During 2022, the Enel Group pursued with determination its growth strategy along the lines of increasingly decarbonized electrification to guarantee its customers competitive prices, sustainability and energy security.
Enel confirms its position as the largest private operator in the renewable energy sector in the world, having reached around 59 GW of managed capacity with the plants built this year. It is also the largest private electricity distributor globally, with around 73 million end users connected to increasingly digital grids, with around 63% of users equipped with smart meters. Furthermore, the Group manages the largest customer base among private companies, with about 67 million customers.
Our business model, entirely based on digital platforms, allows the Group to optimally seize the opportunities generated by the energy transition now under way at the global level.
The Group’s financial performance in 2022 demonstrated our resilience even in highly volatile and adverse environments, such as that characterizing the year just ended.
The Group’s leadership in sustainability has once again been recognized worldwide, underscored by its constant presence in various major sustainability rankings and indices.
After a strong post-pandemic recovery, the global macroeconomic environment in 2022 experienced a generalized slowdown in the real economy, with global GDP growth of around 3% on an annual basis.
The world economies were impacted by sudden and growing inflationary pressures that forced many central banks to rapidly tighten their monetary policies, with a consequent impact on the financial markets. The military conflict between Russia and Ukraine, and the resulting global uncertainty, has also aggravated conditions on the energy, commodity and food markets, with direct repercussions on the prices of final consumer goods.
In the United States, the real economy was heavily affected by growing inflationary pressures, which prompted the Federal Reserve to implement rapid increases in its benchmark interest rate. In the euro area, the 1st Half of the year witnessed an economic recovery that outpaced expectations, while in the 2nd Half, with the emergence of the great uncertainty engendered by the hostilities between Russia and Ukraine and the sudden increase in energy prices, the European economies saw growth slow significantly. The European Central Bank also decided to rapidly adjust its monetary policy stance, with multiple increases in its benchmark rates.
In Latin America, the macroeconomic context was characterized by two different phases. The 1st Half of the year saw a significant post-pandemic recovery, while in the 2nd Half the economies of the area experienced the rapid and large high increase in international commodity prices, mainly driven by the conflict between Russia and Ukraine. National central banks responded by tightening their monetary policies, which, as a result, dampened the economic recovery.
On the energy front, in 2022 the European gas market experienced substantial volatility. The sharp rise in prices, which saw the TTF (Title Transfer Facility) index exceed €300/MWh during August, was caused by the supply uncertainty of flows from Russia, which steadily decreased over the past year. The achievement of high storage filling percentages achieved before the winter season, together with temperatures that exceeded seasonal averages in November and December, subsequently led to a sharp fall in European gas prices in the closing months of 2022.
The rise in gas prices and a number of hitches along the supply chain in turn led to an increase in coal prices, which in 2022 reached an average of $290/t. The quotations of CO2 within the ETS (Emission Trading System) also increased, rising by over 50% compared with the previous year, despite the slowdown in economic activity in the 4th Quarter.
The bullish dynamics on the commodity markets produced a sharp increase in electricity prices throughout Europe, which in the case of Italy and Spain exceeded 140% and 50%, respectively, compared with 2021.
As had occurred in 2021, 2022 was also characterized by pronounced volatility in the industrial metals sector, albeit with different dynamics. The 1st Half of the year was characterized by unexpected peaks and sharp increases in prices, mainly for aluminum and nickel. In the 2nd Half, however, fears for the short-term growth outlook dominated, with a partial reversal of benchmark prices compared with the peak recorded in the 1st Half.
In 2022, the Enel Group continued its growth path despite the turbulence associated with the volatility of the prices of commodities and raw materials.
In particular, the 2022 financial year closed with ordinary EBITDA of €19.7 billion, an increase of 3% compared with 2021. Ordinary profit amounted to €5.4 billion, down about 4% compared with the previous year. The dividend for 2022 amounts to €0.40 per share, up 5% compared with 2021. In terms of cash generation, FFO in 2022 amounted to about €9.1 billion. Net debt amounted to €60.1 billion, down €9.6 billion compared with September 30, 2022.
