | Sales | Effect | Changes | 2006 | % Holding | |||||||||||||||||||||||||
(millions of euro) | ||||||||||||||||||||||||||||||||
Wind Telecomunicazioni | 1,728 | 37.2 | % | — | (328 | ) | 263 | (1,663 | ) | — | — | |||||||||||||||||||||
Weather Investments | — | — | — | (1,962 | ) | (6 | ) | 1,968 | — | — | ||||||||||||||||||||||
Gesam | 14 | 40.0 | % | — | (18 | ) | 4 | — | — | — | ||||||||||||||||||||||
Idrosicilia | 9 | 40.0 | % | — | — | — | — | 9 | 40.0 | % | ||||||||||||||||||||||
Cesi | 7 | 25.9 | % | — | — | — | — | 7 | 25.9 | % | ||||||||||||||||||||||
Compagnia Porto di Civitavecchia | 9 | 25.0 | % | 2 | — | — | (4 | ) | 7 | 25.0 | % | |||||||||||||||||||||
Aes Distribuidores Salvadoreños | 7 | 20.0 | % | — | — | — | (2 | ) | 5 | 20.0 | % | |||||||||||||||||||||
Other | 23 | — | — | (2 | ) | 4 | 3 | 28 | — | |||||||||||||||||||||||
Total | 1,797 | 2 | (2,310 | ) | 265 | 302 | 56 |
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At Dec. 31, 2006 | At Dec. 31, 2005 | |||||||||||||||||||||||||||||||
Net | Net | |||||||||||||||||||||||||||||||
Assets | Liabilities | Revenues | Income/(Loss) | Assets | Liabilities | Revenues | Income/(Loss) | |||||||||||||||||||||||||
(millions of euro) | ||||||||||||||||||||||||||||||||
Idrosicilia | 23 | 1 | — | 1 | 23 | 1 | — | 1 | ||||||||||||||||||||||||
Cesi | 128 | 101 | 80 | 1 | 159 | 129 | 125 | 1 | ||||||||||||||||||||||||
Compagnia Porto di Civitavecchia | 23 | 7 | — | (2 | ) | 2 | 4 | — | (3 | ) | ||||||||||||||||||||||
Aes Distribuidores Salvadoreños | 85 | 57 | 5 | — | 104 | 67 | 9 | 5 | ||||||||||||||||||||||||
Other companies | 166 | 114 | 52 | 6 | 119 | 103 | 14 | 4 |
At Dec. 31, | At Dec. 31, | |||||||
2006 | 2005 | |||||||
(millions of euro) | ||||||||
Equity investments in other companies | 367 | 594 | ||||||
Advance paid on the acquisition of Slovenské elektrárne | — | 168 | ||||||
Receivables due from associates and other equity investments | — | 34 | ||||||
Other securities designated at fair value through profit or loss | 114 | — | ||||||
Other receivables: | ||||||||
— financial receivables due from financing entities | 14 | 27 | ||||||
— derivative contracts | 37 | 11 | ||||||
— other items | 962 | 2 | ||||||
Total other receivables | 1,013 | 40 | ||||||
TOTAL | 1,494 | 836 |
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At Dec. 31, | At Dec. 31, | |||||||||||||||
2006 | % Holding | 2005 | % Holding | |||||||||||||
(millions of euro) | ||||||||||||||||
Weather Investments | — | — | 286 | 5.20 | % | |||||||||||
Terna | 262 | 5.12 | % | 213 | 5.12 | % | ||||||||||
Red Electrica de España | 44 | 1.00 | % | 35 | 1.00 | % | ||||||||||
LaGeo | 25 | 12.50 | % | 25 | 12.50 | % | ||||||||||
Echelon | 18 | 7.67 | % | 20 | 7.54 | % | ||||||||||
Tri Alpha Energy | 7 | 6.18 | % | 7 | 6.74 | % | ||||||||||
Other | 11 | 8 | ||||||||||||||
Total | 367 | 594 |
At Dec. 31, 2006 | At Dec. 31, 2005 | |||||||||||||||
Carrying | Carrying | |||||||||||||||
Amount | Fair Value | Amount | Fair Value | |||||||||||||
(millions of euro) | ||||||||||||||||
Long-term financial receivables | 1,120 | 1,120 | 66 | 66 | ||||||||||||
Total | 1,120 | 1,120 | 66 | 66 |
Notional Value | Fair Value | |||||||||||||||
At Dec. 31, | At Dec. 31, | At Dec. 31, | At Dec. 31, | |||||||||||||
2006 | 2005 | 2006 | 2005 | |||||||||||||
(millions of euro) | ||||||||||||||||
Cash flow hedge derivatives: | ||||||||||||||||
— interest rates | 2,586 | 327 | 37 | 11 | ||||||||||||
Total | 2,586 | 327 | 37 | 11 |
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At Dec. 31, | At Dec. 31, | |||||||
2006 | 2005 | |||||||
(millions of euro) | ||||||||
Receivables from Electricity Equalization Fund | 209 | 847 | ||||||
Receivables from State Decommissioning Fund | 269 | — | ||||||
Other long-term receivables: | ||||||||
— tax paid on account on termination benefits | 5 | 19 | ||||||
— loans to employees | 45 | 44 | ||||||
— other receivables | 40 | 65 | ||||||
Total other long-term receivables | 90 | 128 | ||||||
TOTAL | 568 | 975 |
(16) | CURRENT LIABILITIES |
At Dec. 31, 2006 | At Dec. 31, 2005 | |||||||||||||||
Book Value | Fair Value | Book Value | Fair Value | |||||||||||||
Short-term amounts due to banks | 542 | 542 | 970 | 970 | ||||||||||||
Commercial paper | 531 | 531 | 275 | 275 | ||||||||||||
Other short-term financial payables | 13 | 13 | 116 | 116 | ||||||||||||
Short-term financial debt | 1,086 | 1,086 | 1,361 | 1,361 |
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At Dec. 31, | At Dec. 31, | |||||||
2006 | 2005 | |||||||
(millions of euro) | ||||||||
Deferred financial liabilities | 177 | 176 | ||||||
Derivative contracts | 753 | 103 | ||||||
Other items | 11 | 15 | ||||||
Total | 941 | 294 |
Notional Value | Fair Value | |||||||||||||||
At Dec. 31, | At Dec. 31, | At Dec. 31, | At Dec. 31, | |||||||||||||
2006 | 2005 | 2006 | 2005 | |||||||||||||
(millions of euro) | ||||||||||||||||
Cash flow hedge derivatives: | ||||||||||||||||
— interest rates | 2 | 191 | — | 10 | ||||||||||||
— exchange rates | 1 | 20 | — | — | ||||||||||||
Total | 3 | 211 | — | 10 | ||||||||||||
Trading derivatives: | ||||||||||||||||
— interest rates | 309 | 610 | 26 | 55 | ||||||||||||
— exchange rates | 1,340 | 1,147 | 24 | 15 | ||||||||||||
— commodities | 4,730 | 125 | 698 | 13 | ||||||||||||
— other | — | — | 5 | 10 | ||||||||||||
Total | 6,379 | 1,882 | 753 | 93 | ||||||||||||
TOTAL | 6,382 | 2,093 | 753 | 103 |
• | fuel trading, with a notional value of €444 million and a fair value of €28 million; | |
• | one-way contracts for differences, with a notional value of €3,219 million and a fair value of €123 million; | |
• | trading derivatives on electricity, with a net notional value of about €55 million and a fair value of €7 million; | |
• | embedded derivatives related to energy sale and purchase contracts in Slovakia, with a notional value of €1,012 million and a fair value of €540 million. |
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At Dec. 31, | At Dec. 31, | |||||||
2006 | 2005 | |||||||
(millions of euro) | ||||||||
Payables due to customers | 1,572 | 1,755 | ||||||
Payables due to the Electricity Equalization Fund | 948 | 406 | ||||||
Payables due to employees | 341 | 353 | ||||||
Taxes payable | 221 | 199 | ||||||
Social security contributions payable | 147 | 144 | ||||||
Other | 877 | 533 | ||||||
Total | 4,106 | 3,390 |
(17) | NON-CURRENT LIABILITIES |
Portion | ||||||||||||||||||||||||||||||||||||||||||||
Falling Due | ||||||||||||||||||||||||||||||||||||||||||||
at More | ||||||||||||||||||||||||||||||||||||||||||||
Nominal | Than | Current | ||||||||||||||||||||||||||||||||||||||||||
Balance | Value | Balance | 12 months | Portion | Maturing in | |||||||||||||||||||||||||||||||||||||||
Maturing | 31.12.2006 | 31.12.2006 | 31.12.2005 | 2007 | 2008 | 2009 | 2010 | 2011 | Beyond | |||||||||||||||||||||||||||||||||||
(millions of euro) | ||||||||||||||||||||||||||||||||||||||||||||
Bonds: | ||||||||||||||||||||||||||||||||||||||||||||
— listed, fixed rate | 2008-2033 | 5,680 | 5,721 | 5,621 | 5,674 | 6 | 1,004 | 7 | 107 | 946 | 3,610 | |||||||||||||||||||||||||||||||||
— listed, floating rate | 2009-2012 | 633 | 636 | 799 | 633 | — | 50 | 86 | 100 | — | 397 | |||||||||||||||||||||||||||||||||
— unlisted, fixed rate | 2007-2010 | 91 | 91 | 171 | 61 | 30 | 60 | 1 | — | — | — | |||||||||||||||||||||||||||||||||
— unlisted, floating rate | 2007-2032 | 2,030 | 2,030 | 1,939 | 2,007 | 23 | 22 | 331 | 79 | 56 | 1,519 | |||||||||||||||||||||||||||||||||
Total | 8,434 | 8,478 | 8,530 | 8,375 | 59 | 1,136 | 425 | 286 | 1,002 | 5,526 | ||||||||||||||||||||||||||||||||||
Bank loans: | ||||||||||||||||||||||||||||||||||||||||||||
— fixed rate | 2007-2015 | 130 | 130 | 166 | 91 | 39 | 19 | 20 | 9 | 9 | 34 | |||||||||||||||||||||||||||||||||
— floating rate | 2007-2026 | 3,780 | 3,802 | 3,015 | 3,586 | 194 | 235 | 282 | 254 | 816 | 1,999 | |||||||||||||||||||||||||||||||||
Total | 3,910 | 3,932 | 3,181 | 3,677 | 233 | 254 | 302 | 263 | 825 | 2,033 | ||||||||||||||||||||||||||||||||||
Non-bank loans: | ||||||||||||||||||||||||||||||||||||||||||||
