Annual Report 2010 - Enel.com

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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.
The following table reports the notional amounts and fair values of derivative contracts relating to commodities at December 31, 2010 and December 31, 2009. Millions of euro Notional amount Fair value Fair value assets Fair value liabilities at Dec. 31, 2010 at Dec. 31, 2009 at Dec. 31, 2010 at Dec. 31, 2009 at Dec. 31, 2010 at Dec. 31, 2009 at Dec. 31, 2010 at Dec. 31, 2009 Cash flow hedge derivatives: - two-way contracts for differences 442 130 8 2 9 2 (1) - - swaps on oil commodities 89 183 11 (5) 11 2 - (7) - derivatives on coal 830 858 173 (83) 175 11 (2) (94) - other derivatives on energy 1,420 531 35 (5) 56 16 (21) (21) - derivatives on other commodities 524 367 48 54 48 54 - - Trading derivatives: - two-way contracts for differences 1,532 1,562 38 30 38 30 - - - swaps on oil commodities 5,489 1,919 98 17 312 104 (214) (87) - derivatives on coal 896 1,260 31 (2) 147 85 (116) (87) - futures/options on oil commodities 229 233 (5) 3 3 15 (8) (12) - swaps on gas transmission fees - 17 - (2) - - - (2) - other derivatives on energy 11,510 10,964 (93) 36 21 339 (114) (303) - embedded derivatives 432 578 (356) (441) 8 5 (364) (446) - derivatives on other commodities 445 637 21 28 38 53 (17) (25) TOTAL COMMODITY DERIVATIVES 23,838 19,239 9 (368) 866 716 (857) (1,084) Cash flow hedge derivatives refer to the physical positions in the underlying and, therefore, any positive (negative) change in the fair value of the underlying physical commodity corresponds to a negative (positive) change in the fair value of the derivative instrument, so the impact on the income statement is equal to zero. The following table shows the fair value of the derivatives and the consequent impact on shareholders’ equity at December 31, 2010 (gross of taxes) that would have resulted, all other conditions being equal, in the event of a 10% increase or decrease in the prices of the commodities underlying the valuation model considered in the scenario at that date. Millions of euro -10% Scenario at Dec. 31, 2010 +10% Fair value of two-way contracts for differences in cash flow hedges 52 8 (35) Fair value of derivatives on oil commodities in cash flow hedges 22 11 1 Fair value of derivatives on coal in cash flow hedges 88 173 258 Fair value of derivatives on energy in cash flow hedges 172 35 (104) Fair value of derivatives on gas in cash flow hedges (10) 48 105 The following table shows the fair value of derivatives and the consequent impact on the income statement and shareholders’ equity at December 31, 2010 (gross of taxes), that would have resulted, all other conditions being equal, in the event of a 10% increase or decrease in the prices of the commodities underlying the valuation model considered in the scenario at that date. 177
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Annual Report 2010
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Contents Enel Annual Report 2010 Re
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Report on operations
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Iberia and Latin America Endesa Int
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operates in the end-user market for
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Powers Board of Directors The Board
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The contribution of the operating D
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The Spanish market saw a turnaround
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30.8% of its shares are listed on t
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of 21.4%). More specifically, the p
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Millions of euro Operating assets O
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21 10 January Acquisition of Padoma
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19 April €10 billion revolving li
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1 July Sale of power transmission n
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11 10 November Enel and Kepco sign
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of industrial economies (such as Ge
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inventories at their highest level
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Italy The electricity market Domest
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gradually increasing use, as from 2
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information on customers who have f
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Following the hearing of February 1
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With Resolution ARG/elt no. 211/10,
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Gas transport and metering rates Wi
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With Resolution VIS no. 162/10, the
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Developments in prices in the main
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lished on January 26, 2011, the Min
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On July 2, 2010, the CNC had undert
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ANEEL resolution also provides for
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daily wholesale market. Specificall
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the ARENH price will be set with a
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leading to a final 2010 system cost
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electricity from hydroelectric plan
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National renewable energy action pl
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were held in 2010. Plants with a to
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USA Carbon regulation On May 12, 20
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cial receivables in respect of the
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The performance and balance sheet f
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Costs Millions of euro 2010 2009 re
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Analysis of the Group’s financial
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Sundry provisions, totaling €17,2
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in long-term financial receivables
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eceivable in respect of the sale to
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(1) (2) 2009 results restated Milli
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1 Sales The Sales Division is respo
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the free market, which benefited fr
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Revenues for 2010 totaled €17,540
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of the International Division, rela
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Capital expenditure Millions of eur
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Net efficient generation capacity M
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an increase of €971 million in th
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Contribution to gross thermal gener
