Notes to the consolidated financial statements

Enel SpA has its registered office in Viale Regina Margherita 137, Rome, Italy, and since 1999 has been listed on the Milan stock exchange.
There were no changes in the company name in 2022. Enel is an energy multinational and is one of the world’s leading integrated operators in the electricity and gas industries, with a special focus on Europe and Latin America. The consolidated financial statements as at and for the year ended December 31, 2022 comprise the financial statements of Enel SpA, its subsidiaries and Group holdings in associates and joint ventures, as well as the Group’s share of the assets, liabilities, costs and revenue of joint operations (“the Group”).
A list of the subsidiaries, associates, joint operations and joint ventures included in the consolidation scope is attached.
These consolidated financial statements were approved and authorized for publication by the Board of Directors on March 16, 2023.
These consolidated financial statements have been audited by KPMG SpA.

The consolidated financial statements as at and for the year ended December 31, 2022 have been prepared in accordance with international accounting standards (International Accounting Standards - IAS and International Financial Reporting Standards - IFRS) issued by the International Accounting Standards Board (IASB), the interpretations of the IFRS Interpretations Committee (IFRSIC) and the Standing Interpretations Committee (SIC), recognized in the European Union pursuant to Regulation (EC) no. 1606/2002 and in effect as of the close of the year. All of these standards and interpretations are hereinafter referred to as the “IFRS-EU”. The consolidated financial statements have also been prepared in conformity with measures issued in implementation of Article 9, paragraph 3, of Legislative Decree 38 of February 28, 2005.
The consolidated financial statements consist of the consolidated income statement, the statement of consolidated comprehensive income, the statement of consolidated financial position, the statement of changes in consolidated equity and the consolidated statement of cash flows and the related notes.
The assets and liabilities recognized in the statement of financial position are classified on a “current/non-current basis”, with separate reporting of assets held for sale and liabilities included in disposal groups held for sale. Current assets, which include cash and cash equivalents, are assets that are intended to be realized, sold or consumed during the normal operating cycle of the Group; current liabilities are liabilities that are expected to be settled during the normal operating cycle of the Group.
The income statement classifies costs on the basis of their nature, with separate reporting of profit/(loss) from continuing operations and profit/(loss) from discontinued operations attributable to owners of the Parent and to non-controlling interests.
The consolidated cash flow statement is prepared using the indirect method, with separate reporting of any cash flows by operating, investing and financing activities associated with discontinued operations.
Note that the items reported in the cash flow statement also include any impacts deriving from companies classified as discontinued operations. In particular, although the Group does not diverge from the provisions of IAS 7 in the classification of items:

• cash flows from operating activities report cash flows from core operations, interest on loans granted and obtained and dividends received from associates or joint ventures; 
• investing activities comprise investments in property, plant and equipment and intangible assets and disposals of such assets and contract assets related to service concession arrangements. They include, also, the effects of business combinations in which the Group acquires or loses control of companies, as well as other minor investments; 
• cash flows from financing activities include cash flows generated by liability management transactions and leases, dividends and interim dividends paid to owners of the Parent and non-controlling interests and the effects of transactions in non-controlling interests that do not change the status of control of the companies involved; 
• a separate item is used to report the impact of exchange rates on cash and cash equivalents and their impact on profit or loss is eliminated in full in order to neutralize the effect on cash flows from operating activities.

For more information on cash flows as reported in the statement of cash flows, please see the note 46 “Cash flows”.

The consolidated financial statements have been prepared on a going concern basis using the cost method, with the exception of items measured at fair value in accordance with IFRS, as explained in the measurement bases applied to each individual item, and of non-current assets and disposal groups classified as held for sale, which are measured at the lower of their carrying amount and fair value less costs to sell.
The consolidated financial statements are presented in euro, the functional currency of the Parent Enel SpA. All figures are shown in millions of euro unless stated otherwise.
The consolidated income statement, the statement of financial position and the consolidated statement of cash flows report transactions with related parties, the definition of which is given in note 2.2 “Significant accounting policies”.
The consolidated financial statements provide comparative information in respect of the previous year.

Preparing the consolidated financial statements under IFRS-EU requires management to take decisions and make estimates and assumptions that may impact the carrying amount of revenue, costs, assets and liabilities and the related disclosures concerning the items involved as well as contingent assets and liabilities at the reporting date. The estimates and management’s judgments are based on previous experience and other factors considered reasonable in the circumstances. They are formulated when the carrying amount of assets and liabilities is not easily determined from other sources. The actual results may therefore differ from these estimates. The estimates and assumptions are periodically revised and the effects of any changes are reflected through profit or loss if they only involve that period. If the revision involves both the current and future periods, the change is recognized in the period in which the revision is made and in the related future periods.
In order to enhance understanding of the consolidated financial statements, the following sections examine the main items affected by the use of estimates and the cases that reflect management judgments to a significant degree, underscoring the main assumptions used by management in measuring these items in compliance with the IFRS-EU. The critical element of such valuations is the use of assumptions and professional judgments concerning issues that are by their very nature uncertain.
Changes in the conditions underlying the assumptions and judgments could have a substantial impact on future results.
The information included in the consolidated financial statements is selected on the basis of a materiality analysis carried out in accordance with the requirements of Practice Statement 2 “Making Materiality Judgments”, issued by the International Accounting Standards Board (IASB).

With regard to the effects of climate change issues, the Group believes that climate change represents an implicit element in the application of the methodologies and models used to perform estimates in the valuation and/or measurement of certain accounting items. Furthermore, the Group has also taken account of the impact of climate change in the significant judgments made by management. In this regard, the main items included in the consolidated financial statements at December 31, 2022 affected by management’s use of estimates and judgments refer to the impairment of non-financial assets and obligations connected with the energy transition, including those for decommissioning and site restoration of certain generation plants. For further details on these items, see note 19 “Property, plant and equipment”, note 24 “Goodwill”, and note 40 “Provisions for risks and charges”.

Revenue from contracts with customers
Revenue from supply of electricity and gas to end users is recognized at the time the electricity or gas is delivered and includes, in addition to amounts invoiced on the basis of periodic (and pertaining to the year) meter readings or on the volumes notified by distributors and transporters, an estimate of the electricity and gas delivered during the period but not yet invoiced that is equal to the difference between the amount of electricity and gas delivered to the distribution network and that invoiced in the period, taking account of any network losses. Revenue between the date of the last meter reading and the year-end is based on estimates of the daily consumption of individual customers, primarily determined on their historical information, adjusted to reflect the climate factors or other matters that may affect the estimated consumption.
For more details on such revenue, see note 11.a “Revenue from sales and services”.

Impairment of non-financial assets
When the carrying amount of property, plant and equipment, investment property, intangible assets, right-of-use assets, goodwill and investments in associates/joint ventures exceeds its recoverable amount, which is the higher of the fair value less costs to sell and the value in use, the assets are impaired.
Such impairments are carried out in accordance with the provisions of IAS 36, as described in greater detail in note 24 “Goodwill”.
In order to determine the recoverable amount, the Group generally adopts the value in use criterion. Value in use is based on the estimated future cash flows generated by the asset, discounted to their present value using a pre-tax discount rate that reflects the current market assessment of the time value of money and of the specific risks of the asset.
Future cash flows used to determine value in use are based on the most recent Business Plan, approved by the management, containing forecasts for volumes, revenue, operating costs and investments. These projections cover the next three years. For subsequent years, account is taken of:

• assumptions concerning the long-term evolution of the main variables considered in the calculation of cash flows, as well as the average residual useful life of the assets or the duration of the concessions, based on the specific characteristics of the businesses; 
• a long-term growth rate equal to the long-term growth of electricity demand and/or inflation (depending on the country and business) that does not in any case exceed the average long-term growth rate of the market involved. 

The recoverable amount is sensitive to the estimates and assumptions used in the calculation of cash flows and the discount rates applied. Nevertheless, possible changes in the underlying assumptions on which the calculation of such amounts is based could generate different recoverable amounts. The analysis of each group of non-financial assets is unique and requires management to use estimates and assumptions considered prudent and reasonable in the specific circumstances.

In line with its business model and in the context of the acceleration of the decarbonization of the generation mix and driving the energy transition process, the Group has also carefully assessed whether climate change issues have affected the reasonable and supportable assumption used to estimated expected cash flows. In this regard, where necessary, the Group has also taken account of the long-term impact of climate change, in particular by considering in the estimation of the terminal value a long-term growth rate in line with the change in electricity demand determined using energy models for each country.
Information on the main assumptions used to estimate the recoverable amount of assets with reference to the impacts relating to climate change, as well as information on changes in these assumptions, is provided in note 24 “Goodwill”.

Expected credit losses on financial assets
At the end of each reporting period, the Group recognizes a loss allowance for expected credit losses on trade receivables and other financial assets measured at amortized cost, debt instruments measured at fair value through other comprehensive income, contract assets and all other assets in scope.
Loss allowances for financial assets are based on assumptions about risk of default and on the measurement of expected credit losses. Management uses judgment in making these assumptions and selecting the inputs for the impairment calculation, based on the Group’s past experience, current market conditions as well as forward-looking estimates at the end of each reporting period.
The expected credit loss (i.e., ECL) – determined considering probability of default (PD), loss given default (LGD), and exposure at default (EAD) – is the difference between all contractual cash flows that are due in accordance with the contract and all cash flows that are expected to be received (including all shortfalls) discounted at the original effective interest rate (EIR).
In particular, for trade receivables, contract assets and lease receivables, including those with a significant financial component, the Group applies the simplified approach, determining expected credit losses over a period corresponding to the entire life of the asset, generally equal to 12 months.
Based on the specific reference market and the regulatory context of the sector, as well as expectations of recovery after 90 days, for such assets, the Group mainly applies a default definition of 180 days past due to determine expected credit losses, as this is considered an effective indication of a significant increase in credit risk. Accordingly, financial assets that are more than 90 days past due are generally not considered to be in default, except for some specific regulated markets.
For trade receivables and contract assets the Group mainly applies a collective approach based on grouping trade receivables and contract assets into specific clusters, taking into account the specific regulatory and business context. Only if the trade receivables are deemed to be individually significant by management and there is specific information about any significant increase in credit risk, does the Group apply an analytical approach.
In case of individual assessment, PD is mainly obtained from an external provider.
Conversely, for collective assessment, trade receivables are grouped based on shared credit risk characteristics and past due information, considering a specific definition of default.