— fixed rate | 2007-2026 | 132 | 135 | 138 | 104 | 28 | 21 | 7 | 6 | 7 | 63 | |||||||||||||||||||||||||||||||||
— floating rate | 2009-2020 | 41 | 41 | 53 | 38 | 3 | 3 | 2 | 2 | 2 | 29 | |||||||||||||||||||||||||||||||||
Total | 173 | 176 | 191 | 142 | 31 | 24 | 9 | 8 | 9 | 92 | ||||||||||||||||||||||||||||||||||
TOTAL | 12,517 | 12,586 | 11,902 | 12,194 | 323 | 1,414 | 736 | 557 | 1,836 | 7,651 |
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Current | Effective | |||||||||||||||||||
Balance | Nominal Value | Balance | Interest Rate | Interest Rate | ||||||||||||||||
At Dec. 31, 2006 | At Dec. 31, 2005 | At Dec. 31, 2006 | ||||||||||||||||||
(millions of euro) | ||||||||||||||||||||
Euro | 11,869 | 11,935 | 11,444 | 4.36 | % | 4.41 | % | |||||||||||||
US dollar | 222 | 225 | 185 | 8.09 | % | 8.11 | % | |||||||||||||
Pound sterling | 62 | 62 | 62 | 5.73 | % | 5.73 | % | |||||||||||||
Swiss franc | 13 | 13 | 22 | 6.49 | % | 6.49 | % | |||||||||||||
Japanese yen | 59 | 59 | 109 | 1.65 | % | 1.65 | % | |||||||||||||
Other currencies | 292 | 292 | 80 | 5.92 | % | 5.92 | % | |||||||||||||
Total non-euro currencies | 648 | 651 | 458 | |||||||||||||||||
TOTAL | 12,517 | 12,586 | 11,902 |
Changes in | Exchange | |||||||||||||||||||||||||||
Nominal Value | Change in | Consolidated | New | Rate | Nominal Value | |||||||||||||||||||||||
At Dec. 31, 2005 | Repayments | Own Bonds | Companies | Financing | Differences | At Dec. 31, 2006 | ||||||||||||||||||||||
(millions of euro) | ||||||||||||||||||||||||||||
Bonds | 8,599 | (487 | ) | 53 | 246 | 97 | (30 | ) | 8,478 | |||||||||||||||||||
Bank loans | 3,195 | (1,173 | ) | — | 493 | 1,425 | (8 | ) | 3,932 | |||||||||||||||||||
Non-bank loans | 191 | (45 | ) | — | 45 | 2 | (17 | ) | 176 | |||||||||||||||||||
Total financial debt | 11,985 | (1,705 | ) | 53 | 784 | 1,524 | (55 | ) | 12,586 |
• | the refinancing of Slovenské elektrárne debt with a new5-year revolving line of credit for a total of €600 million without an Enel SpA guarantee, €565 million of which was drawn at the end of 2006; | |
• | the renegotiation of the project financing in respect of Enel Maritza East 3 (formerly Maritza East III Power Company) in the amount of €450 million payable in 2023 and fully guaranteed by SACE, an Italian credit insurance agency, €220 million of which was drawn at December 31, 2006; | |
• | the renegotiation of the Acuerdo Marco II project financing for Enel Unión Fenosa Renovables in the amount of €283 million with a maturity of 15 years, €80 million of which was drawn at December 31, 2006; | |
• | the issue by Enel SpA of two additional tranches of a privately-placed bond issue for leading Italian insurance companies in the amount of €97 million maturing in 2024; | |
• | the signing by Enel Viesgo Generación of an EIB loan in the amount of €150 million for investment in the Escatrón plant, which is yet to be disbursed; | |
• | the signing by Enel Distribuzione of an EIB loan in the amount of €600 million for investments in the “Network Efficiency” project, which was disbursed in its entirety at December 31, 2006. |
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At Dec. 31, 2006 | At Dec. 31, 2005 | |||||||||||||||
Book Value | Fair Value | Book Value | Fair Value | |||||||||||||
(millions of euro) | ||||||||||||||||
Bonds: | ||||||||||||||||
— fixed-rate | 5,771 | 5,938 | 5,792 | 6,235 | ||||||||||||
— floating-rate | 2,663 | 2,699 | 2,738 | 2,826 | ||||||||||||
Total | 8,434 | 8,637 | 8,530 | 9,061 | ||||||||||||
Bank loans: | ||||||||||||||||
— fixed-rate | 130 | 133 | 166 | 173 | ||||||||||||
— floating-rate | 3,780 | 3,785 | 3,015 | 3,012 | ||||||||||||
Total | 3,910 | 3,918 | 3,181 | 3,185 | ||||||||||||
Non-bank loans: | ||||||||||||||||
— fixed-rate | 132 | 135 | 138 | 138 | ||||||||||||
— floating-rate | 41 | 41 | 53 | 53 | ||||||||||||
Total | 173 | 176 | 191 | 191 | ||||||||||||
TOTAL | 12,517 | 12,731 | 11,902 | 12,437 |
Book Value | Book Value | |||||||
At Dec. 31, 2006 | At Dec. 31, 2005 | |||||||
(millions of euro) | ||||||||
Bonds: | ||||||||
— fixed-rate | 5,735 | 5,495 | ||||||
— floating-rate | 2,640 | 2,548 | ||||||
Total | 8,375 | 8,043 | ||||||
Bank loans: | ||||||||
— fixed-rate | 91 | 127 | ||||||
— floating-rate | 3,586 | 2,655 | ||||||
Total | 3,677 | 2,782 | ||||||
Non-bank loans: | ||||||||
— fixed-rate | 104 | 96 | ||||||
— floating-rate | 38 | 46 | ||||||
Total | 142 | 142 | ||||||
TOTAL | 12,194 | 10,967 |
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Book Value | Book Value | |||||||
At Dec. 31, 2006 | At Dec. 31, 2005 | |||||||
(millions of euro) | ||||||||
Bonds: | ||||||||
— fixed-rate | 36 | 297 | ||||||
— floating-rate | 23 | 190 | ||||||
Total | 59 | 487 | ||||||
Bank loans: | ||||||||
— fixed-rate | 39 | 39 | ||||||
— floating-rate | 194 | 360 | ||||||
Total | 233 | 399 | ||||||
Non-bank loans: | ||||||||
— fixed-rate | 28 | 42 | ||||||
— floating-rate | 3 | 7 | ||||||
Total | 31 | 49 | ||||||
TOTAL | 323 | 935 |
• | negative pledge clauses under which the issuer may not establish or maintain (except under statutory requirement) mortgages, liens or other encumbrances on all or part of its assets to secure any listed bond or bond for which listing is planned unless the same guarantee is extended equally or pro rata to the bonds in question; | |
• | pari passu clauses, under which the securities constitute a direct, unconditional and unsecured obligation of the issuer and are issued without preferential rights among them and have the same seniority as other present and future bonds of the issuer; | |
• | specification of default events, whose occurrence (for example, insolvency, failure to pay principle or interest, initiation of liquidation proceedings, etc.) constitutes a default; under “cross default” clauses, the occurrence of a default event in respect of any financial liability (above a threshold level) issued by the issuer or significant subsidiaries (defined as consolidated companies whose gross revenues or total assets are at least 10% of gross consolidated revenues or total consolidated assets) constitutes a default in respect of the liability in question, which becomes immediately repayable; | |
• | early redemption clauses in the event of new tax requirements, which permit early redemption at par of all outstanding bonds. |
• | negative pledge clauses, under which the issuer undertakes not to establish or grant to third parties additional guarantees or privileges with respect to those already established in the individual contracts by the Company |
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or Enel Group companies, unless an equivalent guarantee is extended equally or pro rata to the loans in question; |
• | clauses that require the guarantor (whether Enel SpA or banks acceptable to the EIB) to maintain its rating above a specified grade; | |
• | in the case of guarantees provided by Enel SpA, the Group’s equity may not fall below a specified level; | |
• | material changes clauses, under which the occurrence of a specified event (mergers, spin-offs, disposal or transfer of business units, changes in company control structure, etc.) gives rise to the consequent adjustment of the contract, without which the loan shall become repayable immediately without payment of any commission; | |
• | requirements to report periodically to the EIB; | |
• | requirement for insurance coverage and maintenance of property, possession and use of the works, plant and machinery financed by the loan over the entire term of the agreement; | |
• | contract termination clauses, under which the occurrence of a specified event (serious inaccuracies in documentation presented in support of the contract, failure to repay at maturity, suspension of payments, insolvency, special administration, disposal of assets to creditors, dissolution, liquidation, total or partial disposal of assets, declaration of bankruptcy or composition with creditors or receivership, substantial decrease in equity, etc.) triggers immediate repayment. |
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At Dec. 31, | At Dec. 31, | |||||||
2006 | 2005 | |||||||
