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Analysis of the Group's financial position and structure

(1) In order to facilitate analysis of developments in Group net financial debt, thereby ensuring greater comparability over time, management has decided to exclude the fair value of the cash flow hedge and fair value hedge derivatives used to hedge the exchange rate risk on loans. Accordingly, in order to improve the comparability of the figures, it was necessary to recalculate net financial debt at December 31, 2022.
(2) Does not include €849 million regarding units classified as held for sale (€156 million in 2022).

Net capital employed and funding

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Property, plant and equipment and intangible assets increased due essentially to capital expenditure in the period (€11,919 million), the capitalization of financial expense (€300 million), the activation of new IFRS 16 rights of use (€684 million), and the effect of impairment losses related to the hyperinflation of assets held in Argentina (€914 million). These impacts were partially offset by the classification of certain assets as held for sale (€4,293 million), essentially referring to distribution and generation assets in Peru, as well as by depreciation, amortization and impairment losses recognized for the year (€7,825 million) and adverse exchange rate developments (€1,226 million), referring essentially to Latin America.

Goodwill decreased mainly as a result of the above-mentioned classifications of certain Peruvian companies as available for sale (€616 million) and the impairment recognized on the assets of Enel X and Enel X Way in the United States (€126 million). These effects are partially offset by favorable exchange rate developments (€42 million).

Equity-accounted investments increased mainly due to the consolidation at equity of joint ventures in Greece and Australia following the partial sale, with loss of control, of the related companies and the impairment loss on Slovak Power Holding. These impacts were partially offset by the effects deriving from the sale of Rusenergosbyt.

Net working capital increased, compared with December 31, 2022, by €243 million, mainly due to an increase in trade receivables and a decrease in trade payables. These impacts were partly offset by an increase in payables to institutional electricity market operators, mainly in Italy due to the gradual restoration, in 2023, of the charges related to the support of renewable energy and cogeneration, and in Spain for other components payable to market operators.

Net assets held for sale increased mainly as a result of the classification among the net assets held for the sale of generation and distribution companies in Peru, net of the divestments during the year. For a more detailed breakdown of the aggregate and related changes, please see note 36 of the consolidated financial statements.

Net capital employed at December 31, 2023 came to €105,272 million (€102,743 million at December 31, 2022) and was covered by €45,109 million in equity attributable to owners of the Parent and non-controlling interests and €60,163 million in net financial debt. With regard to net debt, the debt-to-equity ratio at December 31, 2023 was 1.33 (compared with 1.44 at December 31, 2022).

Net financial debt

The Enel Group’s net financial debt and changes in the period are detailed in the table below

Net financial debt

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Net financial debt, in the amount of €60,163 million at December 31, 2023, decreased by €500 million from the €60,663 million of December 31, 2022. Cash flows generated by operating activities (€14,620 million) and from the sale of certain investments included within the Group’s divestment plan (for a total of €2,083 million, mainly related to the sale of the Romanian companies, a shareholding in companies in Greece, and certain renewable generation companies in Chile and Argentina), the effects of the issuance of perpetual hybrid subordinated non-convertible bonds (€986 million), the recognition of NRRP contributions in Italy to support investment as well as the change in net financial liabilities associated with assets available for sale (€720 million) substantially offset the cash flows used in investing activities (€12,714 million) and the payment of dividends (€5,317 million, including coupons paid to holders of hybrid bonds in the amount of €182 million).

Gross financial debt at December 31, 2023 came to €74,949 million, a decrease of €14,469 million from the previous year.

Gross financial debt
Gross financial debt
Gross financial debt

More specifically, gross long-term financial debt (including the short-term portion), in the amount of €70,179 million, includes €45,147 million in sustainable financing and is structured as follows:

  • bonds in the amount of €50,342 million, of which €30,822 million in sustainable bonds, down €1,349 million compared with December 31, 2022. This change is mainly the result of redemptions, including a hybrid bond of Enel SpA in the amount of $1,250 million (equal to €1,132 million at December 31, 2023), currency gains, and changes in the consolidation scope, only partially offset by new issues, including a multi-tranche sustainability-linked bond issued by Enel Finance International in the total amount of €1,500 million in February 2023;
  • bank borrowings in the amount of €16,492 million, €14,325 million of which related to sustainable financing. These borrowings increased by €341 million compared with the previous year due mainly to the use of new financing that was only partially offset by repayments made during the period. Of note among new bank borrowings:
    • a sustainability-linked line of credit granted by EKF to Enel Finance America used at December 31, 2023 for $370 million (equal to €335 million at December 31, 2023);
    • financing linked to sustainability goals granted by the European Investment Bank to various companies of the Group for a total value of €874 million;
  • other borrowings in the amount of €3,345 million, an increase of €161 million from the previous year.

Gross short-term financial debt, which decreased by €13,622 million from December 31, 2022, totals €4,770 million and consists of commercial paper, all linked to sustainability objectives, in the amount of €2,499 million, cash collateral in the amount of €1,383 million, other shortterm financial payables in the amount of €495 million, and other short-term bank borrowings in the amount of €393 million.