Based on each business and local regulatory framework as well as differences in customer portfolios also in terms of risk, default rates and recovery expectations, specific clusters are defined.
The contract assets are considered to have substantially the same risk characteristics as the trade receivables for the same types of contracts.

In order to measure the ECL for trade receivables on a collective basis, as well as for contract assets, the Group considers the following assumptions related to ECL parameters:

• PD, assumed as to be the average default rate, is calculated on a cluster basis and taking into consideration minimum 24-month historical data; • LGD is function of the default bucket’s recovery rates, discounted at the EIR; and 
• EAD is estimated as the carrying exposure at the reporting date net of cash deposits, including invoices issued but not expired and invoices to be issued. 

Based on specific management evaluations, the forward-looking adjustment can be applied considering qualitative and quantitative information in order to reflect possible future events and macroeconomic scenarios, which may affect the risk of the portfolio or the financial instrument. For additional details on the key assumptions and inputs used please see note 48 “Financial instruments by category”.

Depreciable amount of certain elements of Italian hydroelectric plants subsequent to enactment of Law 134/2012
Italian regulations governing large-scale hydroelectric concessions were significantly modified by the “Simplifications Decree” (Decree Law 135 of 2018 ratified with Law 12 of February 11, 2019). The regulations introduce a number of innovations which, if applied to existing concessions, would require a review of the useful lives of certain investments in hydroelectric plants in order to reflect the possibility that, at the end of the concession, some assets could be transferred free of charge to the new concession holder. However, in estimating the useful lives of these plants, management, with the support of a legal opinion, considered the foreseeable outcome of the appeals promptly lodged by the Company – and others – and the related constitutionality issues, which have also been raised by industrial associations. Consequently, we believe that the legislation raises serious constitutionality issues that will be effectively recognized in the appropriate fora. Accordingly, management deemed it appropriate not to reflect the changes introduced by the regulations and therefore has continued to measure the useful lives of the plants as has been done in previous years under the previous regulatory system, considering this to be the most realistic estimate.
Law 134 of August 7, 2012 containing “urgent measures for growth” (published in the Gazzetta Ufficiale of August 11, 2012), introduced a sweeping overhaul of the rules governing hydroelectric concessions. Among its various provisions, the law establishes that five years before the expiration of a major hydroelectric water diversion concession and in cases of lapse, relinquishment or revocation, where there is no prevailing public interest for a different use of the water, incompatible with its use for hydroelectric generation, the competent public entity shall organize a public call for tenders for the award for consideration of the concession for a period ranging from 20 to a maximum of 30 years.
In order to ensure operational continuity, the law also governs the methods of transferring ownership of the business unit necessary to operate the concession, including all legal relationships relating to the concession, from the outgoing concession holder to the new concession holder, in exchange for payment of a price to be determined in negotiations between the departing concession holder and the grantor agency, taking due account of the following elements:

• for intake and governing works, penstocks and outflow channels, which under the consolidated law governing waters and electrical plants are to be relinquished free of charge (Article 25 of Royal Decree 1775 of December 11, 1933), the revalued cost less government capital grants, also revalued, received by the concession holder for the construction of such works, depreciated for ordinary wear and tear; 
• for other property, plant and equipment, the market value, meaning replacement value, reduced by estimated depreciation for ordinary wear and tear.

While acknowledging that the new regulations introduce important changes as to the transfer of ownership of the business unit with regard to the operation of the hydroelectric concession, the practical application of these principles faces difficulties, given the uncertainties that do not permit the formulation of a reliable estimate of the value that can be recovered at the end of existing concessions (residual value).
Accordingly, management has decided it could not produce a reasonable and reliable estimate of residual value. The fact that the legislation requires the new concession holder to make a payment to the departing concession holder prompted management to review the depreciation schedules for assets classified as to be relinquished free of charge prior to Law 134/2012 (until the year ended on December 31, 2011, given that the assets were to be relinquished free of charge, the depreciation period was equal to the closest date between the term of the concession and the end of the useful life of the individual asset), calculating depreciation no longer over the term of the concession but, if longer, over the useful life of the individual assets. If additional information becomes available to enable the calculation of residual value, the carrying amounts of the assets involved will be adjusted prospectively. 

Determining the fair value of financial instruments
The fair value of financial instruments is determined on the basis of prices directly observable in the market, where available, or, for unlisted financial instruments, using specific valuation techniques (mainly based on present value) that maximize the use of observable market inputs. In rare circumstances where this is not possible, the inputs are estimated by management taking due account of the characteristics of the instruments being measured.
For more information on financial instruments measured at fair value, please see note 52 “Assets and liabilities measured at fair value”.
In accordance with IFRS 13, the Group includes a measurement of credit risk, both of the counterparty (Credit Valuation Adjustment or CVA) and its own (Debit Valuation Adjustment or DVA), in order to adjust the fair value of financial instruments for the corresponding amount of counterparty risk, using the method discussed in note 52 “Assets and liabilities measured at fair value”.
Changes in the assumptions made in estimating the input data could have an impact on the fair value recognized for those instruments, especially in current conditions where markets are volatile and the economic outlook is highly uncertain and subject to rapid change.

Development expenditure
In order to determine the recoverability of development expenditure, the recoverable amount is estimated making assumptions regarding any further cash outflow that is expected to be incurred before the asset is ready for use or sale, the discount rates to be applied and the expected period of benefits.

Pensions and other post-employment benefits
Some of the Group’s employees participate in pension plans offering benefits based on their wage history and years of service. Certain employees are also eligible for other post-employment benefit schemes.
The expenses and liabilities of such plans are calculated on the basis of estimates carried out by consulting actuaries, who use a combination of statistical and actuarial elements in their calculations, including statistical data on past years and forecasts of future costs. Other components of the estimation that are considered include mortality and retirement rates as well as assumptions concerning future developments in discount rates, the rate of wage increases, the inflation rate and trends in healthcare cost.
These estimates can differ significantly from actual developments owing to changes in economic and market conditions, increases or decreases in retirement rates and the lifespan of participants, as well as changes in the effective cost of healthcare.
Such differences can have a substantial impact on the quantification of pension costs and other related expenses.
For more details on the main actuarial assumptions adopted, please see note 39.

Provisions for risks and charges 
For more details on provisions for risks and charges, please see note 40 “Provisions for risks and charges”. Note 57 “Contingent assets and liabilities” also provides information regarding the most significant contingent assets and liabilities for the Group at year end.

Litigation
The Group is involved in various civil, administrative and tax disputes connected with the normal pursuit of its activities that could give rise to significant liabilities. It is not always objectively possible to predict the outcome of these disputes. The assessment of the risks associated with this litigation is based on complex factors whose very nature requires recourse to management judgments, even when taking account of the contribution of external advisors assisting the Group, about whether to classify them as contingent liabilities or liabilities.
Provisions have been recognized to cover all significant liabilities for cases in which legal counsel feels an adverse outcome is likely and a reasonable estimate of the amount of the expense can be made.

Obligations associated with generation plants, including decommissioning and site restoration
Generation activities may entail obligations for the operator with regard to future interventions that will have to be performed following the end of the operating life of the plant.
Such interventions may involve the decommissioning of plants and site restoration, or other obligations linked to the type of generation technology involved. The nature of such obligations may also have a major impact on the accounting treatment used for them.
In the case of nuclear power plants, where the costs regard both decommissioning and the storage of waste fuel and other radioactive materials, the estimation of the future cost is a critical process, given that the costs will be incurred over a very long span of time, estimated at up to 100 years.
The obligation, based on financial and engineering assumptions, is calculated by discounting the expected future cash flows that the Group considers it will have to pay to meet the obligations it has assumed.
The discount rate used to determine the present value of the liability is the pre-tax risk-free rate and is based on the economic parameters of the country in which the plant is located.
That liability is quantified by management on the basis of the technology existing at the measurement date and is reviewed each year, taking account of developments in storage, decommissioning and site restoration technology, as well as the ongoing evolution of the legislative framework governing health and environmental protection.
Subsequently, the value of the obligation is adjusted to reflect the passage of time and any changes in estimates. Please see note 40 “Provisions for risks and charges” for more information on discount rates, undiscounted estimated costs and their timing, which are used to calculate the plant decommissioning and site restoration provision.

Onerous contracts
In order to identify an onerous contract, the Group estimates the non-discretionary costs necessary to fulfil the obligations assumed (including any penalties) under the contract and the economic benefits that are presumed to be obtained from the contract.