(millions of euro) | ||||||||
Cash on hand | 6 | 4 | ||||||
Bank and post office deposits | 541 | 472 | ||||||
Securities(1) | 25 | 32 | ||||||
Total cash and cash equivalents | 572 | 508 | ||||||
Financial receivables due from associates | 10 | 3 | ||||||
Factoring receivables | 211 | 374 | ||||||
Short-term portion of long-term financial receivables | 30 | 3 | ||||||
Totalshort-term financial receivables | 251 | 380 | ||||||
Short-term bank debt | (542 | ) | (970 | ) | ||||
Commercial paper | (531 | ) | (275 | ) | ||||
Short-term portion of long-term bank debt | (233 | ) | (399 | ) | ||||
Bonds (short-term portion) | (59 | ) | (487 | ) | ||||
Other loans (short-term portion) | (31 | ) | (49 | ) | ||||
Other short-term financial payables | (13 | ) | (116 | ) | ||||
Total short-term financial debt | (1,409 | ) | (2,296 | ) | ||||
Net short-term financial position | (586 | ) | (1,408 | ) | ||||
Long-term financial receivables | 1,090 | 63 | ||||||
Debt to banks and financing entities | (3,677 | ) | (2,782 | ) | ||||
Bonds | (8,375 | ) | (8,043 | ) | ||||
Other loans | (142 | ) | (142 | ) | ||||
Total long-term financial debt | (12,194 | ) | (10,967 | ) | ||||
Net long-term financial position | (11,104 | ) | (10,904 | ) | ||||
TOTAL NET FINANCIAL POSITION | (11,690 | ) | (12,312 | ) |
(1) | On the consolidated Balance Sheet securities have been presented under Current Financial Assets. |
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Benefits Due on Termination of | ||||||||||||||||
Employment and | ||||||||||||||||
Other Long-Term | Post-Employment Benefits Under | |||||||||||||||
Benefits | Defined-Benefit Plans | |||||||||||||||
2006 | 2005 | 2006 | 2005 | |||||||||||||
(millions of euro) | ||||||||||||||||
Changes in actuarial liabilities: | ||||||||||||||||
Actuarial liabilities at the beginning of the year | 1,783 | 1,977 | 1,199 | 1,237 | ||||||||||||
Service cost | 83 | 95 | (1) | 9 | 9 | (1) | ||||||||||
Interest cost | 74 | 68 | (1) | 48 | 49 | (1) | ||||||||||
Benefits paid | (162 | ) | (232 | ) | (58 | ) | (54 | ) | ||||||||
Other changes | (64 | ) | — | (6 | ) | — | ||||||||||
Changes in scope of consolidation | 37 | (113 | ) | 6 | (61 | ) | ||||||||||
Actuarial (gains)/losses | (31 | ) | (12 | ) | 3 | 19 | ||||||||||
Foreign exchange (gains)/losses | 3 | — | 1 | — | ||||||||||||
Actuarial liabilities at the end of the year | 1,723 | 1,783 | 1,202 | 1,199 | ||||||||||||
Changes in plan assets: | ||||||||||||||||
Fair value at the beginning of the year | 281 | 172 | 23 | 23 | ||||||||||||
Expected return on plan assets | 14 | 12 | — | 1 | ||||||||||||
Actuarial gains/(losses) | (2 | ) | (9 | ) | — | — | ||||||||||
Contributions paid by company | 26 | 15 | 1 | — | ||||||||||||
Other changes | — | 109 | — | — | ||||||||||||
Benefits paid | (24 | ) | (18 | ) | (1 | ) | (1 | ) | ||||||||
Fair value at the end of the year | 295 | 281 | 23 | 23 | ||||||||||||
Reconciliation with carrying amount: | ||||||||||||||||
Net actuarial liabilities at the end of the year | 1,428 | 1,502 | 1,179 | 1,176 | ||||||||||||
Unrecognized (gains)/losses | (29 | ) | (3 | ) | 3 | (19 | ) | |||||||||
Carrying amount of liabilities at the end of the year | 1,457 | 1,505 | 1,176 | 1,157 |
(1) | Includes Telecommunications and Transmission Networks Divisions until date of deconsolidation. |
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2006 | 2005 | 2004 | ||||||||||
Discount rate | 4.25 | % | 4.00 | % | 4.25 | % | ||||||
Rate of increase in wages | 3.00 | % | 3.00 | % | 3.00 | % | ||||||
Rate of increase in healthcare costs | 3.00 | % | 3.00 | % | 3.00 | % |
Provision | Changes in | Utilization | Taken to | Changes in | Utilization | |||||||||||||||||||||||||||||||||||
At Dec. 31, | Made During | Scope of | and other | At Dec. 31, | Income | Scope of | and Other | At Dec. 31, | ||||||||||||||||||||||||||||||||
2004 | the Year | Consolidation | Changes | 2005 | Accruals | Statement | Consolidation | Changes | 2006 | |||||||||||||||||||||||||||||||
(millions of euro) | ||||||||||||||||||||||||||||||||||||||||
Provision for litigation, risks and other charges: | ||||||||||||||||||||||||||||||||||||||||
— nuclear decommissioning | 382 | 56 | (38 | ) | (59 | ) | — | 123 | — | 1,893 | 173 | 2,189 | ||||||||||||||||||||||||||||
— non-nuclear plant retirement and site restoration | 80 | — | (60 | ) | 7 | 27 | 16 | — | 169 | 11 | 223 | |||||||||||||||||||||||||||||
— litigation | 382 | 56 | (38 | ) | (59 | ) | 341 | 62 | (22 | ) | 7 | (40 | ) | 348 | ||||||||||||||||||||||||||
— CO2 emissions charges | — | 228 | — | — | 228 | 9 | (108 | ) | — | (120 | ) | 9 | ||||||||||||||||||||||||||||
— other | 647 | 171 | (74 | ) | (194 | ) | 550 | 215 | (61 | ) | 436 | (180 | ) | 960 | ||||||||||||||||||||||||||
Total | 1,109 | 455 | (172 | ) | (246 | ) | 1,146 | 425 | (191 | ) | 2,505 | (156 | ) | 3,729 | ||||||||||||||||||||||||||
Provision for early-retirement incentives | 295 | 69 | (8 | ) | (235 | ) | 121 | 400 | — | 21 | (120 | ) | 422 | |||||||||||||||||||||||||||
TOTAL | 1,404 | 524 | (180 | ) | (481 | ) | 1,267 | 825 | (191 | ) | 2,526 | (276 | ) | 4,151 |
• | provision for disposal and storage of radioactive waste: at December 31, 2006 this amounted to €288 million in respect of the cost for the transport, treatment and storage of nuclear waste. The liability was estimated on the basis of the Company’s obligations under the applicable Slovakian legislation; | |
• | provision for storage and long-term disposal of spent nuclear fuel: at December 31, 2006 this amounted to €1,222 million in respect of the estimated cost for the transport and storage of spent nuclear fuel. The liability was estimated on the basis of engineering and financial assessments of the costs of building the storage facilities; | |
• | provision for decommissioning of nuclear power plants: at December 31, 2006 this amounted to €679 million in respect of the estimated cost of retiring the plants. The liability was estimated on the basis of engineering and financial assessments of the cost of retirement (also using comparative analyses) and the operating plans for decommissioning established by the relevant Slovakian authorities. |
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Increase | Increase | |||||||||||||||||||||||||||||||
(Decrease) | (Decrease) | |||||||||||||||||||||||||||||||
Taken to | Changes in | Taken to | ||||||||||||||||||||||||||||||
At Dec. 31, | Income | Other | Scope of | At Dec. 31, | Income | Other | At Dec. 31, | |||||||||||||||||||||||||
2004 | Statement | Changes | Consolidation | 2005 | Statement | Changes | 2006 | |||||||||||||||||||||||||
(millions of euro) | ||||||||||||||||||||||||||||||||
Nature of the temporary differences: | ||||||||||||||||||||||||||||||||
— differences on non-current and financial assets | 2,100 | 282 | 20 | (502 | ) | 1,900 | 127 | (14 | ) | 2,013 | ||||||||||||||||||||||
— income subject to deferred taxation | 98 | (41 | ) | — | — | 57 | (43 | ) | 6 | 20 | ||||||||||||||||||||||
— allocation of goodwill to assets | 61 | (3 | ) | 39 | — | 97 | (4 | ) | 7 | 100 | ||||||||||||||||||||||
— measurement of financial instruments | 12 | (19 | ) | 105 | (2 | ) | 96 | (41 | ) | (5 | ) | 50 | ||||||||||||||||||||
— other items | 241 | 64 | — | 9 | 314 | 8 | (1 | ) | 321 | |||||||||||||||||||||||
Total | 2,512 | 283 | 164 | (495 | ) | 2,464 | 47 | (7 | ) | 2,504 |
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Notional value | Fair value | |||||||||||||||
At Dec. 31, | At Dec. 31, | At Dec. 31, | At Dec. 31, | |||||||||||||
2006 | 2005 | 2006 | 2005 | |||||||||||||
(millions of euro) | ||||||||||||||||
Cash flow hedge derivatives: | ||||||||||||||||
— interest rates | 2,238 | 3,749 | 116 | 262 | ||||||||||||
Total | 2,238 | 3,749 | 116 | 262 |
At Dec. 31, | At Dec. 31, | |||||||
2006 | 2005 | |||||||
(millions of euro) | ||||||||
Deferred operating liabilities | 1,014 | 828 | ||||||
Other items | 30 | 18 | ||||||
Total | 1,044 | 846 |
(18) | EQUITY ATTRIBUTABLE TO THE SHAREHOLDERS OF THE PARENT COMPANY |
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Gains/(Losses) | ||||||||||||||||