Cash and cash equivalents and short- and long-term financial assets, totaling €14,786 million, decreased by €13,969 million compared with the end of 2022, mainly due to the €5,420 million decrease in financial receivables for cash collateral, the €4,237 million decrease in cash and cash equivalents, and the €2,105 million decrease in other short-term financial receivables, mainly attributable to the repayment of the receivable due at the end of 2022 from Equatorial for the sale of the Brazilian electricity distribution company Celg Distribuição SA - Celg-D (Enel Goiás).


Sustainability-linked finance at Enel

At Enel, sustainable finance is a key lever in creating economic and financial value, enabling us to raise public and private capital and channel those resources into sustainable investments, thereby sustaining achievement of our development goals. The new sustainability-linked bond issues, together with all the sustainable financing arranged in the last year, made it possible to reach a 64% ratio of sustainable sources of financing to the Group’s total gross debt at the end of 2023, with a goal of reaching around 70% in 2026.

Sustainability-Linked Financing Framework In 2020, Enel was the world’s first company to include amechanism in its funding agreements that links the cost of financing to achieving one or more of the sustainability targets specified in the Sustainability-Linked Financing Framework, a document that extends the sustainability-linked approach to all instruments of financial debt. The Sustainability-Linked Financing Framework is updated annually in line with the objectives defined in the Group’s Strategic Plan.

The latest version published in January 2024 updated theSustainability Performance Targets (SPT) of the five key performance indicators (KPIs) included in the framework, which contribute to achievement of SDG 7 (“Clean and Accessible Energy”) and SDG 13 (“Climate Action“) and the European Environmental Objective of Climate Change Mitigation:

1. Intensity of Scope 1 GHG emissions related to power generation (gCO2eq/kWh);

2. Intensity of Scope 1 and Scope 3 GHG emissions related to Integrated Power (gCO2eq/kWh);

3. Absolute Scope 3 GHG emissions related to retail gas (MtCO2eq);

4. Percentage of installed renewable capacity (%);

5. Percentage of capital expenditure aligned with the EU taxonomy (%).

Sustainability-linked finance at Enel
Sustainability-linked finance at Enel

(39) SPT with cumulative observation period of 2023-2025.
(40) SPT with cumulative observation period of 2024-2026.


Sustainability-linked finance at Enel

Developments in the KPIs shown in the table are periodically verified by an external auditor and are published by Enel in the Integrated Annual Report and the Sustainability Report.

Globally, greenhouse gas (GHG) emissions continued to increase in 2023, largely as a result of economic recovery and a further increase in fossil fuel consumption, with the energy crisis and the high prices of natural gas and liquefied natural gas sparking greater use of coal as a cheaper but more polluting fuel.

Nevertheless, the Group managed to reduce direct and indirect greenhouse gas emissions along the entire value chain by 26.3% overall compared with the previous year. Furthermore, the Group also reduced the intensity of Scope 1 GHG emissions related to power generation by over 30.6%, going from 229 gCO2eq/kWh in 2022 to 160 gCO2eq/kWh in 2023. This reduction reflected a 12.9% increase in consolidated renewables generation and a 37.5% reduction in consolidated thermal generation compared with 2022, a consequence of the Group’s strategy to shift its generation mix towards renewables and to advance the decarbonization process.

However, the war in Ukraine and the resulting restrictions on gas imports from Russia into the EU, which caused a decrease in gas supplies accompanied by a surge in wholesale electricity and gas prices, with serious effects for households and businesses, prompted EU governments to implement a series of policy responses to mitigate the impact of rising costs and ensure the stability of the energy system.

In particular, the Italian government responded with a national plan to contain natural gas consumption, including measures to maximize thermal generation using fuels other than gas. This was implemented with Decree Law 14/2022, which required the national transmission system operator (TSO) to develop a program to maximize electricity production from coal-fired power plants until the end of September 2023. Consequently, the TSO identified Enel’s coal plants as essential and required them to maximize such output.

In Spain, the government authorization for the closure of the As Pontes coal plant, requested by Enel’s Endesa subsidiary in December 2019 for June 2021, was postponed to the end of 2023 as the plant was identified as essential by the transmission system operator.

Due to the unprecedented crisis faced by the European energy system in 2022 and 2023, the Group’s emissions reduction in 2023 was not sufficient to achieve the Scope 1 GHG emissions intensity target related to electricity generation set for 2023 as announced on the occasion of the Capital Markets Day held in November 2020 for the launch of the 2021-2023 Strategic Plan. As a result of the energy crisis, the intensity value was slightly higher than the target of 148 gCO2eq/kWh. In the absence of these factors, Enel would have been able to reach an emissions intensity level well below the target of 148 gCO2eq/kWh.

As a result, the Group’s sustainability-linked instruments that set the Scope 1 emissions intensity target for electricity generation at 148 gCO2eq/kWh for 2023 will be subject to an increase in the relative step-up, and Enel will comply with its obligations in accordance with the terms and conditions of the legal documentation of these sustainability-linked transactions.