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The table below shows performance b
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Operations Net electricity generati
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prior-year items recognized in 2009
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Services and Other Activities The p
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its generation mix towards the use
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Country risk By now, some 50% of th
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Sustainability
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Sustainability in Enel Providing su
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Sustainability reporting Since 2002
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which is needed in order to rationa
Page 125 and 126: project, which resulted in hiring a
Page 127 and 128: The Nine Points project was one of
Page 129 and 130: well as in light of the recent reca
Page 131 and 132: sustainability by following the Blu
Page 133 and 134: tainability and governance help bus
Page 135 and 136: mapping of production sites located
Page 137 and 138: Zero-emission thermal power generat
Page 139 and 140: developing low-cost distributed pow
Page 141 and 142: Electric mobility The “Electric M
Page 143: Reconciliation of shareholders’ e
Page 146 and 147: Consolidated Income Statement Milli
Page 148 and 149: Consolidated Balance Sheet Millions
Page 150 and 151: Statement of Changes in Consolidate
Page 152 and 153: Consolidated Statement of Cash Flow
Page 154 and 155: 2 Accounting policies and measureme
Page 156 and 157: esposibilities, and their close rel
Page 158 and 159: and completed before that date are
Page 160 and 161: Investment property Investment prop
Page 162 and 163: Financial liabilities Financial lia
Page 164 and 165: For more information on the estimat
Page 166 and 167: incorporating the guidelines contai
Page 168 and 169: classified as equity if (and only i
Page 170 and 171: Millions of euro LIABILITIES AND SH
Page 172 and 173: are conducted within the framework
Page 174 and 175: Expected cash flows from interest r
Page 178 and 179: Millions of euro -10% Scenario +10%
Page 180 and 181: disposal, on September 23, 2009, of
Page 182 and 183: Segment information for 2010 and 20
Page 184 and 185: The following table reconciles segm
Page 186 and 187: The table below gives a breakdown o
Page 188 and 189: 9.c Personnel - €4,907 million Mi
Page 190 and 191: Net income/(charges) from commodity
Page 192 and 193: Financial expense Millions of euro
Page 194 and 195: Information on the Consolidated Bal
Page 196 and 197: subsequently sold in December 2010;
Page 198 and 199: expected future cash flows and appl
Page 200 and 201: 18. Equity investments accounted fo
Page 202 and 203: Equity investments in other compani
Page 204 and 205: 20. Other non-current assets - €1
Page 206 and 207: addition to direct reimbursement) b
Page 208 and 209: Assets held for sale 27. Assets hel
Page 210 and 211: Non-current liabilities 29. Long-te
Page 212 and 213: issue of bonds for retail investors
Page 214 and 215: Current portion of long-term loans
Page 216 and 217: failure to make payment, breach of
Page 218 and 219: Millions of euro Pension benefits O
Page 220 and 221: 31. Provisions for risks and charge
Page 222 and 223: Commodity derivatives mainly relate
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Liabilities held for sale 38. Liabi
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40. Contractual commitments and gua
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Developments in the inquiries of th
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provisionally enforceable, held the
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creditor rights in respect of CELF
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43. Stock incentive plans Between 2
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of the dividend (for 2004) of €0.
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that of a specific benchmark index
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Compensation of Directors, members
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Corporate governance
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Major shareholdings and shareholder
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prescribed by the Unified Financial
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C) The revolving credit facility ag
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structure, internal auditing system
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listed companies), distinctly menti
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University, in Syracuse, New York (
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The Directors perform their duties
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letter b) above, have assets exceed
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sufficient to ensure that their jud
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compensation of the Chief Executive
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the power - which may also be exerc
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Conte is concerned, the Board of St
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in December 2006, the Board of Dire
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“independent” monitoring, entru
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conditions, and those whose conside
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of the Company’s website (www.ene
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Ethics consists of: > general princ
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“Zero Tolerance of Corruption”
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In principle, unless there are spec
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Internal control Has the Company ap
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Declaration of the Chief Executive
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Attachments
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Subsidiaries consolidated on a line
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Company name Registered office Coun
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Company name International Endesa B
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Enel SpA companies consolidated on
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Company name Companhia Térmica Rib
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Endesa SA companies consolidated on
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Associated companies accounted for
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Company name P.N. Endesa SA Central
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Other significant equity investment
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Reports
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Concept design Inarea - Rome Publis
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Annual Report 2010 - Enel.com

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