Recognized in | Released to | |||||||||||||||
At Dec. 31, | Equity for the | Income | At Dec. 31, | |||||||||||||
2005 | Period | Statement | 2006 | |||||||||||||
(millions of euro) | ||||||||||||||||
Reserve for fair value measurement of cash flow hedging, effective portion | (138 | ) | 71 | 52 | (15 | ) | ||||||||||
Reserve for fair value measurement of financial investments held for sale | 132 | 77 | (32 | ) | 177 | |||||||||||
Reserve for foreign exchange differences | 60 | 66 | 126 | |||||||||||||
Total gains/(losses) recognized in equity | 54 | 214 | 20 | 288 |
(19) | RELATED PARTIES |
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Balance sheet | ||||||||||||||||
At Dec. 31, 2006 | At Dec. 31, 2005 | |||||||||||||||
Receivables | Payables | Receivables | Payables | |||||||||||||
(millions of euro) | ||||||||||||||||
Single Buyer | 483 | 2,017 | 653 | 2,199 | ||||||||||||
Market Operator | 968 | 352 | 1,230 | 210 | ||||||||||||
Terna | 357 | 394 | 378 | 334 | ||||||||||||
Electricity Services Operator | 263 | 354 | 200 | 231 | ||||||||||||
ENI | 39 | 191 | 2 | 589 | ||||||||||||
Italian Post Office | — | 41 | 1 | 20 | ||||||||||||
Total | 2,110 | 3,349 | 2,464 | 3,583 |
Income Statement | ||||||||||||||||||||||||
2006 | 2005 | 2004 | ||||||||||||||||||||||
Costs | Revenues | Costs | Revenues | Costs | Revenues | |||||||||||||||||||
(millions of euro) | ||||||||||||||||||||||||
Single Buyer | 12,309 | 1,749 | 10,150 | 1,160 | 7,183 | 1,824 | ||||||||||||||||||
Market Operator | 1,579 | 6,274 | 1,159 | 6,308 | 483 | 3,079 | ||||||||||||||||||
Terna | 1,919 | 2,062 | 292 | 316 | — | — | ||||||||||||||||||
Electricity Services Operator | 27 | 539 | 1,294 | 2,455 | 1,917 | 2,715 | ||||||||||||||||||
ENI | 1,502 | 199 | 1,848 | 123 | 1,638 | — | ||||||||||||||||||
Italian Post Office | 145 | 15 | 99 | 15 | — | — | ||||||||||||||||||
Total | 17,481 | 10,838 | 14,842 | 10,377 | 11,221 | 7,618 |
Balance sheet | ||||||||||||||||
At Dec. 31, 2006 | At Dec. 31, 2005 | |||||||||||||||
Receivables | Payables | Receivables | Payables | |||||||||||||
(millions of euro) | ||||||||||||||||
Cesi | 1 | 17 | 4 | 24 | ||||||||||||
Wind Telecomunicazioni | — | — | 291 | 193 | ||||||||||||
Other companies | 16 | 1 | — | — | ||||||||||||
Total | 17 | 18 | 295 | 217 |
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Income Statement | ||||||||||||||||||||||||
2006 | 2005 | 2004 | ||||||||||||||||||||||
Costs | Revenues | Costs | Revenues | Costs | Revenues | |||||||||||||||||||
(millions of euro) | ||||||||||||||||||||||||
Wind Telecomunicazioni | — | — | 138 | 26 | — | — | ||||||||||||||||||
Cesi | 15 | 1 | 24 | 4 | 22 | 4 | ||||||||||||||||||
Immobiliare Foro Bonaparte | — | — | 21 | — | 33 | — | ||||||||||||||||||
Leasys | — | — | 162 | 2 | 103 | 3 | ||||||||||||||||||
Idrolatina | — | — | 2 | — | — | — | ||||||||||||||||||
Other companies | 3 | 7 | — | — | 2 | — | ||||||||||||||||||
Total | 18 | 8 | 347 | 32 | 160 | 7 |
(20) | CONTRACTUAL COMMITMENTS AND GUARANTEES |
At Dec. 31, 2006 | ||||
(millions of euro) | ||||
Guarantees given: | ||||
— sureties and other guarantees granted to third parties | 1,356 | |||
Commitments to suppliers for: | ||||
— electricity purchases | 4,592 | |||
— fuel purchases | 33,024 | |||
— various supplies | 6,177 | |||
— tenders | 1,827 | |||
— other | 258 | |||
Total | 45,878 | |||
TOTAL | 47,234 |
• | 2007: €74 million; | |
• | 2008: €73 million; | |
• | 2009: €74 million; | |
• | 2010: €68 million; | |
• | 2011: €55 million. |
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(21) | CONTINGENT LIABILITIES AND ASSETS |
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F-72
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F-73
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(22) | STOCK OPTION PLANS AND REMUNERATION OF DIRECTORS AND SENIOR EXECUTIVES |
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F-75
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Number of Options | 2002 Plan | 2003 Plan | 2004 Plan | 2006 Plan | Total | |||||||||||||||
Options granted at December 31, 2004 | 41,748,500 | 47,624,005 | 38,527,550 | — | 127,900,055 | |||||||||||||||
Options exercised at December 31, 2004 | 24,104,556 | 16,342,119 | — | — | 40,446,675 | |||||||||||||||
Options lapsed at December 31, 2004 | 4,824,000 | 3,237,700 | 1,231,000 | — | 9,292,700 | |||||||||||||||
Options outstanding at December 31, 2004 | 12,819,944 | 28,044,186 | 37,296,550 | — | 78,160,680 | |||||||||||||||
Options exercised in 2005 | 10,697,094 | 14,158,373 | 12,392,982 | — | 37,248,449 | |||||||||||||||
Options lapsed in 2005 | 48,500 | 50,726 | 394,500 | — | 493,726 | |||||||||||||||
Options outstanding at December 31, 2005 | 2,074,350 | 13,835,087 | 24,509,068 | — | 40,418,505 | |||||||||||||||
New options granted in 2006 | — | — | — | 31,790,000 | 31,790,000 | |||||||||||||||
Options exercised in 2006 | 1,319,050 | 11,726,012 | 6,079,571 | — | 19,124,633 | |||||||||||||||
Options lapsed in 2006 | — | 60,290 | 334,300 | 286,000 | 680,590 | |||||||||||||||
Options outstanding at December 31, 2006 | 755,300 | 2,048,785 | 18,095,197 | 31,504,000 | 52,403,282 | |||||||||||||||
Fair value at grant date (euro) | 0.17 | 0.37 | 0.18 | 0.27 | ||||||||||||||||
Volatility | 28 | % | 28 | % | 17 | % | 14 | % | ||||||||||||
Vesting period | 2 years | 2 years | 3.5 years | 4 years | ||||||||||||||||
Option expiry | December 2007 | December 2008 | December 2009 | December 2012 | ||||||||||||||||
Average expected annual dividend | 0.28 | 0.28 | 0.36 | 0.44 | ||||||||||||||||
Risk-free interest rate | 2.82 | % | 2.82 | % | 2.72 | % | 4.00 | % |
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Last Name | Name | Position | 2006 | 2005 | ||||||||||||
Gnudi | Piero | Chairman | 735,764.00 | 700,755.14 | ||||||||||||
Conti | Fulvio | CEO and GM | 600,000.00 | 350,000.00 | ||||||||||||
Scaroni | Paolo | CEO and GM(1 | ) | — | 294,507.19 | |||||||||||
Ballio | Giulio | Director | 117,000.00 | 63,583.10 | ||||||||||||
Fantozzi | Augusto | Director | 116,427.00 | 62,833.10 | ||||||||||||
Luciano | Alessandro | Director | 117,000.00 | 62,833.10 | ||||||||||||
Miccio | Mauro | Director(1 | ) | — | 47,404.21 | |||||||||||
Morganti | Franco | Director(1 | ) | — | 46,630.90 | |||||||||||
Napolitano | Fernando | Director | 117,250.00 | 110,479.99 | ||||||||||||
Taranto | Francesco | Director | 122,500.00 | 117,029.40 | ||||||||||||
Tosi | Gianfranco | Director | 117,500.00 | 109,963.53 | ||||||||||||
Valsecchi | Francesco | Director | 117,000.00 | 62,883.10 | ||||||||||||
2,160,441.00 | 2,028,902.76 | |||||||||||||||
(1) | Former member of Enel’s board of directors. |
2006 | 2005 | |||||||||||||||||||||||||||
Bonuses | Bonuses | |||||||||||||||||||||||||||
Non-Monetary | and Other | Other | Non-Monetary | and Other | Other | |||||||||||||||||||||||
Last Name | Name | Position | Benefits | Incentives | Compensation | Benefits | Incentives | Compensation | ||||||||||||||||||||
Gnudi | Piero | Chairman | 11,779.68 | — | — | 11,050.68 | 585,998.30 | 2,640,000.00 | ||||||||||||||||||||
Conti | Fulvio | CEO and GM | — | — | 701,678.52 | — | 350,000.00 | 982,959.61 | ||||||||||||||||||||
Scaroni | Paolo | CEO and GM | — | — | — | — | 3,187,024.91 | 5,997,675.71 | ||||||||||||||||||||
Ballio | Giulio | Director | — | — | — | — | — | — | ||||||||||||||||||||
Fantozzi | Augusto | Director | — | — | — | — | — | — | ||||||||||||||||||||
Luciano | Alessandro | Director | — | — | — | — | — | — | ||||||||||||||||||||
Miccio | Mauro | Director | — | — | — | — | — | — | ||||||||||||||||||||
Morganti | Franco | Director | — | — | — | — | — | 28,506.84 | ||||||||||||||||||||
Napolitano | Fernando | Director | — | — | — | — | — | — | ||||||||||||||||||||
Taranto | Francesco | Director | — | — | — | — | — | 18,273.97 | ||||||||||||||||||||
Tosi | Gianfranco | Director | — | — | — | — | — | — | ||||||||||||||||||||
Valsecchi | Francesco | Director | — | — | — | — | — | — | ||||||||||||||||||||
11,779.68 | — | 701,678.52 | 11,050.68 | 4,123,023.21 | 9,667,416.13 | |||||||||||||||||||||||