Leases
When the interest rate implicit in the lease cannot be readily determined, the Group uses the incremental borrowing rate (IBR) at the lease commencement date to calculate the present value of the lease payments. This is the interest rate that the lessee would have to pay to borrow over a similar term, and with a similar security, the funds necessary to obtain an asset of a similar value to the rightofuse asset in a similar economic environment. When no observable inputs are available, the Group estimates the IBR making assumptions to reflect the terms and conditions of the lease and certain lessee-specific estimates.
One of the most significant judgments for the Group is determining this IBR necessary to calculate the present value of the lease payments required to be paid to the lessor.
The Group approach to determine an IBR is based on the assessment of the following three key components:

• the risk free rate, that consider the currency flows of the lease payments, the economic environment where the lease contract has been negotiated and also the lease term; 
• the credit spread adjustment, in order to calculate an IBR that is specific for the lessee considering any underlying Parent or other guarantee; 
• the lease related adjustments, in order to reflect into the IBR calculation the fact that the discount rate is directly linked to the type of the underlying asset, rather than being a general incremental borrowing rate. In particular, the risk of default is mitigated for the lessors as they have the right to reclaim the underlying asset itself.
  

For more information on lease liabilities, please see note 48 “Financial instruments by category”.

Income tax

Recovery of deferred tax assets
At December 31, 2022, the consolidated financial statements report deferred tax assets in respect of tax losses or tax credits usable in subsequent years and income components whose deductibility is deferred in an amount whose future recovery is considered by management to be highly probable.
The recoverability of such assets is subject to the achievement of future profits sufficient to absorb such tax losses and to use the benefits of the other deferred tax assets.
Significant management judgment is required to assess the probability of recovering deferred tax assets, considering all negative and positive evidence, and to determine the amount that can be recognized, based upon the likely timing and the level of future taxable profits together with future tax planning strategies and the tax rates applicable at the date of reversal. However, where the Group should become aware that it is unable to recover all or part of recognized tax assets in future years, the consequent adjustment would be taken to profit or loss in the year in which this circumstance arises.
The recoverability of deferred tax assets is reviewed at the end of each period. Deferred tax assets not recognized are reassessed at each reporting date in order to verify the conditions for their recognition.

For more detail in deferred tax assets recognized or not recognized, please see note 25 “Deferred tax assets and liabilities”.

Identification of cash generating units (CGUs)
For impairment testing, if the recoverable amount cannot be determined for an individual asset, the Group identifies the smallest group of assets that generate largely independent cash inflows. The smallest group of assets that generates cash inflows that are largely independent of the cash inflows from other assets or group of assets is a CGU. Identifying such CGUs involves management judgments regarding the specific nature of the assets and the business involved (geographical segment, business segment, regulatory framework, etc.) and the evidence that the cash inflows of the group of assets are largely independent of those associated with other assets (or groups of assets). The assets of each CGU are also identified on the basis of the manner in which management manages and monitors those assets within the business model adopted. In particular, the number and scope of the CGUs are updated systematically to reflect the impact of new business combinations and reorganizations carried out by the Group, and to take account of external factors that could influence the ability of assets to generate independent cash inflows.
In particular, if certain specific identified assets owned by the Group are impacted by adverse economic or operating conditions that undermine their capacity to contribute to the generation of cash flows, they can be isolated from the rest of the assets of the CGU, undergo separate analysis of their recoverability and be impaired where necessary.
The CGUs identified by management to which the goodwill recognized in these consolidated financial statements has been allocated and the criteria used to identify the CGUs are indicated in note 24 “Goodwill”.

Determining the useful life of non-financial assets
In determining the useful life of property, plant and equipment and intangible assets with a finite useful life, the Group considers not only the future economic benefits – contained in the assets – obtained through their use, but also many other factors, such as physical wear and tear, the technical, commercial or other obsolescence of the product or service produced with the asset, legal or similar limits (e.g., safety, environmental or other restrictions) on the use of the asset, if the useful life of the asset depends on the useful life of other assets.
Furthermore, in estimating the useful lives of the assets concerned, the Group has taken account of its commitment under the Paris Agreement. For more information on this issue, please see note 19 “Property, plant and equipment”.

Determination of the existence of control
Under the provisions of IFRS 10, control is achieved when the Group is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Power is defined as the current ability to direct the relevant activities of the investee based on existing substantive rights. 
The existence of control does not depend solely on ownership of a majority investment, but rather it arises from substantive rights that each investor holds over the investee. Consequently, management must use its judgment in assessing whether specific situations determine substantive rights that give the Group the power to direct the relevant activities of the investee in order to affect its returns.
For the purpose of assessing control, management analyzes all facts and circumstances including any agreements with other investors, rights arising from other contractual arrangements and potential voting rights (call options, warrants, put options granted to non-controlling shareholders, etc.). These other facts and circumstances could be especially significant in such assessment when the Group holds less than a majority of voting rights, or similar rights, in the investee.
Furthermore, even if it holds more than half of the voting rights in an entity, the Group considers all the relevant facts and circumstances in assessing whether it controls the investee.
The Group reassesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the elements considered in verifying the existence of control.
As reported in Enel’s consolidated financial statements at December 31, 2022, the Enel Group holds minor interests in Enel Green Power Rus LLC and Enel X Rus LLC.
In the wake of the Ukrainian conflict, a number of measures were adopted or undertaken that resulted in the termination of Enel’s management and coordination role at the Russian companies in which the Group holds investments. These measures include: (i) the resignation of all non-independent directors and all managers of non-Russian nationality; (ii) the termination of intercompany contracts; and (iii) the modification of the organizational structure of the Enel Group in order to terminate reporting by the staff or business functions to Enel.
At December 31, 2022 the Enel Group continues to control the companies from an accounting point of view, in compliance with “IFRS 10 - Consolidated Financial Statements”.

Determination of the existence of joint control and of the type of joint arrangement
Under the provisions of IFRS 11, a joint arrangement is an agreement where two or more parties have joint control. Joint control exists only when the decisions over the relevant activities require the unanimous consent of the parties that share joint control.
A joint arrangement can be configured as a joint venture or a joint operation. Joint ventures are joint arrangements whereby the parties that have joint control have rights to the net assets of the arrangement. Conversely, joint operations are joint arrangements whereby the parties that have joint control have rights to the assets and obligations for the liabilities relating to the arrangement.
In order to determine the existence of the joint control and the type of joint arrangement, management must apply judgment and assess its rights and obligations arising from the arrangement. For this purpose, the management considers the structure and legal form of the arrangement, the terms agreed by the parties in the contractual arrangement and, when relevant, other facts and circumstances. Following that analysis, the Group has considered its interest in Asociación Nuclear Ascó-Vandellós II as a joint operation.
The Group re-assesses whether or not it has joint control if facts and circumstances indicate that changes have occurred in one or more of the elements considered in verifying the existence of joint control and the type of the joint arrangement.
In the wake of the Ukrainian conflict, a number of measures were adopted or undertaken that resulted in the termination of Enel’s management of Rusenergosbyt LLC (Group’s associate). These measures include the resignation of all non-independent directors and all managers of non-Russian nationality and the termination of reporting by the staff or business functions to Enel.
At December 31, 2022 the Enel Group continues to exercise joint control of the company from an accounting point of view, in accordance with “IFRS 11 - Joint arrangements”. For more information on the Group’s investments in joint ventures, please see note 26 “Equity-accounted investments”.

Determination of the existence of significant influence over an associate
Associates are those in which the Group exercises significant influence, i.e., the power to participate in the financial and operating policy decisions of the investee but not exercise control or joint control over those policies. In general, it is presumed that the Group has a significant influence when it has an ownership interest of 20% or more.
In order to determine the existence of significant influence, management must apply judgment and consider all facts and circumstances.
The Group re-assesses whether or not it has significant influence if facts and circumstances indicate that there are changes to one or more of the elements considered in verifying the existence of significant influence.
For more information on the Group’s equity investments in associates, please see note 26 “Equity-accounted investments”.

Application of “IFRIC 12 - Service concession arrangements” to concessions
IFRIC 12 applies to “public-to-private” service concession arrangements, which can be defined as contracts under which the operator is obligated to provide public services, i.e., give access to major economic and social services for a certain period of time, on behalf of a public entity (the grantor). In these contracts, the grantor conveys to an operator the right to manage the infrastructure used to provide services.
More specifically, IFRIC 12 gives guidance on the accounting by operators for “public-to-private” service concession arrangements in the event that:

• the grantor controls or regulates what services the operator must provide with the infrastructure, to whom it must provide them, and at what price; and 
• the grantor controls – through ownership, beneficial entitlement or otherwise – any significant residual interest in the infrastructure at the end of the term of the arrangement.

In assessing the applicability of these requirements for the Group, as operator, management carefully analyzed existing concessions.
On the basis of that analysis, the provisions of IFRIC 12 are applicable to some of the infrastructure of a number of companies that operate primarily in Brazil. Further details about the infrastructure used in the service concession arrangements in the scope of IFRIC 12 are provided in note 20 “Infrastructure within the scope of ‘IFRIC 12 - Service concession arrangements’”.

Revenue from contracts with customers In the process of applying
IFRS 15, the Group has made the following judgments (further details about the most significant effect on the Group’s revenue are provided in note 11.a “Revenue from sales and services”).

The Group carefully analyzes the contractual terms and conditions on a jurisdictional level in order to determine when a contract exists and the terms of that contract’s enforceability so as to apply IFRS 15 only to such contracts. 

When a contract includes multiple promised goods or services, in order to assess if they should be accounted for separately or as a group, the Group considers both the individual characteristics of goods/services and the nature of the promise within the context of the contract, also evaluating all the facts and circumstances relating to the specific contract under the relevant legal and regulatory framework. To evaluate when a performance obligation is satisfied, the Group evaluates when the control of the goods or services is transferred to the customer, assessed primarily from the perspective of the customer. 

