Annual Report 2010 - Enel.com

The following table reports the cash flows expected in coming years from these financial derivatives:
Expected cash flows from exchange rate derivatives
Millions of euro Fair value Stratification of expected cash flows
at Dec. 31,
2010 2011 2012 2013 2014 2015 Beyond
CFH on exchange rates
Positive fair value 705 112 82 89 176 41 583
Negative fair value
FVH on exchange rates
(1,602) (136) (259) (70) (227) (311) (710)
Positive fair value 15 8 8 6 (3) 11 (13)
Negative fair value
Trading derivatives on exchange rates
(21) (2) (16) (2) (1) - -
Positive fair value 55 49 4 2 - - -
Negative fair value (128) (120) (10) (1) - - -
An analysis of the Group’s financial debt shows that 30%
of medium- and long-term debt (27% at December 31,
2009) is denominated in currencies other than the euro.
Taking into account exchange rate hedges and the portion
of debt denominated in the functional currency of
the country in which the Group company holding the debt
position operates, the proportion of unhedged debt denominated
in currencies other than the euro decreases to
about 2% (3% at December 31, 2009), a proportion that
is felt would not have a significant impact on the income
statement in the event of a change in market exchange
rates.
At December 31, 2010, assuming a 10% appreciation of
the euro against the dollar, all other variables being equal,
shareholders’ equity would have been €1,449 million
lower (€1,348 million at December 31, 2009) as a result
of the decrease in the fair value of CFH derivatives on exchange
rates. Conversely, assuming a 10% depreciation of
the euro against the dollar, all other variables being equal,
shareholders’ equity would have been about €1,780 million
higher (€1,633 million at December 31, 2009) as a result
of the increase in the fair value of CFH derivatives on
exchange rates.
Commodity risk
The exposure to the risk of changes in commodity prices
is associated with the purchase of fuel for power plants
and the purchase and sale of gas under indexed contracts
as well as the purchase and sale of electricity at variable
prices (indexed bilateral contracts and sales on Power Exchange).
176 Enel Annual Report 2010 Consolidated financial statements
The exposures on indexed contracts are quantified by
breaking down the contracts that generate exposure into
the underlying risk factors.
Various types of derivatives are used to reduce the exposure
to fluctuations in energy commodity prices and
as part of proprietary trading activities (mainly forwards,
swaps, commodity options, futures and contracts for differences).
Enel manages the risks associated with transactions in
commodities used for the Group’s core business and the
general risks generated by proprietary trading separately.
Each company/business unit is assigned specific risk limits
for each type of commodity in each industrial or proprietary
trading portfolio. Enel assesses and monitors compliance
with the assigned risk limits in terms of Profit-at-Risk
for the monthly exposures generated by the energy commodity
industrial portfolios and in terms of Value-at-Risk
with regard to the daily exposures generated by proprietary
trading activities.
As regards electricity sold by the Group, Enel uses fixedprice
contracts in the form of bilateral physical contracts
and financial contracts (e.g. contracts for differences, VPP
contracts, etc.) in which differences are paid to the counterparty
if the market electricity price exceeds the strike
price and to Enel in the opposite case.
The residual exposure in respect of the sale of energy on
the spot market not hedged with such contracts is quantified
and managed on the basis of an estimation of developments
in generation costs. The residual positions thus
determined are aggregated on the basis of uniform risk
factors that can be hedged in the market.