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Stock Option Plan | Options Exercisable | Strike Price | Option Exercised | Resulting Shares Sold | ||||||||||||||||||
of Which in 2006 | ||||||||||||||||||||||
2001 | 347,916 | 7.272 | 347,916 | — | 332,916 | |||||||||||||||||
2002 | 902,500 | 6.426 | 566,500 | — | 566,500 | |||||||||||||||||
2003 | 992,800 | 5.240 | 497,840 | — | 497,840 | |||||||||||||||||
2004 | 600,000 | 6.242 | — | — | — | |||||||||||||||||
2006 | 1,500,000 | 6.842 | — | — | — |
23. | NET INCOME AND SHAREHOLDERS’ EQUITY IN ACCORDANCE WITH U.S. GAAP |
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Net Income | Equity | |||||||||||||||||||||||||||||||
For the Years Ended December 31, | As of December 31, | |||||||||||||||||||||||||||||||
Note | 2006 | 2005 | 2004 | 2006 | 2006 | 2005 | 2006 | |||||||||||||||||||||||||
(millions of euros) | (millions of | (millions of euros) | (millions of | |||||||||||||||||||||||||||||
U.S. dollars) | U.S. dollars) | |||||||||||||||||||||||||||||||
Financial statements: | ||||||||||||||||||||||||||||||||
Of the parent company | 3,036 | 3,895 | 2,631 | 4,007 | 18,460 | 19,057 | 24,362 | |||||||||||||||||||||||||
Of the minority interest | 23.1 | 65 | 237 | 116 | 86 | 565 | 359 | 746 | ||||||||||||||||||||||||
Total | 3,101 | 4,132 | 2,747 | 4,093 | 19,025 | 19,416 | 25,108 | |||||||||||||||||||||||||
Increases/(Decreases) due to: | ||||||||||||||||||||||||||||||||
Minority Interest | 23.1 | (61 | ) | (237 | ) | (116 | ) | (81 | ) | (968 | ) | (359 | ) | (1,277 | ) | |||||||||||||||||
Customers’ connection fees | 23.2 | (355 | ) | (419 | ) | (464 | ) | (469 | ) | (2,182 | ) | (1,827 | ) | (2,880 | ) | |||||||||||||||||
Revaluation of fixed assets, related depreciation and adjustment for gain/loss on disposal | 23.3 | (27 | ) | 183 | 1,057 | (36 | ) | 618 | 645 | 816 | ||||||||||||||||||||||
Capitalized interests and related depreciation | 23.4 | 33 | (12 | ) | (33 | ) | 44 | 1,269 | 1,236 | 1,675 | ||||||||||||||||||||||
Early retirement program | 23.5 | 294 | (121 | ) | 197 | 388 | 370 | 76 | 488 | |||||||||||||||||||||||
Employee benefit obligations | 23.6 | (36 | ) | 6 | 38 | (48 | ) | (8 | ) | 151 | (11 | ) | ||||||||||||||||||||
Goodwill impairment and subsequent disposal of an affiliate | 23.7 | 775 | 947 | (1,722 | ) | 1,023 | — | (775 | ) | — | ||||||||||||||||||||||
Business combinations, goodwill and other intangible assets | 23.8 | (100 | ) | (69 | ) | (86 | ) | (132 | ) | (3 | ) | 97 | (4 | ) | ||||||||||||||||||
Negative goodwill and related adjustments | 23.9 | (24 | ) | (24 | ) | — | (32 | ) | (48 | ) | (24 | ) | (63 | ) | ||||||||||||||||||
Deferred taxes on equity reserves | 23.10 | — | — | — | — | (571 | ) | (571 | ) | (754 | ) | |||||||||||||||||||||
Assets retirement obligations | 23.11 | 62 | 1 | (6 | ) | 82 | 72 | 10 | 95 | |||||||||||||||||||||||
Gain on sale of real estate business | 23.12 | 24 | 220 | (667 | ) | 31 | (423 | ) | (447 | ) | (558 | ) | ||||||||||||||||||||
Investment in equity securities — unlisted equity investments | 23.13 | — | (4 | ) | 4 | — | (4 | ) | 19 | (5 | ) | |||||||||||||||||||||
Transfer of financial asset | 23.14 | (2 | ) | — | — | (3 | ) | (2 | ) | — | (3 | ) | ||||||||||||||||||||
Onerous contracts | 23.15 | 32 | — | — | 42 | 32 | — | 42 | ||||||||||||||||||||||||
Other differences | 23.16 | (66 | ) | 43 | (70 | ) | (86 | ) | (112 | ) | (47 | ) | (148 | ) | ||||||||||||||||||
Tax effect of reconciling items | 74 | 62 | 146 | 98 | 151 | 29 | 199 | |||||||||||||||||||||||||
Minorities on reconciling items | 23.1 | (5 | ) | (10 | ) | 6 | (7 | ) | 4 | 9 | 5 | |||||||||||||||||||||
Amounts under U.S. GAAP corresponding to Parent Company | 3,719 | 4,698 | 1,031 | 4,907 | 17,220 | 17,638 | 22,725 | |||||||||||||||||||||||||
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As of December 31, | ||||||||||||
2006 | 2005 | 2006 | ||||||||||
(millions of euro) | (millions of | |||||||||||
U.S. dollars) | ||||||||||||
Assets | ||||||||||||
Current Assets | 12,704 | 12,654 | 16,764 | |||||||||
Property, plant and equipment, net | 33,684 | 30,320 | 44,454 | |||||||||
Other non-current assets | 9,716 | 7,622 | 12,822 | |||||||||
56,104 | 50,596 | 74,040 | ||||||||||
Liabilities and Shareholders’ Equity | ||||||||||||
Current liabilities | 12,923 | 13,446 | 17,054 | |||||||||
Long-term debt | 12,056 | 10,967 | 15,911 | |||||||||
Other non-current liabilities | 13,561 | 8,195 | 17,896 | |||||||||
Total liabilities | 38,540 | 32,608 | 50,861 | |||||||||
Minority interest | 344 | 350 | 454 | |||||||||
Shareholders’ equity | 17,220 | 17,638 | 22,725 | |||||||||
56,104 | 50,596 | 74,040 | ||||||||||
2006 | 2005 | 2004 | 2006 | |||||||||||||
(millions of euro) | (millions of | |||||||||||||||
U.S. dollars) | ||||||||||||||||
Total operating revenues | 39,023 | 35,875 | 31,535 | 51,498 | ||||||||||||
Income from equity exchange transaction | 263 | — | — | 347 | ||||||||||||
Total operating expenses | 32,551 | 29,235 | 24,436 | 42,957 | ||||||||||||
Net income/(charges) from commodity risk management | (614 | ) | 272 | (16 | ) | (810 | ) | |||||||||
Operating income | 6,121 | 6,912 | 7,083 | 8,078 | ||||||||||||
Financial income (loss) | (362 | ) | (763 | ) | (703 | ) | (478 | ) | ||||||||
Gain (Loss) on equity method investments | 3 | (30 | ) | (36 | ) | 4 | ||||||||||
Income from continuing operations before income taxes and minority interest | 5,762 | 6,119 | 6,344 | 7,604 | ||||||||||||
Income tax expense | 1,985 | 1,991 | 2,288 | 2,620 | ||||||||||||
Income from continuing operations before minority interest | 3,777 | 4,128 | 4,056 | 4,984 | ||||||||||||
Minority interest (losses) | (58 | ) | (247 | ) | (98 | ) | (77 | ) | ||||||||
Income from continuing operations | 3,719 | 3,881 | 3,958 | 4,907 | ||||||||||||
Income from discontinued operations, net of tax | — | 817 | (2,927 | ) | — | |||||||||||
Net income | 3,719 | 4,698 | 1,031 | 4,907 | ||||||||||||
F-80
Table of Contents
2005 | 2004 | |||||||
Income from operations of discontinued operations | (200 | ) | 94 | |||||
Gain from disposal of discontinued operations | 951 | (2,990 | ) | |||||
Income taxes | 66 | (31 | ) | |||||
Net income of discontinued operations, net of tax | 817 | (2,927 | ) |
Notes | 2006 | 2005 | 2004 | 2006 | ||||||||||||||||
(millions of euros) | (millions of | |||||||||||||||||||
U.S. dollars) | ||||||||||||||||||||
U.S. GAAP shareholders’ equity at the beginning of the year | 17,638 | 15,697 | 18,651 | 23,277 | ||||||||||||||||
Movements during the year: | ||||||||||||||||||||
Net income for the year | 3,719 | 4,698 | 1,031 | 4,908 | ||||||||||||||||
Interim dividend | (1,235 | ) | (1,169 | ) | (2,014 | ) | (1,630 | ) | ||||||||||||
Dividend | (2,715 | ) | (2,214 | ) | (2,195 | ) | (3,583 | ) | ||||||||||||
Accumulated other comprehensive income (loss), net of tax | ||||||||||||||||||||
— Minimum pension liabilities | (33 | ) | 17 | 43 | (44 | ) | ||||||||||||||
— Application of SFAS 158 | (49 | ) | — | (65 | ) | |||||||||||||||
— Financial instruments | 145 | 241 | (45 | ) | 191 | |||||||||||||||
— Other | 49 | 29 | (15 | ) | 65 | |||||||||||||||
Exercise of stock options | 108 | 339 | 241 | 143 | ||||||||||||||||
Minority interest of Slovenské elektrárne | 23.1 | (407 | ) | (537 | ) | |||||||||||||||
U.S. GAAP shareholders’ equity at the end of the year | 17,220 | 17,638 | 15,697 | 22,725 | ||||||||||||||||
2006 | 2005 | 2004 | 2006 | |||||||||||||
(millions of euro) | (millions of | |||||||||||||||
U.S. dollars) | ||||||||||||||||
Net income in accordance with U.S. GAAP | 3,719 | 4,698 | 1,031 | 4,908 | ||||||||||||
Minimum pension liabilities | (33 | ) | 17 | 43 | (44 | ) | ||||||||||
Investments in equity securities | 30 | 141 | 5 | 39 | ||||||||||||
Derivatives | 115 | 100 | (50 | ) | 152 | |||||||||||
Other changes | 49 | 29 | (15 | ) | 65 | |||||||||||
Total comprehensive income, net of tax | 3,880 | 4,985 | 1,014 | 5,120 | ||||||||||||
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2006 | 2005 | |||||||
(millions of euro) | ||||||||
Property, plant and equipment, gross: | ||||||||
Generating Plant: | ||||||||