For each performance obligation, and in relation to the type of transaction:

• revenue is recognized over time on the basis of the progress towards complete satisfaction of the performance obligation, as in the case of the provision of services. The measurement of progress towards complete satisfaction of a performance obligation is carried out consistently for performance obligations and similar circumstances using an “output” or “input” method. In particular, the cost incurred method (cost-to-cost method) is considered appropriate for measuring progress except when a specific analysis of the contract counsels the use of an alternative method. If it should prove impossible to reasonably assess progress towards satisfaction of the performance obligation, the Group recognizes revenue only to the extent of the incurred costs that are considered recoverable; 
• if, on the other hand, the performance obligation is satisfied at a given moment, as in the case of the supply of goods, revenue is recognized at the point in time in which the customer obtains the control of the goods, considering all relevant indicators. 

The Group considers all relevant facts and circumstances in determining whether a contract includes variable consideration (i.e., consideration that may vary or depends upon the occurrence or non-occurrence of a future event). In estimating variable consideration, the Group uses the method that better predicts the consideration to which it will be entitled, applying it consistently throughout the contract and for similar contracts, also considering all available information, and updating such estimates until the uncertainly is resolved. The Group includes the estimated variable consideration in the transaction price only to the extent that it is highly probable that a significant reversal in the cumulative revenue recognized will not occur when the uncertainty is resolved.

The Group considers that it is an agent in some contracts in which it is not primarily responsible for fulfilling the contract and therefore it does not control goods or services before they are being transferred to customers. For example, the Group acts as an agent in some contracts for electricity/gas network connection services and other related activities depending on local legal and regulatory framework.

For contracts that have more than one performance obligation (e.g., “bundled” sale contracts), the Group generally allocates the transaction price to each performance obligation in proportion to its stand-alone selling price. The Group determines stand-alone selling prices considering all information and using observable prices when they are available in the market or, if not, using an estimation method that maximizes the use of observable inputs and applying it consistently to similar arrangements.
If the Group evaluates that a contract includes an option for additional goods or services (e.g., customer loyalty programs or renewal options) that represents a material right, it allocates the transaction price to this option since the option gives rise to an additional performance obligation.

The Group assesses recoverability of the incremental costs of obtaining a contract either on a contract-by-contract basis, or for a group of contracts if those costs are associated with the group of contracts.
The Group supports the recoverability of such costs on the basis of its experience with other similar transactions and evaluating various factors, including potential renewals, amendments and follow-on contracts with the same customer.
The Group amortizes such costs over the average customer term. In order to determine this expected period of benefit from the contract, the Group considers its past experience (e.g., “churn rate”), the predictive evidence from similar contracts and available information about the market.

Power Purchase Agreements
Power Purchase Agreements (PPAs), which provide for the physical delivery of energy and which do not comply with the requirements of IFRS 10 for the existence of control or joint control over a company or an asset, and IFRS 16 for the recognition of a lease, but which comply with the definition of a derivative under IFRS 9, are accounted for on the basis of the own use exemption when the relevant conditions are met.
For more information on Virtual PPAs complying with the definition of derivative pursuant to IFRS 9, please see note 51 “Derivatives and hedge accounting”.

Classification and measurement of financial assets
At initial recognition, in order to classify financial assets as financial assets at amortized cost, at fair value through other comprehensive income and at fair value through profit or loss, management assesses both the contractual cash-flow characteristics of the instrument and the business model for managing financial assets in order to generate cash flows.
In order to evaluate the contractual cash-flow characteristics of the instrument, management performs the SPPI test at an instrument level, in order to determine if it gives rise to cash flows that are solely payments of principal and interest (SPPI) on the principal amount outstanding, performing specific assessment on the contractual clauses of the financial instruments, as well as quantitative analysis, if required. The business model determines whether cash flows will result from collecting contractual cash flows, selling the financial assets, or both.
For more details, please see note 48 “Financial instruments by category”.

Hedge accounting
Hedge accounting is applied to derivatives in order to reflect into the financial statements the effect of risk management strategies. Accordingly, at the inception of the transaction the Group documents the hedge relationship between hedging instruments and hedged items, as well as its risk management objectives and strategy.
The Group also assesses, both at hedge inception and on an ongoing basis, whether hedging instruments are highly effective in offsetting changes in the fair values or cash flows of hedged items. On the basis of management’s judgment, the effectiveness assessment based on the existence of an economic relationship between the hedging instruments and the hedged items, the dominance of credit risk in the changes in fair value and the hedge ratio, as well as the measurement of the ineffectiveness, is evaluated through a qualitative assessment or a quantitative computation, depending on the specific facts and circumstances and on the characteristics of the hedged items and the hedging instruments.
For cash flow hedges of forecast transactions designated as hedged items, management assesses and documents that they are highly probable and present an exposure to changes in cash flows that affect profit or loss.

For additional details on the key assumptions about effectiveness assessment and ineffectiveness measurement, please refer to note 51.1 “Derivatives designated as hedging instruments”.

Leases
The complexity of the assessment of the lease contracts, and also their long-term expiring date, requires considerable professional judgments for application of IFRS 16. In particular, this regards:

• the application of the definition of a lease to the cases typical of the sectors in which the Group operates; • the identification of the non-lease component into the lease arrangements; 
• the evaluation of any renewable and termination options included in the lease in order to determine the term of leases, also considering the probability of their exercise and any significant leasehold improvements on the underlying asset, taking due consideration of recent interpretations issued by the IFRS Interpretations Committee; 
• the identification of any variable lease payments that depend on an index or a rate to determine whether the changes of the latter impact the future lease payments and also the amount of the right-of-use asset; 
• the estimate of the discount rate to calculate the present value of the lease payments; further details on assumptions about this rate are provided in the paragraph “Use of estimates”.

For more information on leases, please see note 21 “Leases”.

Uncertainty over income tax treatments
The Group determines whether to consider each uncertain income tax treatment separately or together with one or more other uncertain tax treatments as well as whether to reflect the effect of uncertainty by using the most likely amount or the expected value method, based on which approach better predicts the resolution of the uncertainty for each uncertain tax treatments, taking account of local tax regulations.
The Group makes significant use of professional judgment in identifying uncertainties about income tax treatments and reviews the judgments and estimates made in the event of a change in facts and circumstances that could change its assessment of the acceptability of a specific tax treatment or the estimate of the effects of uncertainty, or both. For more information on income taxes, please see note 17 “Income taxes”.

Related parties are mainly those that share the same controlling entity with Enel SpA, the companies that directly or indirectly are controlled by Enel SpA, the associates or joint ventures (including their subsidiaries) of Enel SpA, or the associates or joint ventures (including their subsidiaries) of any Group company. Related parties also include entities that operate post-employment benefit plans for employees of Enel SpA or its associates (specifically, the FOPEN and FONDENEL pension funds), as well as the members of the boards of statutory auditors, and their immediate family, and the key management personnel, and their immediate family, of Enel SpA and its subsidiaries. Key management personnel comprises management personnel who have the power and direct or indirect responsibility for the planning, management and control of the activities of the Company. They include directors (whether executive or not).

Subsidiaries are all entities over which the Group has control. The Group controls an entity, regardless of the nature of the formal relationship between them, when it is exposed, or has rights, to variable returns deriving from its involvement and has the ability, through the exercise of its power over the investee, to affect its returns.
The figures of the subsidiaries are consolidated on a full line-by-line basis as from the date control is acquired until such control ceases.

The financial statements of subsidiaries used to prepare the consolidated financial statements were prepared at December 31, 2022 in accordance with the accounting policies adopted by the Group.
If a subsidiary uses different accounting policies from those adopted in preparing the consolidated financial statements for similar transactions and facts in similar circumstances, appropriate adjustments are made to ensure conformity with Group accounting policies.
Assets, liabilities, revenue and expenses of a subsidiary acquired or disposed of during the year are included in or excluded from the consolidated financial statements, respectively, from the date the Group gains control or until the date the Group ceases to control the subsidiary.
Profit or loss for the year and the other comprehensive income are attributed to the owners of the Parent and non-controlling interests, even if this results in a loss for non-controlling interests.
All intercompany assets and liabilities, equity item, revenue, expenses and cash flows relating to transactions between entities of the Group are eliminated in full.
Changes in ownership interest in subsidiaries that do not result in loss of control are accounted for as equity transactions, with the carrying amounts of the controlling and non-controlling interests adjusted to reflect changes in their interests in the subsidiary. Any difference between the amount to which non-controlling interests are adjusted and the fair value of the consideration paid or received is recognized in consolidated equity.
When the Group ceases to have control over a subsidiary, any interest retained in the entity is remeasured to its fair value, recognized through profit or loss, at the date when control is lost, recognizing any gain or loss from the loss of control through profit or loss. In addition, any amounts previously recognized in other comprehensive income in respect of the former subsidiary are accounted for as if the Group had directly disposed of the related assets or liabilities.

An associate is an entity over which the Group has significant influence. Significant influence is the power to participate in decisions concerning the financial and operating policies of the investee without having control or joint control over the investee.
A joint venture is a joint arrangement over which the Group exercises joint control and has rights to the net assets of the arrangement. Joint control is the sharing of control of an arrangement, whereby decisions about the relevant activities require unanimous consent of the parties sharing control.