As in previous years, in 2022 Enel once again achieved a new record for generation capacity from renewable sources, globally building 5,223 MW of new renewables capacity, including 387 MW of BESS.
With the plants built in 2022, installed renewable capacity, including batteries, reached about 59 GW, producing a total of about 124 TWh of power from renewable sources over the year, of which about 66 TWh from wind and sun, about 52 TWh from hydroelectric and about 6 TWh from geothermal.
The pipeline of projects under development in 2022 also set a record, with 462 GW, inclusive of renewable energy plants, batteries capacity and capacity already under construction, an increase of around 24% compared with the previous year. At the same time, the process of decommissioning and conversion of coal-fired plants continues.
As a result, the Group’s specific greenhouse gas emissions linked to electricity generation in 2022 amounted to 229 gCO2eq/kWh, in line with the objectives certified by the Science Based Target initiative (SBTi) in accordance with the path to limit the increase in global temperature to 1.5 °C.
In 2022, the creation of digital platforms was also completed. Using advanced analytics and artificial intelligence algorithms, these will analyze more than 50 million data points on a daily basis to optimize the management of our wind and solar plants throughout their entire life cycle, from design and construction to operation and maintenance.
2022 was also a crucial year for the opening of the 3SUN Gigafactory construction site in Sicily. The project will increase the production of photovoltaic panels at the current factory from 200 MW per year to 3 GW by 2024, raising efficiency standards while improving the reliability and sustainability of the panels produced. A journey that began more than fifteen years ago and which will help make a substantial contribution to the revival of the photovoltaic industry in Italy and Europe, giving the country a position on a strategic supply chain for the energy transition.
Enel’s strong commitment to electricity grids, which are enablers and protagonists of the energy transition, also continues. Thanks to the investment in their modernization and their even greater digitalization, 63% of the Group’s end users are equipped with smart meters, while a total of about 65 GW of distributed renewable energy, more than half of which in Italy, is connected to our grids.
The digital transformation continues through the adoption of a platform operating model based on advanced technological solutions that impact all operating processes – from the design and construction of new grid infrastructure to the optimization of operating and maintenance activities and managing the relationship with customers. The volume of electricity distributed worldwide was 508 TWh, constantly improving the quality of service rendered to our customers.
2022 was also a crucial year for the development and growth of the NewCo Gridspertise, launched in 2021 with the aim of making Enel’s innovative solutions in the smart meter field available to third-party distribution companies to accelerate the energy transition.
The strong commitment of the Group to the development of the electricity distribution infrastructure serving Italy is confirmed once again this year.
Developments in this regard include the successful participation in the two tenders under the NRRP relating to Smart Grids and Grid Resilience, with the award of around €3.5 billion to e-distribuzione, and the success of the Energy for Growth project, with the training of 2,500 people a year once fully operational.
Following the birth of Enel X Global Retail, a new organizational model was defined among the various countries to better develop and manage the increasingly integrated, innovative and sustainable solutions that use the commodity as a competitive lever. Enel X Global Retail focuses on the electrification of consumption, studying its effective benefits for customers with the aim of defining a strategy for acceleration at the global level, leveraging about 67 million customers.
Through the new Global e-Mobility Business Line we are accelerating the electrification of transport thanks to the strategic focus and the strengthening of the offering and the operating model. This has enabled a significant increase in commercial performance in terms of charging points sold (around 92 thousand in 2022, +82% compared with 2021) and charging services provided (43 GWh in 2022, +134% compared with 2021).
In order to ensure that we take a customer-centric approach to all processes, a recurring customer satisfaction survey system was consolidated in 2022 through the continuous measurement on a global scale of the Group Net Promoter Score.(1) In 2022, Global Customer Operations received around 1 million feedbacks, which made it possible to define and guide improvement initiatives to make the customer experience increasingly simple, intuitive and effective. One result was a 34% reduction in commercial complaints compared with the previous year.