Hydroelectric | 7,218 | 6,661 | ||||||
Thermal | 18,325 | 17,304 | ||||||
Nuclear | 2,597 | |||||||
Geothermal and renewable sources | 1,853 | 2,317 | ||||||
Distribution Electricity Network | 34,267 | 33,710 | ||||||
Distribution Gas Network | 2,743 | 2,733 | ||||||
Land and Buildings | 3,215 | 1,792 | ||||||
Other | 1,835 | 1,478 | ||||||
Construction in progress | 2,761 | 2,038 | ||||||
Total | 74,814 | 68,033 | ||||||
Accumulated Depreciation: | ||||||||
Generating Plant: | ||||||||
Hydroelectric | 3,125 | 2,595 | ||||||
Thermal | 10,093 | 9,641 | ||||||
Nuclear | 928 | |||||||
Geothermal and renewable sources | 1,364 | 1,108 | ||||||
Distribution Electricity Network | 22,363 | 21,867 | ||||||
Distribution Gas Network | 1,077 | 1,029 | ||||||
Land and Buildings | 1,059 | 607 | ||||||
Other | 1,121 | 866 | ||||||
Total | 41,130 | 37,713 | ||||||
Property, plant and equipment, net: | ||||||||
Generating Plant: | ||||||||
Hydroelectric | 4,093 | 4,066 | ||||||
Thermal | 8,232 | 7,663 | ||||||
Nuclear | 1,669 | |||||||
Geothermal and renewable sources | 489 | 1,209 | ||||||
Distribution Electricity Network | 11,904 | 11,843 | ||||||
Distribution Gas Network | 1,666 | 1,704 | ||||||
Land and Buildings | 2,156 | 1,185 | ||||||
Other | 714 | 612 | ||||||
Construction in progress | 2,761 | 2,038 | ||||||
Total | 33,684 | 30,320 | ||||||
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Dec. 31, | ||||||||||||||||
2006 Before | Dec. 31, | |||||||||||||||
Adjustment of | 2006 | |||||||||||||||
Minimum Liability | After Adjustment of | |||||||||||||||
and Adoption of | Adjustment of | Adoption of | Minimum Liability and | |||||||||||||
SFAS 158 | Minimum Liability | SFAS 158 | Adoption of SFAS 158 | |||||||||||||
(millions of euro) | ||||||||||||||||
Provisions for pensions | 2,570 | — | 71 | 2,641 | ||||||||||||
Accumulated other comprehensive income | (178 | ) | (33 | ) | (49 | ) | (260 | ) | ||||||||
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Pensions Benefits | Other Post-retirement Benefits | |||||||||||||||
2006 | 2005 | 2006 | 2005 | |||||||||||||
(millions of euro) | (millions of euro) | |||||||||||||||
Change in Projected Benefit Obligation: | ||||||||||||||||
Benefit Obligation at Jan 1 | 1,792 | 1,990 | 1,220 | 1,241 | ||||||||||||
Service cost | 83 | 78 | 9 | 6 | ||||||||||||
Interest cost | 75 | 78 | 49 | 48 | ||||||||||||
Actuarial (gain) loss | (30 | ) | (12 | ) | 3 | 39 | ||||||||||
Settlement | (49 | ) | (48 | ) | — | — | ||||||||||
PBO of business acquired (disposed) | 37 | (113 | ) | 6 | (61 | ) | ||||||||||
Benefits paid | (162 | ) | (181 | ) | (58 | ) | (53 | ) | ||||||||
Adjustment | (1 | ) | — | 2 | — | |||||||||||
Benefit Obligation at Dec 31 | 1,745 | 1,792 | 1,231 | 1,220 | ||||||||||||
Change in Plan Asset: | ||||||||||||||||
Fair value of plan assets at Jan 1 | 312 | 297 | 26 | 22 | ||||||||||||
Actuarial return on plan assets | (4 | ) | 14 | (1 | ) | 1 | ||||||||||
Company contribution | 21 | 156 | — | — | ||||||||||||
Benefit paid | (20 | ) | (111 | ) | — | (1 | ) | |||||||||
Settlement | — | (48 | ) | — | — | |||||||||||
Adjustments | (1 | ) | — | 2 | — | |||||||||||
Gains/(Losses) | — | 4 | — | 4 | ||||||||||||
Fair value of plan assets at Dec 31 | 308 | 312 | 27 | 26 | ||||||||||||
Reconciliation of Funded Status of the Plan: | ||||||||||||||||
Funded/(unfunded) status | (1,437 | ) | (1,480 | ) | (1,204 | ) | (1,194 | ) | ||||||||
Unrecognized net (gain)/loss | — | 400 | — | 42 | ||||||||||||
Unrecognized net transition obligation | — | (14 | ) | — | — | |||||||||||
Accrued benefit cost | (1,437 | ) | (1,094 | ) | (1,204 | ) | (1,152 | ) | ||||||||
Adjustment for minimum liability | — | (265 | ) | — | — | |||||||||||
Amount recognized in the consolidated balance sheet | (1,437 | ) | (1,359 | ) | (1,204 | ) | (1,152 | ) | ||||||||
Information for pension plans with an accumulated benefit obligation in excess of plan assets: | ||||||||||||||||
Projected benefit obligation | (1,401 | ) | (1,794 | ) | (60 | ) | (1,208 | ) | ||||||||
Accumulated benefit obligation | (1,380 | ) | (1,676 | ) | (46 | ) | (1,134 | ) | ||||||||
Fair value of plan assets | 32 | 312 | — | 26 |
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2006 | 2005 | |||||||
(millions of euro) | ||||||||
Provisions for pensions | 2,641 | 2,246 | ||||||
Thereof current | 132 | 200 | ||||||
Thereof non-current | 2,509 | 2,046 |
Pensions Benefits | Other Post-Retirement Benefits | |||||||||||||||
2006 | 2005 | 2006 | 2005 | |||||||||||||
(millions of euro) | (millions of euro) | |||||||||||||||
Accrued benefit cost | (1,437 | ) | (1,359 | ) | (1,204 | ) | (1,152 | ) | ||||||||
Accumulated other comprehensive income | — | 265 | — | — | ||||||||||||
Net amount recognized | (1,437 | ) | (1,094 | ) | (1,204 | ) | (1,152 | ) | ||||||||
Other Post- | ||||||||||||||||||||||||
Pensions Benefits | Retirement Benefits | |||||||||||||||||||||||
2006 | 2005 | 2004 | 2006 | 2005 | 2004 | |||||||||||||||||||
(millions of euro) | (millions of euro) | |||||||||||||||||||||||
Components of Net Periodic Benefit Cost: | ||||||||||||||||||||||||
Service cost | 83 | 78 | 101 | 9 | 6 | 12 | ||||||||||||||||||
Interest cost | 75 | 78 | 104 | 49 | 48 | 56 | ||||||||||||||||||
Expected return on plan assets | (15 | ) | (13 | ) | (13 | ) | (1 | ) | (1 | ) | (1 | ) | ||||||||||||
Amortization and of actuarial (gain) loss | (16 | ) | 13 | 17 | 3 | — | — | |||||||||||||||||
Net periodic benefit cost | 127 | 156 | 209 | 60 | 53 | 67 | ||||||||||||||||||
Settlement cost and other adjustments | (50 | ) | 39 | 71 | — | — | 2 | |||||||||||||||||
Total cost accrual | 77 | 195 | 280 | 60 | 53 | 69 | ||||||||||||||||||
Other Post- | ||||||||||||||||||||||||
Pensions Benefits | Retirement Benefits | |||||||||||||||||||||||
2006 | 2005 | 2004 | 2006 | 2005 | 2004 | |||||||||||||||||||
Weighted-average assumptions used in determining net periodic cost for year: | ||||||||||||||||||||||||
Discount rate | 4.0 | % | 4.25 | % | 5.0 | % | 4.0 | % | 4.25 | % | 5.0 | % | ||||||||||||
Expected return on plan assets | 4.5 | % | 4.2 | % | 5.0 | % | 4.5 | % | 4.2 | % | 5.0 | % | ||||||||||||
Rate of compensation increase | 3.0 | % | 3.0 | % | 3.5 | % | 3.0 | % | 3.0 | % | 3.5 | % |
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2006 | 2005 | |||||||
Assumed health care cost trend rates at December 31 | ||||||||
Health care cost trend rate assumed for next year | 2.00 | % | 3.00 | % | ||||
Rate to which the trend rate is assumed to decline (the ultimate trend rate) | 2.00 | % | 3.00 | % | ||||
Year that the rate reaches the ultimate trend rate | 2007 | 2006 |
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1-Percentage- | 1-Percentage- | |||||||
Point Increase | Point Decrease | |||||||
(millions of euro) | ||||||||
Effect on total cost | — | — | ||||||
Effect on accumulated post-retirement benefit obligation | 2 | (1 | ) |
Pension | Other Post- | |||||||
Benefits | Retirement Benefits | |||||||
(millions of euro) | ||||||||
2007 | 142 | 12 | ||||||
2008 | 152 | 12 | ||||||
2009 | 172 | 13 | ||||||
2010 | 194 | 13 | ||||||
2011 | 222 | 13 | ||||||
Years2012-2016 | 1,146 | 68 |
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Millions of euro | ||||
Current assets | 479 | |||
Fixed assets, net | 866 | |||
Intangible assets | 632 | |||
Other non-current assets | 98 | |||
Total assets acquired | 2,075 | |||
Current liabilities | (658 | ) | ||
Long-term debt | (228 | ) | ||
Minority interest | (2 | ) | ||
Other non-current liabilities | (142 | ) | ||
Total liabilities assumed | (1,030 | ) | ||
Net assets acquired | 1,045 |
Millions of euro | ||||
Current assets | 46 | |||
Fixed assets, net | 168 | |||
Goodwill | 123 | |||
Other non-current assets | 39 | |||
Total assets acquired | 376 | |||
Current liabilities | (47 | ) | ||
Long-term debt | (135 | ) | ||
Minority interest | (14 | ) | ||
Other non-current liabilities | (2 | ) | ||
Total liabilities assumed | (198 | ) | ||
Net assets acquired | 178 |
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Millions of euro | ||||
Current assets | 395 | |||
Fixed assets, net | 922 | |||
Goodwill | 855 | |||