The Group’s investments in associates and joint ventures are accounted for using the equity method.
Under the equity method, these investments are initially recognized at cost and any goodwill arising from the difference between the cost of the investment and the Group’s share of the net fair value of the investee’s identifiable assets and liabilities at the acquisition date is included in the carrying amount of the investment.
After the acquisition date, their carrying amount is adjusted to recognize changes in the Group’s share of profit or loss of the associate or joint venture in Group profit or loss. Adjustments to the carrying amount may also be necessary following changes in the Group’s share in the associate or joint venture as a result of changes in the other comprehensive income of the investee. The Group’s share of these changes is recognized in the Group’s other comprehensive income.
Distributions received from joint venture and associates reduce the carrying amount of the investments. Gains and losses resulting from transactions between the Group and the associates or joint ventures are eliminated to the extent of the interest in the associate or joint venture. 
The financial statements of the associates or joint ventures are prepared for the same reporting period as the Group.
When necessary, adjustments are made to bring the accounting policies in line with those of the Group. After application of the equity method, the Group determines whether it is necessary to recognize an impairment loss on its investment in an associate or joint venture. If there is objective evidence of a loss of value, the entire carrying amount of the investment undergoes impairment testing pursuant to IAS 36 as a single asset. For more information on impairment, please see the section “Impairment of non-financial assets” in note 2.1 “Use of estimates and management judgment”.
If the investment ceases to be an associate or a joint venture, the Group recognizes any retained investment at its fair value, through profit or loss. Any amounts previously recognized in other comprehensive income in respect of the former associate or joint venture are accounted for as if the Group had directly disposed of the related assets or liabilities.
If the ownership interest in an associate or a joint venture is reduced, but the Group continues to exercise a significant influence or joint control, the Group continues to apply the equity method and the share of the gain or loss that had previously been recognized in other comprehensive income relating to that reduction is accounted for as if the Group had directly disposed of the related assets or liabilities.
When a portion of an investment in an associate or joint venture meets the criteria to be classified as held for sale, any retained portion of an investment in the associate or joint venture that has not been classified as held for sale is accounted for using the equity method until disposal of the portion classified as held for sale takes place. 
Joint operations are joint arrangements whereby the Group, which holds joint control, has rights to the assets and obligations for the liabilities relating to the arrangement. For each joint operation, the Group recognized assets, liabilities, costs and revenue on the basis of the provisions of the arrangement rather than the interest held. Where there is an increase in the interest in a joint arrangement that meets the definition of a business:

• if the Group acquires control, and had rights over the assets and obligations for the liabilities of the joint arrangement immediately before the acquisition date, then the transaction represents a business combination achieved in stages. Consequently, the Group applies the requirements for a business combination achieved in stages, including the remeasurement of the interest it held previously in the joint operation at its fair value at the acquisition date; 
• if the Group obtains joint control (i.e., it already had an interest in a joint operation without holding joint control), the interest previously held in the joint operation shall not be remeasured. 

For more information on the Group’s investments in associates and joint ventures, please see note 26 “Equity-accounted investments”.

Transactions in currencies other than the functional currency are initially recognized at the spot exchange rate prevailing on the date of the transaction.
Monetary assets and liabilities denominated in a foreign currency other than the functional currency are subsequently translated using the closing exchange rate (i.e., the spot exchange rate prevailing at the reporting date).
Non-monetary assets and liabilities denominated in foreign currency that are recognized at historical cost are translated using the exchange rate at the date of the transaction. Non-monetary assets and liabilities in foreign currency measured at fair value are translated using the exchange rate at the date the fair value was determined. Any exchange differences are recognized through profit or loss.
In determining the spot exchange rate to use on initial recognition of the related asset, expense or income (or part of it) on the derecognition of a non-monetary asset or non-monetary liability relating to advance consideration in foreign currency paid or received, the date of the transaction is the date on which the Group initially recognizes the non-monetary asset or non-monetary liability associated with the advance consideration.
If there are multiple advance payments or receipts, the Group determines the transaction date for each payment or receipt of advance consideration.

For the purposes of the consolidated financial statements, all revenue, expenses, assets and liabilities are stated in euro, which is the presentation currency of the Parent.
In order to prepare the consolidated financial statements, the financial statements of consolidated companies with functional currencies other than the presentation currency used in the consolidated financial statements are translated into euros by applying the closing exchange rate to the assets and liabilities, including goodwill and consolidation adjustments, and the average exchange rate for the period to the income statement items on the condition it approximates the exchange rates prevailing at the date of the respective transactions.
Any resulting exchange gains or losses are recognized as a separate component of equity in a special reserve. The gains and losses are recognized proportionately in the income statement on the disposal (partial or total) of the subsidiary.
When the functional currency of a consolidated company is the currency of a hyperinflationary economy, the Group restates the financial statements in accordance with IAS 29 before applying the specific conversion method set out below.
In order to consider the impact of hyperinflation on the local currency exchange rate, the financial position and performance (i.e., assets, liabilities, equity items, revenue and expenses) of a company whose functional currency is the currency of a hyperinflationary economy are translated into the Group’s presentation currency (the euro) using the exchange rate prevailing at the reporting date, except for comparative amounts presented in the previous year’s financial statements which are not adjusted for subsequent changes in the price level or subsequent changes in exchange rates.

Business combinations initiated before January 1, 2010 and completed within that financial year are recognized on the basis of IFRS 3 (2004).
Such business combinations were recognized using the purchase method, where the purchase cost is equal to the fair value at the date of the exchange of the assets acquired and the liabilities incurred or assumed, plus costs directly attributable to the acquisition. This cost was allocated by recognizing the assets, liabilities and identifiable contingent liabilities of the acquired company at their fair values. Any positive difference between the cost of the acquisition and the fair value of the net assets acquired attributable to the owners of the Parent was recognized as goodwill. If the difference is negative, it is recognized through profit or loss.
The carrying amount of non-controlling interests was determined in proportion to the interest held by non-controlling shareholders in the net assets. In the case of business combinations achieved in stages, at the date of acquisition any adjustment to the fair value of the net assets acquired previously was recognized in equity; the amount of goodwill was determined for each transaction separately based on the fair values of the acquiree’s net assets at the date of each exchange transaction.

Business combinations carried out as from January 1, 2010 are recognized on the basis of IFRS 3 (2008), which is referred to as IFRS 3 (Revised) hereafter.
More specifically, business combinations are recognized using the acquisition method, where the purchase cost (the consideration transferred) is equal to the fair value at the purchase date of the assets acquired and the liabilities incurred or assumed, as well as any equity instruments issued by the purchaser. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement.
Costs directly attributable to the acquisition are recognized through profit or loss.
The consideration transferred is allocated by recognizing the assets, liabilities and identifiable contingent liabilities of the acquired company at their fair values as at the acquisition date. The excess of the consideration transferred, measured at fair value as at the acquisition date, the amount of any non-controlling interest in the acquiree plus the fair value of any equity interest in the acquiree previously held by the Group (in a business combination achieved in stages) over the net amount of the identifiable assets acquired and the liabilities incurred or assumed measured at fair value is recognized as goodwill. If the difference is negative, the Group verifies whether it has correctly identified all the assets acquired and liabilities assumed and reviews the procedures used to determine the amounts to recognize at the acquisition date. If after this assessment the fair value of the net assets acquired still exceeds the total consideration transferred, this excess represents the profit on a bargain purchase and is recognized through profit or loss.
The carrying amount of non-controlling interests is determined either in proportion to the interest held by non-controlling shareholders in the net identifiable assets of the acquiree or at their fair value as at the acquisition date. In the case of business combinations achieved in stages, at the date of acquisition of control the previously held equity interest in the acquiree is remeasured to fair value and any positive or negative difference is recognized in profit or loss.
Any contingent consideration is recognized at fair value at the acquisition date. Subsequent changes to the fair value of the contingent consideration classified as an asset or a liability, or as a financial instrument within the scope of IFRS 9, are recognized in profit or loss. If the contingent consideration is not within the scope of IFRS 9, it is measured in accordance with the appropriate IFRS-EU. Contingent consideration that is classified as equity is not re-measured, and its subsequent settlement is accounted for within equity.
If the fair values of the assets, liabilities and contingent liabilities can only be calculated on a provisional basis, the business combination is recognized using such provisional values. Any adjustments resulting from the completion of the measurement process are recognized within 12 months of the date of acquisition, restating comparative figures.

For all fair value measurements and disclosures of fair value, that are either required or permitted by IFRS, the Group applies IFRS 13.
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability, in an orderly transaction, between market participants, at the measurement date (i.e., an exit price).
The fair value measurement assumes that the transaction to sell an asset or transfer a liability takes place in the principal market, i.e., the market with the greatest volume and level of activity for the asset or liability. In the absence of a principal market, it is assumed that the transaction takes place in the most advantageous market to which the Group has access, i.e., the market that maximizes the amount that would be received to sell the asset or minimizes the amount that would be paid to transfer the liability.
The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest. Market participants are independent, knowledgeable sellers and buyers who are able to enter into a transaction for the asset or the liability and who are motivated but not forced or otherwise compelled to do so.
When measuring fair value, the Group considers the characteristics of the asset or liability, in particular:

• for a non-financial asset, a fair value measurement takes into account a market participant’s ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use;
• for liabilities and own equity instruments, the fair value reflects the effect of non-performance risk, i.e., the risk that an entity will not fulfill an obligation, including among others the credit risk of the Group itself; 
• in the case of groups of financial assets and financial liabilities with offsetting positions in market risk or credit risk, managed on the basis of an entity’s net exposure to such risks, it is permitted to measure fair value on a net basis.

In measuring the fair value of assets and liabilities, the Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available, maximizing the use of relevant observable inputs and minimizing the use of unobservable inputs.

