Annual Report 2010 - Enel.com

its generation mix towards the use of low-carbon technologies
and resources, with a focus on renewables and
nuclear power, develops strategies to acquire allowances
at competitive prices and, above all, enhances the environmental
performance of its generation plants, increasing
their energy efficiency.
Commodity prices and supply continuity
As part of its ordinary operations, Enel is exposed to
changes in the prices of fuel and electricity, which can
have a significant impact on its results.
To mitigate this exposure, the Group has developed a
strategy of stabilizing margins by contracting for supplies
of fuel and the delivery of electricity to end users or
wholesalers in advance.
The Group has also implemented a formal procedure that
provides for the measurement of the residual commodity
risk, the specification of a ceiling for maximum acceptable
Credit risk
In its commercial and financial activities, the Group is exposed
to the risk that its counterparties might not be able
to discharge all or part of their obligations, whether these
involve payment for goods already delivered and services
rendered or payment of the expected cash flows under financial
derivatives contracts.
In order to minimize such risks, the Group assesses in advance
the creditworthiness of the counterparties to which
it plans to maintain its largest exposures on the basis of
Liquidity risk
Enel SpA (directly and through its subsidiary Enel Finance
International SA) is responsible for the centralized Group
Treasury function (with the exception of the Endesa
Group, where that function is performed by Endesa SA
and its subsidiaries International Endesa BV and Endesa
Capital SA), meeting liquidity requirements primarily
through cash flows generated by ordinary operations and
drawing on a range of sources of financing. In addition, it
manages any excess liquidity as appropriate.
risk and the implementation of a hedging strategy using
derivatives.
For a more detailed examination of management of commodity
risk and the derivatives portfolio, please see note
5 of the notes to the consolidated financial statements.
In order to limit the risk of interruptions in fuel supplies,
the Group has diversified fuel sources, using suppliers
from different geographical areas and encouraging the
construction of transportation and storage infrastructure.
information supplied by independent providers and internal
rating models.
This process provides for the attribution of an exposure
limit for each counterparty, the request for appropriate
guarantees for exposures exceeding such limits and periodic
monitoring of the exposures.
For certain segments of its customer portfolio, the Group
also enters into insurance contracts with leading credit insurance
companies.
Underscoring the Enel Group’s continued capacity to access
the credit market despite the recent financial crisis,
bond issues for Italian and European retail investors totaling
€3 billion (with demand exceeding €14 billion) were
carried out successfully in 2010. Enel SpA and its subsidiary
Enel Finance International SA also obtained a 5-year
revolving credit facility for €10 billion to be used to manage
working capital (it is not part of the Group’s debt refinancing
program).
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