Intangible assets | 595 | |||
Other non-current assets | 1,284 | |||
Total assets acquired | 4,051 | |||
Current liabilities | (622 | ) | ||
Long-term debt | (1,855 | ) | ||
Minority interest | (7 | ) | ||
Other non-current liabilities | (178 | ) | ||
Total liabilities assumed | (2,662 | ) | ||
Net assets acquired | 1,389 |
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Millions of euro | ||||
Current assets | 95 | |||
Fixed assets, net | 57 | |||
Goodwill | 28 | |||
Other non-current assets | 9 | |||
Total assets acquired | 189 | |||
Current liabilities | (53 | ) | ||
Long-term debt | — | |||
Minority interest | (61 | ) | ||
Other non-current liabilities | — | |||
Total liabilities assumed | (114 | ) | ||
Net assets acquired | 75 |
Millions of euro | ||||
Current assets | 252 | |||
Fixed assets, net | 1,421 | |||
Goodwill | 757 | |||
Other non-current assets | 123 | |||
Total assets acquired | 2,553 | |||
Current liabilities | (457 | ) | ||
Long-term debt | (12 | ) | ||
Minority interest | (19 | ) | ||
Other non-current liabilities | (145 | ) | ||
Total liabilities assumed | (633 | ) | ||
Net assets acquired | 1,920 |
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Millions of euro | ||||
Current assets | 408 | |||
Fixed assets, net | 3,210 | |||
Goodwill | 561 | |||
Intangible assets | 15 | |||
Other non -current assets | 590 | |||
Total assets acquired | 4,784 | |||
Current liabilities | (947 | ) | ||
Long-term debt | (835 | ) | ||
Other non -current liabilities | (2,565 | ) | ||
Total liabilities assumed | (4,347 | ) | ||
Equity deficit of acquired enterprise | 407 | |||
Net assets acquired | 844 |
Year Ended December 31, | ||||||||
2005 | 2006 | |||||||
(millions of euro) | ||||||||
Operating Revenues | 40,882 | 39,513 | ||||||
Net income | 4,510 | 3,738 | ||||||
Earnings per share-basic (euro) | 0.73 | 0.61 | ||||||
Earnings per share-diluted (euro) | 0.73 | 0.61 |
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Domestic | ||||||||||||||||||||||||
Generation | ||||||||||||||||||||||||
Telecommu- | and Energy | |||||||||||||||||||||||
nications | Management | Domestic Sales | International | Other | Total | |||||||||||||||||||
Balance as of January 1, 2005 | 2,820 | 1,071 | 8 | — | 7 | 3,906 | ||||||||||||||||||
Exchange differences | — | 23 | — | — | — | 23 | ||||||||||||||||||
Disposals(1) | (2,820 | ) | — | — | — | — | (2,820 | ) | ||||||||||||||||
Balance as of December 31, 2005 | — | 1,094 | 8 | — | 7 | 1,109 | ||||||||||||||||||
Reclassification due to change in reorganized segment | — | (1,094 | ) | — | 1,094 | — | — | |||||||||||||||||
Acquisitions | — | — | — | 577 | — | 577 | ||||||||||||||||||
Disposals(2) | — | — | — | (131 | ) | — | (131 | ) | ||||||||||||||||
Impairment | — | — | — | (1 | ) | (2 | ) | (3 | ) | |||||||||||||||
Exchange differences | — | — | — | 33 | — | 33 | ||||||||||||||||||
Balance as of December 31, 2006 | — | — | 8 | 1,572 | 5 | 1,585 | ||||||||||||||||||
(1) | Following the disposal of the 62.75% of stake in Wind, the remaining goodwill, equal to €1,050 million, has been classified at December 31, 2005 in the related investment. In 2006, following the disposal of the remaining 37.25% stake in Wind, the aforesaid goodwill has been disposed. | |
(2) | Following the disposal of the 30% of stake in EUFER, the remaining goodwill equal to €82 million has been classified in the related investment accounted for using the equity method. |
Customer | Customer | |||||||||||
Relationships | Licences | Portfolio | ||||||||||
Balance as of January 1, 2004, net | 561 | 122 | 86 | |||||||||
2005 amortization expense | (51 | ) | (11 | ) | (8 | ) | ||||||
Disposals in 2005 | (60 | ) | (72 | ) | (78 | ) | ||||||
Balance as of December 31, 2005, net | 450 | 39 | — | |||||||||
2006 amortization expense | (38 | ) | (7 | ) | — | |||||||
Disposals in 2006 | (19 | ) | — | — | ||||||||
Balance as of December 31, 2006, net | 393 | 32 | — | |||||||||
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(24) | ADDITIONAL U.S. GAAP DISCLOSURES |
(a) | Accounting for Income Taxes |
2006 | 2005 | 2004 | 2006 | |||||||||||||
(millions of euro) | (millions of | |||||||||||||||
U.S. dollars) | ||||||||||||||||
Current | 1,657 | 1,398 | 1,525 | 2,187 | ||||||||||||
Deferred | 328 | 593 | 763 | 433 | ||||||||||||
Total | 1,985 | 1,991 | 2,288 | 2,620 |
2006 | 2005 | 2004 | ||||||||||
Theoretical tax rate* | 33.0 | % | 33.0 | % | 33.0 | % | ||||||
Permanent differences and minor items | (4.0 | )% | (3.3 | )% | (0.6 | )% | ||||||
Difference on estimated income taxes from prior years | (0.1 | )% | 0.3 | % | (0.3 | )% | ||||||
Regional taxes (IRAP) | 5.6 | % | 7.6 | % | 7.4 | % | ||||||
Income tax rate for the year | 34.5 | % | 37.6 | % | 39.5 | % | ||||||
* | Italian Corporate income tax rate of 33%. |
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For the Years Ended December 31, | ||||||||||||
2006 | 2005 | 2006 | ||||||||||
(millions of euros) | (millions of | |||||||||||
U.S. dollars) | ||||||||||||
Deferred tax assets: | ||||||||||||
Other post retirement benefits accounting | 9 | — | 12 | |||||||||
Assets write-downs | 57 | — | 75 | |||||||||
Provision for litigation and contingent liabilities | 542 | 515 | 715 | |||||||||
Tax loss carryforwards | 317 | 343 | 418 | |||||||||
Customers’ connection fees | 813 | 681 | 1,073 | |||||||||
Measurement of financial assets | 44 | 146 | 58 | |||||||||
Deferred Income | 165 | 174 | 218 | |||||||||
Other | 700 | 821 | 924 | |||||||||
Total deferred tax assets | 2,647 | 2,680 | 3,493 | |||||||||
Valuation allowances | (252 | ) | (218 | ) | (333 | ) | ||||||
Total deferred tax assets, net | 2,395 | 2,462 | 3,160 | |||||||||
Deferred tax liabilities: | ||||||||||||
Other post retirement benefits accounting | — | (2 | ) | — | ||||||||
Assets write-downs | (228 | ) | (172 | ) | (301 | ) | ||||||
Revaluation of utility plant | (100 | ) | (95 | ) | (132 | ) | ||||||
Accelerated depreciation of utility plant | (1,740 | ) | (1,640 | ) | (2,296 | ) | ||||||
Capitalization of interest on utility plant | (463 | ) | (460 | ) | (611 | ) | ||||||
Equity reserves | (288 | ) | (282 | ) | (380 | ) | ||||||
Other | (376 | ) | (20 | ) | (496 | ) | ||||||
Total deferred tax liabilities | (3,195 | ) | (2,671 | ) | (4,216 | ) | ||||||
Net deferred tax liabilities | (800 | ) | (209 | ) | (1,056 | ) | ||||||
• | After 2011: €213 million; | |
• | No limits: €763 million. |
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2006 | 2005 | 2004 | ||||||||||
(millions of euro) | ||||||||||||
Minimum Pension Liabilities | 17 | (17 | ) | 20 | ||||||||
Application of SFAS 158 | 23 | — | — | |||||||||
Investments in equity securities | 7 | 2 | (2 | ) |
(b) | Earnings per Share |
2006 | 2005 | 2004 | 2006 | |||||||||||||
(millions of euro)* | (millions of | |||||||||||||||
U.S. dollars) * | ||||||||||||||||
Income available to common shareholders | 3,719 | 4,698 | 1,031 | 4,908 | ||||||||||||
Weighted average shares — basic (in millions) | 6,170 | 6,142 | 6,084 | 6,170 | ||||||||||||
Weighted average shares — diluted (in millions) | 6,235 | 6,171 | 6,186 | 6,235 | ||||||||||||
Earnings per share-basic | 0.60 | 0.76 | 0.17 | 0.79 | ||||||||||||
Earnings from continuing operations per share (basic and diluted) | 0.60 | 0.63 | 0.65 | 0.79 | ||||||||||||
Earnings from discontinued operations per share (basic and diluted) | — | 0.13 | (0.48 | ) | — |
(*) | Except per-share data which is in euro and U.S. dollars respectively. |
(c) | Effects of Regulation |
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(d) | Stock option compensation cost |
Number of | Average Grant | |||||||
Options | Price (euro) | |||||||
Outstanding at January 1, 2002 | 24,706,668 | 7.6 | ||||||
Granted | 41,748,500 | 6.4 | ||||||
Exercised | — | — | ||||||
Forfeited | — | — | ||||||
Outstanding at December 31, 2002 | 66,455,168 | 6.9 | ||||||
Outstanding at January 1, 2003 | 66,455,168 | 6.9 | ||||||
Granted | 47,624,005 | 5.2 | ||||||
Exercised | — | — | ||||||
Forfeited | — | — | ||||||
Outstanding at December 31, 2003 | 114,079,173 | 6.2 | ||||||