Property, plant and equipment is stated at cost, net of accumulated depreciation and accumulated impairment losses, if any. Such cost includes expenses directly attributable to bringing the asset to the location and condition necessary for its intended use.
The cost is also increased by the present value of the estimate of the costs of decommissioning and restoring the site on which the asset is located where there is a legal or constructive obligation to do so. The corresponding liability is recognized under provisions for risks and charges. The accounting treatment of changes in the estimate of these costs, the passage of time and the discount rate is discussed in note 40 “Provisions for risks and charges”. Property, plant and equipment transferred from customers to connect them to the electricity distribution network and/or to provide them with other related services is initially recognized at its fair value at the date on which control is obtained.
Borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset, i.e., an asset that takes a substantial period of time to get ready for its intended use or sale, are capitalized as part of the cost of the assets themselves. Borrowing costs associated with the purchase/construction of assets that do not meet such requirement are expensed in the period in which they are incurred.
Certain assets that were revalued at the IFRS-EU transition date or in previous periods are recognized at their fair value, which is considered to be their deemed cost at the revaluation date.
Where individual items of major components of property, plant and equipment have different useful lives, the components are recognized and depreciated separately. Subsequent costs are recognized as an increase in the carrying amount of the asset when it is probable that future economic benefits associated with the cost incurred to replace a part of the asset will flow to the Group and the cost of the item can be measured reliably. All other costs are recognized in profit or loss as incurred.
The cost of replacing part or all of an asset is recognized as an increase in the carrying amount of the asset and is depreciated over its useful life; the carrying amount of the replaced unit is derecognized through profit or loss.
Property, plant and equipment, net of its residual value, is depreciated on a straight-line basis over its estimated useful life, which is reviewed annually. Any changes in depreciation criteria shall be applied prospectively. For more information on estimating useful life, please see note 2.1 “Use of estimates and management judgment”.
Depreciation begins when the asset is available for use. The estimated useful life of the main items of property, plant and equipment is as follows:

The useful life of leasehold improvements is determined on the basis of the term of the lease or, if shorter, on the duration of the benefits produced by the improvements themselves.
Land is not depreciated as it has an indefinite useful life. Assets recognized under property, plant and equipment are derecognized either upon their disposal (i.e., at the date the recipient obtains control) or when no future economic benefit is expected from their use or disposal. Any gain or loss, recognized through profit or loss, is calculated as the difference between the net disposal proceeds, determined in accordance with the transaction price requirements of IFRS 15, and the carrying amount of the derecognized assets.

Assets to be relinquished free of charge
The Group’s plants include assets to be relinquished free of charge at the end of the concessions. These mainly regard major water diversion works and the public lands used for the operation of the thermal power plants.
Within the Italian regulatory framework in force until 2011, if the concessions are not renewed, at those dates all intake and governing works, penstocks, outflow channels and other assets on public lands were to be relinquished free of charge to the State in good operating condition. Accordingly, depreciation on assets to be relinquished was calculated over the shorter of the term of the concession and the useful life of the assets.
In the wake of the legislative changes introduced with Law 134 of August 7, 2012, the assets previously classified as assets “to be relinquished free of charge” connected with the hydroelectric water diversion concessions are now considered in the same manner as other categories of “Property, plant and equipment” and are therefore depreciated over the useful life of the asset (where this exceeds the term of the concession), as discussed in the section above on the “Depreciable amount of certain elements of Italian hydroelectric plants subsequent to enactment of Law 134/2012”, which you are invited to consult for more details. 

In accordance with Spanish laws 29/1985 and 46/1999, hydroelectric power stations in Spanish territory operate under administrative concessions at the end of which the plants will be returned to the government in good operating condition. The terms of the concessions extend up to 2078.
A number of generation companies that operate in Latin America hold administrative concessions with similar conditions to those applied under the Spanish concession system. These concessions will expire in Argentina in 2087, in Brazil in 2047, in Costa Rica in 2031, in Panama in 2060 and in Guatemala in 2062.

Infrastructure serving a concession not within the scope of “IFRIC 12 - Service concession arrangements”
As regards the distribution of electricity, the Group is a concession holder in Italy for this service. The concession, granted by the Ministry for Economic Development, was issued free of charge and terminates on December 31, 2030. If the concession is not renewed upon expiry, the grantor is required to pay an indemnity. The amount of the indemnity will be determined by agreement of the parties using appropriate valuation methods, based on both the carrying amount of the assets themselves and their profitability.
In determining the indemnity, such profitability will be represented by the present value of future cash flows. The infrastructure serving the concession is owned and available to the concession holder. It is recognized under “Property, plant and equipment” and is depreciated over the useful lives of the assets.
Enel also operates under administrative concessions for the distribution of electricity in other countries (including Spain and Romania). These concessions give the right to build and operate distribution networks for an indefinite period of time.

Under a “public-to-private” service concession arrangement within the scope of “IFRIC 12 - Service concession arrangements” the operator acts as a service provider and, in accordance with the terms specified in the contract, it constructs/upgrades infrastructure used to provide a public service and/or operates and maintains that infrastructure for the years of the concession.
The Group, as operator, does not account for the infrastructure within the scope of IFRIC 12 as property, plant and equipment and it recognizes and measures revenue in accordance with IFRS 15 for the services it performs. In particular, when the Group provides construction or upgrade services, depending on the characteristics of the service concession arrangement, it recognizes:

• a financial asset, if the Group has an unconditional contractual right to receive cash or another financial asset from the grantor (or from a third party at the direction of the grantor), that is the grantor has little discretion to avoid payment. In this case, the grantor contractually guarantees to pay to the operator specified or determinable amounts or the shortfall between the amounts received from the users of the public service and specified or determinable amounts (defined by the contract), and such payments are not dependent on the usage of the infrastructure; and/or 
• an intangible asset, if the Group receives the right (a license) to charge users of the public service provided. In such a case, the operator does not have an unconditional right to receive cash because the amounts are contingent on the extent that the public uses the service. If the Group (as operator) has a contractual right to receive an intangible asset (a right to charge users of public service), borrowing costs are capitalized using the criteria specified in note 19 “Property, plant and equipment”.
  However, for construction/upgrade services, both types of consideration are classified as a contract asset during the construction/upgrade period.
  For more details about such consideration, please see note 11.a “Revenue from sales and services”.

The Group holds property, plant and equipment for its various activities under lease contracts. At inception of a contract, the Group assesses whether a contract is, or contains, a lease.
For contracts entered into or changed on or after January 1, 2019, the Group has applied the definition of a lease under IFRS 16, that is met if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration.
Conversely, for contracts entered into before January 1, 2019, the Group determined whether the arrangement was or contained a lease under IFRIC 4. 

Group as a lessee
At commencement or on modification of a contract that contains a lease component and one or more additional lease or non-lease components, the Group allocates the consideration in the contract to each lease component on the basis of its relative stand-alone price.
The Group recognizes a right-of-use asset and a lease liability at the commencement date of the lease (i.e., the date the underlying asset is available for use).
The right-of-use asset represents a lessee’s right to use an underlying asset for the lease term; it is initially measured at cost, which includes the initial amount of lease liability adjusted for any lease payments made at or before the commencement date less any lease incentives received, plus any initial direct costs incurred and an estimate of costs to retire and remove the underlying asset and to restore the underlying asset or the site on which it is located. Right-of-use assets are subsequently depreciated on a straight-line basis over the shorter of the lease term and the estimated useful lives of the right-of-use assets, as follows:

If the lease transfers ownership of the underlying asset to the Group at the end of the lease term or if the cost of the right-of-use asset reflects the fact that the Group will exercise a purchase option, depreciation is calculated using the estimated useful life of the underlying asset.
In addition, the right-of-use assets are subject to impairment and adjusted for any remeasurement of lease liabilities.
The lease liability is initially measured at the present value of lease payments to be made over the lease term. In calculating the present value of lease payments, the Group uses the lessee’s incremental borrowing rate at the lease commencement date when the interest rate implicit in the lease is not readily determinable.
Variable lease payments that do not depend on an index or a rate are recognized as expenses in the period in which the event or condition that triggers the payment occurs.
After the commencement date, the lease liability is measured at amortized cost using the effective interest method and is remeasured upon the occurrence of certain events. The Group applies the short-term lease recognition exemption to its lease contracts that have a lease term of 12 months or less from the commencement date. It also applies the low-value assets recognition exemption to lease contracts for which the underlying asset is of low-value whose amount is estimated not material. For example, the Group has leases of certain office equipment (i.e., personal computers, printing and photocopying machines) that are considered of low-value. Lease payments on short-term leases and leases of low-value assets are recognized as expense on a straight-line basis over the lease term.
The Group presents right-of-use assets that do not meet the definition of investment property in “Property, plant and equipment” and lease liabilities in “Borrowings”. Consistent with the requirement of the standard, the Group presents separately the interest expense on lease liabilities under “Other financial expense” and the depreciation charge on the right-of-use assets under “Depreciation, amortization and impairment losses”.

Group as a lessor
When the Group acts as a lessor, it determines at the lease inception date whether each lease is a finance lease or an operating lease. Leases in which the Group essentially transfers all the risks and rewards associated with ownership of the underlying asset are classified as finance leases; otherwise, they are classified as operating leases.
To make this assessment, the Group considers the indicators provided by IFRS 16. If a contract contains lease and non-lease components, the Group allocates the consideration in the contract applying IFRS 15. The Group accounts for rental income arising from operating leases on a straight-line basis over the lease terms and it recognizes it as other revenue.

Investment property consists of the Group’s real estate held to earn rentals and/or for capital appreciation rather than for use in the production or supply of goods and services.
Investment property is measured at acquisition cost less any accumulated depreciation and any accumulated impairment losses.
Investment property, excluding land, is depreciated on a straight-line basis over the useful lives of the related assets.
Impairment losses are determined on the basis of the criteria following described.
The breakdown of the fair value of investment property is detailed in note 52 “Assets and liabilities measured at fair value”.
Investment property is derecognized either when it has been transferred (i.e., at the date the recipient obtains control) or when it is permanently withdrawn from use and no future economic benefit is expected from its disposal. Any gain or loss, recognized through profit or loss, is calculated as the difference between the net disposal proceeds, determined in accordance with the transaction price requirements of IFRS 15, and the carrying amount of the derecognized assets.
Transfers are made to (or from) investment property only when there is a change in use.