Despite these unprecedented circumstances, the Group’s emissions intensity in 2023 remained aligned with the 1.5 ºC pathway: the sector’s decarbonization approach envisaged by the SBTi initiative had established a maximum threshold of 246 gCO2eq/kWh for 2023, well above Enel’s actual performance.

Ultimately, Enel’s commitment to decarbonization remains confirmed for both the short, medium and long term, as envisaged in the new 2024-2026 Strategic Plan, which establishes a new short-term target for 2026 of 125 gCO2eq/kWh. This new target, which is incorporated in the Sustainability-Linked Financing Framework as updated in January 2024 and linked to the first issue of sustainability-linked bonds in 2024, confirms Enel’s commitment to the energy transition and contributes to the environmental and financial sustainability of the Group’s development strategy. Furthermore, we are still committed to the 2030 target of an 80% reduction in the intensity of Scope 1 GHG emissions related to power generation compared with the 2017 baseline and the final 2040 target of a 100% reduction in these emissions without resort to any type of offsetting or carbon removal mechanisms.

In 2023, the Group, acting through its financial subsidiary Enel Finance International NV (EFI), issued a bond in February on the European market in the amount of €1,500 million, combining, in the eight-year tranche, a KPI linked to the EU taxonomy with a KPI linked to the United Nations SDGs. The second tranche of the 20-year bond, on the other hand, was linked to two KPIs associated with the Group’s focus on complete decarbonization through the reduction of direct and indirect greenhouse gas emissions. In November 2023, Enel SpA obtained a three-year sustainability-linked revolving credit facility worth €1,500 million and linked to SDG 13. In March 2023, Enel Finance International renewed its €8,000 million commercial paper program, linking it to the KPI “Intensity of Scope 1 GHG emissions related to power generation (gCO2eq/kWh)” and the KPI “Percentage of capital expenditure aligned with the EU taxonomy (%)”.

Enel’s role in the Recovery Plan Enel acts as a strategic partner in the Recovery Plan with the aim of driving sustainable, rapid and effective growth through the implementation of projects in line with the missions of the individual Recovery and Resilience Plans at the national level. In this regard, in 2023, the decrees relating to the projects Smart Grids and Resilience in Italy were signed, for a total of €3,500 million. In addition to Recovery, the Enel Group has submitted project proposals for other opportunities offered at European level, such as the Innovation Fund where the grant agreement for the Catania Gigafactory was signed, the Important Projects of Common European Interest (IPCEI) where projects for the development of green hydrogen were presented, and the Connecting Europe Facility (CEF) for the development of electric charging infrastructures.

International development finance The Group is leading an innovation process aimed at accelerating the mobilization of capital to support sustainable growth through the use of sustainability-linked financial instruments. More specifically, in 2023, the Group obtained incentivized loans for a total of €1,800 million, which include sustainability-linked mechanisms tied to SDG 13. The main operations include sustainability-linked financing for a total of $800 million by Enel Finance America and EKF (Danish export credit agency), which is the EKF’s first sustainability-linked financing agreement.

Cash flows

For more information, please see note 46 of the consolidated financial statements.

Capital expenditure

Capital expenditure

(1) The figures for 2022 for the End-user Market Business Line have been adjusted to take account of the values for Enel X and Enel X Way. The latter had previously been reported under Holding, Services and Other.
(2) The figure does not include €849 million regarding units classified as held for sale (€156 million in 2022).

Capital expenditure

Capital expenditure decreased by €1,633 million from the previous year.
In line with the Paris Agreement in terms of reducing CO2 emissions, the Group’s investments focused mainly on renewable energy and grids.
In particular, with regard to renewable energy, the change mainly concerned the increases in Italy (€824 million) and Colombia (€15 million), which were more than offset by lower capital expenditure in the United States (€1,197 million), Chile (€236 million), Peru (€196 million), Canada (€181 million), and Spain (€51 million).
Capital expenditure on grids, aimed at ensuring reliability and quality of service through efficient, resilient and digital networks, increased in Italy (€370 million), Spain (€25 million), and Colombia (€18 million), while decreasing in Brazil (€335 million), Romania (€140 million), Peru (€111 million), Argentina (€60 million), and Chile (€26 million).
Capital expenditure in the End-user Markets Business Line fell by €67 million. More specifically, the decrease in Retailconcerned Italy (€81 million), Spain (€18 million) and Romania, essentially in the digitization of operational customer management processes.
Within the End-user Markets, but related to mobility, capital expenditure mainly decreased in Brazil, by €30 million, only partially offset by increased capital expenditure in Italy. Within the End-user Markets Business Line for Enel X, capital expenditure increased mainly in Italy, in the e-City and Distributed Energy businesses, and in Brazil in the e-City business.
Capital expenditure in Thermal Generation and Trading decreased by €229 million, particularly in Latin America and Italy.

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