On the financial front, Enel issued “sustainability-linked” bonds in euros, US dollars and British pounds in a total amount equivalent to about €12.1 billion. These issues are linked to the achievement of Enel’s sustainability objective for the reduction of direct greenhouse gas emissions (Scope 1) and also contribute to achievement of the United Nations Sustainable Development Goal (SDG) 13 (“Climate Action”). For the first time ever for a multinational energy group, a bond linked to full decarbonization was issued, in line with the Group’s goal of achieving zero direct greenhouse gas emissions by 2040.
The bond issue programs have made it possible to achieve a ratio between sustainable funding sources and the Group’s total gross debt of about 63%.
Furthermore, on December 22, 2022, Enel obtained a €12 billion revolving credit line dedicated to funding the collateral requirements for trading activities on energy markets. This financing operation, the effectiveness of which is subject to the signing of an implementing decree by the competent ministries, falls within the framework of the measures made available to all energy companies based in Italy that meet specific characteristics in order to ensure, in the current environment of high volatility in the energy markets, the effective operation of the market on equal terms with other European operators in the sector.
Among extraordinary transactions, in January 2022 the subsidiary Enel Produzione SpA completed the acquisition of the entire share capital of ERG Hydro Srl, owner of hydroelectric plants located in central Italy with an installed capacity of 527 MW and an average annual output of about 1.5 TWh.
In March 2022, Enel X International Srl renewed its partnership with the private equity fund Cinven in Ufinet Latam, having acquired 79.4% of the share capital of Ufinet Latam SLU from Sixth Cinven Fund and at the same time sold 80.5% of the share capital of the same company to Seventh Cinven Fund, ending up with an indirect stake of 19.5% of the share capital.
In October 2022, Enel completed the closing for the sale of its entire stake in PJSC Enel Russia, equal to 56.43% of the latter’s share capital, to PJSC Lukoil and the Closed Combined Mutual Investment Fund “GazprombankFrezia”, thus completing the divestment of all its electricity generation assets in Russia.
In December 2022, a) Enel completed, through Enel Grids Srl, the sale of 50% of the subsidiary Gridspertise Srl to the private equity fund CVC Capital Partners Fund VIII, following which Enel and CVC now exercise joint control over the company; b) the subsidiary Enel Chile SA completed the sale of the entire investment, equal to 99.09% of the share capital, held in Enel Transmisión Chile SA, a Chilean electricity transmission company, to Sociedad Transmisora Metropolitana SpA; and c) the subsidiary Enel Brasil SA completed the sale of its entire stake held in the Brazilian electricity distribution company Celg Distribuição SA – Celg-D, equal to about 99.9% of the latter’s share capital, to Equatorial Participações e Investimentos SA.
(1) The Net Promoter Score (NPS) is calculated as the percentage of “promoters” less the percentage of “detractors” (score between 0 and 6 out of 10). The values therefore lie in a range of -100 to +100 (NPS = % Number of Promoters - % Number of Detractors).
The combined effect of two years of the COVID-19 pandemic, geopolitical tensions and extreme weather events related to climate change has increased the need for an acceleration in the energy transition and digitalization, together with the reorganization and rebalancing of global supply chains.
The current situation underscores the need to achieve certain objectives in terms of accessibility, safety and sustainability. To achieve these objectives, over the course of the Plan, the Group plans to focus on an integrated business model targeted at the sustainable electrification of energy consumption, an increasingly necessary step in global energy systems, supplying about 90% of fixed-price sales in the core countries with zero-emission electricity in 2025, bringing generation from renewable sources to around 75% of the total, and digitalizing about 80% of grid customers.