Intangible assets are identifiable assets without physical substance controlled by the Group and capable of generating future economic benefits. They are measured at purchase or internal development cost when it is probable that the use of such assets will generate future economic benefits and the related cost can be reliably determined. The cost includes any directly attributable expenses necessary to make the assets ready for their intended use. Development expenditure is recognized as an intangible asset only when Group can demonstrate the technical feasibility of completing the asset, its intention and ability to complete development and to use or sell the asset and the availability of resources to complete the asset.
Research costs are recognized as expenses.
Intangible assets with a finite useful life are recognized net of accumulated amortization and any impairment losses. Amortization is calculated on a straight-line basis over the asset’s estimated useful life, which is reassessed at least annually; any changes in amortization policies are reflected on a prospective basis. For more information on estimating useful life, please see note 2.1 “Use of estimates and management judgment”.
Amortization commences when the asset is ready for use. Consequently, intangible assets not yet available for use are not amortized, but are tested for impairment at least annually. 
The Group’s intangible assets have a finite useful life, with the exception of a number of concessions and goodwill. Intangible assets with indefinite useful lives are not amortized, but are tested for impairment annually.
The assessment of indefinite useful life is reviewed annually to determine whether the indefinite useful life continues to be supportable. If not, the change in useful life from indefinite to finite is accounted for as a change in accounting estimate. Intangible assets are derecognized either at the time of their disposal (at the date when the recipient obtains control) or when no future economic benefit is expected from their use or disposal. Any gain or loss, recognized through profit or loss, is calculated as the difference between the net consideration received in the disposal, determined in accordance with the provisions of IFRS 15 concerning the transaction price, and the carrying amount of the derecognized assets.
The estimated useful life of the main intangible assets, distinguishing between internally generated and acquired assets, is as follows:

The Group also presents costs to obtain a contract with a customer capitalized in accordance with IFRS 15 as intangible assets.
The Group recognized such costs as an asset only if:

• the costs are incremental, that is they are directly attributable to an identified contract and the Group would not have incurred them if the contract had not been obtained; 
• the Group expects to recover them, through reimbursements (direct recoverability) or the margin (indirect recoverability). 

In particular, the Group generally capitalizes trade fees and commissions paid to agents for such contracts if the capitalization criteria are met.
Capitalized customer contract costs are amortized on a systematic basis, consistent with the pattern of the transfer of the goods or services to which they relate, and undergo impairment testing to identify any impairment losses to the extent that the carrying amount of the asset recognized exceeds the recoverable amount.
The Group amortizes the capitalized customer contract costs on a straight-line basis over the expected period of benefit from the contract (i.e., the average term of the customer relationship); any changes in amortization policies are reflected on a prospective basis. 

Goodwill represents the future economic benefits arising from other assets acquired in a business combination that are not individually identified and separately recognized. For further details, please see the section of the accounting policies “Business combinations”.
Goodwill arising on the acquisition of subsidiaries is recognized separately. After initial recognition, goodwill is not amortized, but is tested for impairment at least annually as part of the CGU to which it pertains.
For the purpose of impairment testing, goodwill is allocated, from the acquisition date, to each CGU that is expected to benefit from the synergies of the combination. Goodwill relating to equity investments in associates and joint venture is included in their carrying amount.

At each reporting date, property, plant and equipment, investment property, intangible assets, right-of-use assets, goodwill and equity investments in associates/joint ventures are reviewed to determine whether there is evidence of impairment.
CGUs to which goodwill, intangible assets with an indefinite useful life and intangible assets not yet available for use are allocated are tested for recoverability annually or more frequently if there is evidence suggesting that the assets can be impaired.
If such evidence exists, the recoverable amount of any involved asset is estimated on the basis of the use of the asset and its future disposal, in accordance with the Group’s most recent Business Plan. For the estimate of the recoverable amount, please see note 2.1 “Use of estimates and management judgment”.
The recoverable amount is determined for an individual asset, unless the asset do not generate cash inflows that are largely independent of those from other assets or groups of assets and therefore it is determined for the CGU to which the asset belongs.
If the carrying amount of an asset or of a CGU to which it is allocated is greater than its recoverable amount, an impairment loss is recognized in profit or loss and presented under “Depreciation, amortization and other impairment losses”.
Impairment losses of CGUs are firstly charged against the carrying amount of any goodwill attributed to it and then against the other assets, in proportion to their carrying amount.
If the reasons for a previously recognized impairment loss no longer apply, the carrying amount of the asset is restored through profit or loss, under “Depreciation, amortization and other impairment losses”, in an amount that shall not exceed the carrying amount that the asset would have had if the impairment loss had not been recognized. The original amount of goodwill is not restored even if in subsequent years the reasons for the impairment no longer apply.
If certain specific identified assets owned by the Group are impacted by adverse economic or operating conditions that undermine their capacity to contribute to the generation of cash flows, they can be isolated from the rest of the assets of the CGU, undergo separate analysis of their recoverability and be impaired where necessary.

Inventories are measured at the lower of cost and net realizable value except for inventories involved in trading activities, which are measured at fair value with recognition through profit or loss. Cost is determined on the basis of average weighted cost, which includes related ancillary charges. Net estimated realizable value is the estimated normal selling price net of estimated costs to sell or, where applicable, replacement cost.
For the portion of inventories held to discharge sales that have already been made, the net realizable value is determined on the basis of the amount established in the contract of sale.
Inventories include environmental certificates (for example, green certificates, energy efficiency certificates and European CO₂ emissions allowances and guarantees of origin) exceeding compliance in the reporting period. As regards CO₂ emissions allowances, inventories are allocated between the trading portfolio and the compliance portfolio, i.e., those used for compliance with greenhouse gas emissions requirements.
Inventories also include nuclear fuel stocks, use of which is determined on the basis of the electricity generated. Materials and other consumables (including energy commodities) held for use in production are not written down if it is expected that the final product in which they will be incorporated will be sold at a price sufficient to enable recovery of the cost incurred.

Financial instruments are any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity; they are recognized and measured in accordance with IAS 32 and IFRS 9.
A financial asset or liability is recognized in the consolidated financial statements when, and only when, the Group becomes party to the contractual provision of the instrument (i.e., the trade date).
Trade receivables arising from contracts with customers, in the scope of IFRS 15, are initially measured at their transaction price (as defined in IFRS 15) if such receivables do not contain a significant financing component or when the Group applies the practical expedient allowed by IFRS 15. Conversely, the Group initially measures financial assets other than the above-mentioned trade receivables at their fair value plus, in the case of a financial asset not measured at fair value through profit or loss, transaction costs. 
Financial assets are classified, at initial recognition, as financial assets at amortized cost, at fair value through other comprehensive income and at fair value through profit or loss, on the basis of both the Group’s business model and the contractual cash-flow characteristics of the instrument.
For this purpose, the assessment to determine whether the instrument gives rise to cash flows that are solely payments of principal and interest (SPPI) on the principal amount outstanding is referred to as the SPPI test and is performed at an instrument level.
The Group’s business model for managing financial assets refers to how it manages its financial assets in order to generate cash flows. The business model determines whether cash flows will result from collecting contractual cash flows, selling the financial assets, or both.
For purposes of subsequent measurement, financial assets are classified in four categories:

• financial assets measured at amortized cost (debt instruments); 
• financial assets at fair value through OCI with reclassification of cumulative gains and losses (debt instruments); 
• financial assets designated at fair value through OCI with no reclassification of cumulative gains and losses upon derecognition (equity instruments); and 
• financial assets at fair value through profit or loss.
  

Financial assets measured at amortized cost
This category mainly includes trade receivables, other financial assets and loan assets.
Financial assets at amortized cost are held within a business model whose objective is to hold financial assets in order to collect contractual cash flows and whose contractual terms give rise, on specified dates, to cash flows that are solely payments of principal and interest on the principal amount outstanding.
Such assets are initially recognized at fair value, adjusted for any transaction costs, and subsequently measured at amortized cost using the effective interest method and are subject to impairment.
Gains and losses are recognized in profit or loss when the asset is derecognized, modified or impaired.

Financial assets at fair value through other comprehensive income (FVOCI) - Debt instruments
This category mainly includes:

• listed debt securities held by the Group reinsurance company and not classified as held for trading; and 
• tax credits deriving from application of Decree Law 34/2020 (so-called “Revival Decree”). 

Financial assets at fair value through other comprehensive income are assets held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets and whose contractual cash flows give rise, on specified dates, to cash flows that are solely payments of principal and interest on the principal amount outstanding.
Changes in fair value for these financial assets are recognized in other comprehensive income as well as loss allowances that do not reduce the carrying amount of the financial assets.
When a financial asset is derecognized (e.g., at the time of sale), the cumulative gains and losses previously recognized in equity (except impairment and foreign exchange gains and losses to be recognized in profit or loss) are reversed to profit or loss.

Financial assets at fair value through other comprehensive income (FVOCI) - Equity instruments
This category includes mainly equity investments in other entities irrevocably designated as such upon initial recognition.
Gains and losses on these financial assets are never reclassified to profit or loss. The Group may transfer the cumulative gain or loss within equity.
Equity instruments designated at fair value through OCI are not subject to impairment testing.
Dividends on such investments are recognized in profit or loss unless they clearly represent a recovery of a part of the cost of the investment.