Outstanding at January 1, 2004 | 114,079,173 | 6.2 | ||||||
Granted | 38,527,550 | 6.2 | ||||||
Exercised | (40,446,675 | ) | 6.0 | |||||
Forfeited | (17,309,226 | ) | 6.8 | |||||
Outstanding at December 31, 2004 | 94,850,822 | 6.2 | ||||||
Outstanding at January 1, 2005 | 94,850,822 | 6.2 | ||||||
Granted | 28,757,000 | 7.3 | ||||||
Exercised | (53,549,782 | ) | 4.1 | |||||
Forfeited | (29,639,535 | ) | 7.2 | |||||
Outstanding at December 31, 2005 | 40,418,505 | 5.9 | ||||||
Outstanding at January 1, 2006 | 40,418,505 | 5.9 | ||||||
Granted | 31,790,000 | 6.8 | ||||||
Exercised | (19,124,633 | ) | 5.6 | |||||
Forfeited | (680,590 | ) | 6.4 | |||||
Outstanding at December 31, 2006 | 52,403,282 | 6.6 |
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2006 | ||||
(millions of euro) | ||||
Income before income taxes | (22 | ) | ||
Net income | (15 | ) | ||
Basic earnings per share | 0.00 | |||
Diluted earning per share | 0.00 |
2005 | 2004 | |||||||
Net income in accordance with U.S. GAAP, as reported | 4,698 | 1,031 | ||||||
Stock-based employee compensation expense, as reported | 165 | 139 | ||||||
Stock-based employee compensation expense under fair value | (179 | ) | (122 | ) | ||||
Pro forma net income | 4,684 | 1,048 |
2005 | 2004 | |||||||||||||||
As Reported | Pro Forma | As Reported | Pro Forma | |||||||||||||
Basic and diluted earnings per share | 0.77 | 0.76 | 0.17 | 0.17 |
(25) | SUBSEQUENT EVENTS (unaudited) |
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• | to authorize the acquisition of Endesa shares amounting to more than 10% of that company’s share capital up to the threshold (currently set at 24.99% of the share capital) beyond which it is obligatory to launch a public tender offer; | |
• | to remove any restrictions on Enel’s exercise of its rights as a shareholder of Endesa with regard to the qualification of the latter as a “principal operator”. |
• | the price offered to Endesa shareholders is €41.30 per share, entirely in cash, equal to the price of €41 per Endesa share announced by the offerors on March 26, 2007, increased by interest of3-month Euribor for the period from March 26, 2007 to May 31, 2007 (rounded up). The offer price will be reduced by the amount of |
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any dividends (including any extraordinary dividends or similar payments) that should be distributed by Endesa between the date of the submission of the tender and the date of publication of the results of the tender (both dates are included for the purposes of any adjustment); |
• | the effectiveness of the tender is subject to the complete satisfaction of the following conditions, which may however be waived: |
• | the tender offer is accepted by shareholders representing a percentage of Endesa share capital that, together with the shares already held directly and indirectly by the offerors, exceeds 50%; | |
• | that before the end of the tender acceptance period: (a) the shareholders’ meeting of Endesa approves amendments to a number of articles of the bylaws that restrict shareholder voting rights and removes any other impediment to control of the company with regard to the membership of the board of directors; (b) all resolutions in this regard have been entered in the “Registro Mercantil” of Madrid; | |
• | the offerors notify the concentration resulting from the tender to the European Commission in accordance with the provisions of regulations governing the control of concentrations between undertakings (Regulation no. 139 of January 20, 2004) and to the antitrust authorities of any other country involved; | |
• | the tender is subject to receipt of a series of administrative authorizations. To this end, the offerors will make all necessary notifications to the Comisión Nacional de Energía and the Secretaría General de Energía of the Spanish Ministry for Industry, Tourism and Trade, as well as to the administrative and regulatory authorities of any other country involved; | |
• | in view of the fact that Endesa shares are listed on the New York Stock Exchange (in the form of American Depositary Shares) and are also listed on the offshore exchange (Registro de Valores Extranjeros) of Santiago in Chile, the offerors must perform all necessary formalities for the presentation or extension of the tender to these jurisdictions. |
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• | the renewal of the program for the issue of medium-term notes, raising the amount from €10 to €25 billion; | |
• | the issue by Enel, as part of the above program, of one or more bonds in euro or foreign currency to be placed with institutional investors by December 31, 2007, in the total amount of €5 billion. |
• | 1.0 billion euro seven-year floating-rate note, priced at 99.757 equal to 0.20% over 3 months Euribor plus 0.24% yield over the 3 months Euribor; | |
• | 1.5 billion euro 5.25% ten-year fixed-rate note, priced at 99.582, equal to a spread of 0.34% on the swap rate with similar maturity, with a 5.305% yield; | |
• | 850 million euro 5.625% twenty-year fixed-rate note, priced at 99.834, equal to a spread of 0.55% over the swap rate with similar maturity, with a yield of 5.639%; | |
• | 550 million pound (GBP) 6.25% twelve-year fixed-rate note, priced at 99.671, equal to a spread of 0.83% over the Gilt with similar maturity, for a yield of 6.194%; | |
• | 550 million pound (GBP) 5.75% thirty-year fixed-rate note, priced at 98.286, equal to a spread of 0.94% over the Gilt with similar maturity, for a yield of 5.789%. |
• | the construction of new nuclear power plants; | |
• | the operation and upgrading of electricity transport networks; | |
• | the operation of existing nuclear power plants. |
F-105
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• | 100% of OAO Arcticgaz; | |
• | 100% of ZAO Urengoil; | |
• | 100% of OAO Neftegaztechnologia; | |
• | 20% of OAO Gazprom Neft (which will be entirely transferred to Eni). |
F-106
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F-107
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1 | We have audited the consolidated statements of income, of changes in shareholders’ equity and of cash flows of Wind Telecomunicazioni SpA (an Italian corporation) and its subsidiaries (the “Company”) as of December 31, 2004 for the year then ended (expressed in Euro). These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits. |
2 | We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. |
3 | The consolidated financial statements as of December 31, 2004 do not include comparative information and notes for 2003 that would be required to present the financial position, the result of operations and the cash flows in conformity with International Financial Reporting Standards as adopted by EU. As described in the notes, in fact, these consolidated financial statements are intended to comprise the comparative financial statements to the year ended December 31, 2005, which will be the first IFRS compliant consolidated financial statements. |
4 | In our opinion, except for the matter reported in the previous paragraph regarding the omission of comparative financial information for 2003, the consolidated financial statements referred to above present fairly, in all material respects the results of the operations and the cash flows of Wind Telecomunicazioni SpA and its subsidiaries for the year ended December 31, 2004, in conformity with the International Financial Reporting Standards issued by the International Accounting Standards Board as adopted by EU. |
5 | We draw your attention to the matters regarding deferred tax assets and intangible assets as described in the notes to the consolidated financial statements. |
6 | International Financial Reporting Standards vary in certain significant respects from accounting principles generally accepted in the United States of America. Information relating to the nature and effect of such differences is presented in the notes to the consolidated financial statements under the caption US GAAP schedules and additional disclosures. |
F-108
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F-109