The consequence of the strategy focused on the integrated margin is the particular attention to the countries where the Group's presence covers the entire value chain in order to fully seize the opportunities associated with the energy transition. In this context, the process that began years ago towards the disposal of the assets no longer aligned with our strategy is reaching completion, with planned disposals of around €21 billion over the 2022-2024 period in terms of the positive contribution to the reduction of the Group’s net debt. The majority of this plan is expected to be completed by the end of 2023, completing the path towards a more agile corporate structure, focused on the six core countries (Italy, Spain, United States, Brazil, Chile and Colombia). The Group intends to ensure growth and financial strength by combining a compound annual growth rate (“CAGR”) of 9-10% in ordinary profit with an expected FFO/net debt ratio of 28% starting in 2023, as well as maintaining a fixed DPS of €0.43 in 2023-2025, an increase on the €0.40 paid in 2022. In addition, the DPS for 2024 and 2025 is to be considered a sustainable minimum, not a maximum.
The Group confirms the use of two different business models: the Ownership model, in which the Group directly invests in renewables, grids and customers, and the Stewardship model, in which the Group invests capital in existing businesses, newly established enterprises or acquiring minority stakes, in order to maximize the value of the know-how developed in the various businesses. These models will be applied, depending on the geographical area and the operational context, to achieve the defined objectives.
The Group’s investments in 2023-2025 will amount to about €37 billion. More than 80% will be aligned with the criteria of the European taxonomy, as they relate to activities that contribute to the mitigation of climate change thanks to the strong contribution of investments in renewables, the connection of distributed generation to the grid and advanced services for industrial and private customers.
Some 60% of the Group’s investments, of which about 50% in generation and about 10% in advanced energy customers and services, are expected to support the Group’s integrated commercial strategy, with grids accounting for about 40% of investments over the period covered by the Strategic Plan. At the country level, about 85% of these investments are expected to be allocated to Italy, Spain and the United States, where the Group can also benefit from policies to support sustainable electrification introduced by the EU and the United States.
By 2025, the Group plans to add about 21 GW of installed renewable capacity, including 4 GW of BESS. The decarbonization strategy, combined with the push towards electrification, enables the Group to once again confirm its commitment to combating climate change. In 2022, the Group delineated a decarbonization roadmap, which covers both direct and indirect emissions along the entire value chain. It is composed of four targets that were certified by the Science Based Target initiative (SBTi) in December, in line with the goal of keeping global warming below 1.5 ºC.
Enel’s new certified targets follow up on the ambition set by the Company in 2021, when it brought forward its commitment to achieving zero emissions by ten years, from 2050 to 2040.
The Plan is based on the implementation of a number of fundamental strategic steps: i) the abandonment of coal-fired generation by 2027 and gas-fired generation by 2040, replacing the thermal generation portfolio with new renewables capacity and hybridizing renewables with storage solutions; ii) by 2040, 100% of the electricity sold by the Group will be generated from renewables and by the same year the Group will stop selling gas to end users.
About 40% of investments over the course of the Strategic Plan will be dedicated to the grids in five of the six core countries, specifically Italy, Spain, Brazil, Chile and Colombia, where the Group has an integrated position and where its experience in digital evolution can be best deployed, mainly in large metropolitan areas. The drivers of investments are: the continuous improvement of the quality and resilience of grids to better handle the increase in loads, the continuation of the digitalization process now under way and the increase in demand for new connections in the wake of the substantial growth of distributed energy and the expansion of urban grids.
The Group’s net debt will reach around €51-52 billion by the end of 2023, with a ratio of net debt to EBITDA of around 2.4-2.5x, remaining stable over the rest of the Plan period.
The Group’s ordinary EBITDA will grow to between €22.2 and 22.8 billion in 2025, from €19.7 billion in 2022, with a CAGR of 4-5%, and the Group’s ordinary profit will grow to €7.0-7.2 billion in 2025, from €5.4 billion in 2022, with a CAGR of 9-10%.