Financial assets at fair value through profit or loss
This category mainly includes: securities, equity investments in other companies, financial investments in fund held for trading and financial assets designated as at fair value through profit or loss at initial recognition.
Financial assets at fair value through profit or loss are:

• financial assets with cash flows that are not solely payments of principal and interest, irrespective of the business model; 
• financial assets held for trading because acquired or incurred principally for the purpose of selling or repurchasing in short term; 
• debt instruments designated upon initial recognition, under the option allowed by IFRS 9 (fair value option), if doing so eliminates, or significantly reduces, an accounting mismatch; 
• derivatives, including separated embedded derivatives, held for trading or not designated as effective hedging instruments. 

Such financial assets are initially recognized at fair value with subsequent gains and losses from changes in their fair value recognized through profit or loss.
This category also includes listed equity investments which the Group had not irrevocably elected to classify at fair value through OCI. Dividends on such investments are also recognized as other income in the income statement when the right of payment has been established.
Financial assets that qualify as contingent consideration are also measured at fair value through profit or loss.

Impairment of financial assets
At each reporting date, the Group recognizes a loss allowance for expected credit losses on trade receivables and other financial assets measured at amortized cost, debt instruments measured at fair value through other comprehensive income (FVOCI), contract assets and all other assets within the scope of IFRS 9.
In compliance with IFRS 9, as from January 1, 2018, the Group adopted a new impairment model based on the determination of expected credit losses (ECL) using a forward-looking approach. In essence, the model provides for:

• the application of a single framework for all financial assets; 
• the recognition of expected credit losses on an ongoing basis and the updating of the amount of such losses at the end of each reporting period, reflecting changes in the credit risk of the financial instrument; 
• the measurement of expected losses on the basis of reasonable information, obtainable without undue cost, about past events, current conditions and forecasts of future conditions.

For trade receivables, contract assets and lease receivables, including those with a significant financial component, the Group adopts the simplified approach, determining expected credit losses over a period corresponding to the entire life of the asset, generally equal to 12 months. For all financial assets other than trade receivables, contract assets and lease receivables, the Group applies the general approach under IFRS 9, based on the assessment of a significant increase in credit risk since initial recognition. Under such approach, a loss allowance on financial assets is recognized at an amount equal to the lifetime expected credit losses, if the credit risk on those financial assets has increased significantly, since initial recognition, considering all reasonable and supportable information, including also forward-looking inputs.
If at the reporting date the credit risk on financial assets has not increased significantly since initial recognition, the Group measures the loss allowance for those financial assets at an amount equal to 12-month expected credit losses.
For financial assets on which a loss allowance equal to lifetime expected credit losses has been recognized in the previous reporting period, the Group measures the loss allowance at an amount equal to 12-month expected credit losses when the condition regarding a significant increase in credit risk is no longer met.
The Group recognizes in profit or loss, as an impairment gain or loss, the amount of expected credit losses (or reversal) that is required to adjust the loss allowance at the reporting date to the amount that is required to be recognized in accordance with IFRS 9.
The Group applies the low credit risk exemption, avoiding the recognition of loss allowances at an amount equal to lifetime expected credit losses due to a significant increase in credit risk of debt securities at fair value through OCI, whose counterparty has a strong financial capacity to meet its contractual cash-flow obligations (e.g., investment grade).
For more information on the impairment of financial assets, please see note 48 “Financial instruments by category”.

Cash and cash equivalents
This category includes deposits that are available on demand or at very short term, as well as highly liquid shortterm financial investments that are readily convertible into a known amount of cash and which are subject to insignificant risk of changes in value.
In addition, for the purpose of the consolidated statement of cash flows, cash and cash equivalents do not include bank overdrafts at period-end.

Financial liabilities at amortized cost
This category mainly includes borrowings, trade payables, lease liabilities and debt instruments.
Financial liabilities, other than derivatives, are recognized when the Group becomes a party to the contractual clauses of the instrument and are initially measured at fair value adjusted for directly attributable transaction costs. Financial liabilities are subsequently measured at amortized cost using the effective interest rate method. The effective interest rate is the rate that exactly discounts the estimated future cash payments or receipts over the expected life of the financial instrument or a shorter period, where appropriate, to the carrying amount of the financial asset or liability.

Financial liabilities at fair value through profit or loss
Financial liabilities at fair value through profit or loss include financial liabilities held for trading and financial liabilities designated upon initial recognition as at fair value through profit or loss.
Financial liabilities are classified as held for trading if they are incurred for the purpose of repurchasing in the near term. This category also includes derivative financial instruments entered into by the Group that are not designated as hedging instruments in hedge relationships as defined by IFRS 9. Separated embedded derivatives are also classified as at fair value through profit or loss unless they are designated as effective hedging instruments. Gains or losses on liabilities at fair value through profit or loss are recognized through profit or loss.
Financial liabilities designated upon initial recognition at fair value through profit or loss are designated at the initial date of recognition, only if the criteria in IFRS 9 are satisfied.
In this case, the portion of the change in fair value attributable to own credit risk is recognized in other comprehensive income.
The Group has not designated any financial liability as at fair value through profit or loss, upon initial recognition. Financial liabilities that qualify as contingent consideration are also measured at fair value through profit or loss.

Derecognition of financial assets and liabilities
Financial assets are derecognized whenever one of the following conditions is met:

• the contractual right to receive the cash flows associated with the asset expires;
• the Group has transferred substantially all the risks and rewards associated with the asset, transferring its rights to receive the cash flows of the asset or assuming a contractual obligation to pay such cash flows to one or more beneficiaries under a contract that meets the requirements provided by IFRS 9 (the “pass through test”); 
• the Group has not transferred or retained substantially all the risks and rewards associated with the asset but has transferred control over the asset. 

Financial liabilities are derecognized when they are extinguished, i.e., when the contractual obligation has been discharged, cancelled or expired.
When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as the derecognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognized in profit or loss.

Derivative financial instruments
A derivative is a financial instrument or another contract:

• whose value changes in response to the changes in an underlying variable such as an interest rate, commodity or security price, foreign exchange rate, a price or rate index, a credit rating or other variable; 
• that requires no initial net investment, or one that is smaller than would be required for a contract with similar response to changes in market factors; 
• that is settled at a future date.

Derivative instruments are classified as financial assets or liabilities depending on the positive or negative fair value and they are classified as “held for trading” within “Other business models” and measured at fair value through profit or loss, except for those designated as effective hedging instruments.
All derivatives held for trading are classified as current assets or liabilities.
Derivatives not held for trading purposes, but measured at fair value through profit or loss since they do not qualify for hedge accounting, and derivatives designated as effective hedging instruments are classified as current or not current on the basis of their maturity date and the Group intention to hold the financial instrument till maturity or not. For more details about derivatives and hedge accounting, please see note 51 “Derivatives and hedge accounting”.

Embedded derivatives
An embedded derivative is a derivative included in a “combined” contract (the so-called “hybrid instrument”) that contains another non-derivative contract (the so-called host contract) and gives rise to some or all of the combined contract’s cash flows.
The main Group contracts that may contain embedded derivatives are contracts to buy or sell non-financial items with clauses or options that affect the contract price, volume or maturity. 
A derivative embedded in a hybrid contract containing a financial asset host is not accounted for separately. The financial asset host together with the embedded derivative is required to be classified in its entirety as a financial asset at fair value through profit or loss.
Contracts that do not represent financial instruments to be measured at fair value are analyzed in order to identify any embedded derivatives, which are to be separated and measured at fair value. This analysis is performed when the Group becomes party to the contract or when the contract is renegotiated in a manner that significantly changes the original associated cash flows.
Embedded derivatives are separated from the host contract and accounted for as derivatives when:

• the host contract is not a financial instrument measured at fair value through profit or loss; 
• the economic risks and characteristics of the embedded derivative are not closely related to those of the host contract; 
• a separate contract with the same terms as the embedded derivative would meet the definition of a derivative.

Embedded derivatives that are separated from the host contract are recognized in the consolidated financial statements at fair value with changes recognized in profit or loss (except when the embedded derivative is part of a designated hedge relationship).

Contracts to buy or sell non-financial items
In general, contracts to buy or sell non-financial items that are entered into and continue to be held for receipt or delivery in accordance with the Group’s normal expected purchase, sale or usage requirements are out of the scope of IFRS 9 and then recognized as executory contracts, according to the “own use exemption”.
A contract to buy or sell non-financial items is classified as “normal purchase or sale” if it is entered into:

• for the purpose of the physical settlement; 
• in accordance with the entity’s expected purchase, sale or usage requirements.

Moreover, contracts to buy or sell non-financial items with physical settlement (for example, fixed-price forward contracts on energy commodities) that do not qualify for the own use exemption are recognized as derivatives measured at fair value from the trade date only if:

• they can be settled net in cash; and 
• they are not entered into in accordance with the Group’s expected purchase, sale or usage requirements.

Trading contracts are valued at fair value through profit or loss; the results of the measurement of changes in the fair value of contracts still outstanding at the reporting date are recognized on a net basis under the item “Net results from commodity contracts”, while at the settlement date:

• the results of the measurement of changes in the fair value of closed contracts for the sale of energy commodities as well as the related revenue, together with the impact on profit or loss of the derecognition of the derivative, are recognized under “Revenue from sales and services”; 
• the results of the measurement of changes in the fair value of closed contracts for the purchase of energy commodities as well as the related cost, together with the impact on profit or loss of the derecognition of the derivative, are recognized under “Electricity, gas and fuel” and “Services and other materials”.

Contracts to buy or sell non-financial items falling within the scope of application of IFRS 9 can also be subsequently designated as hedging instruments if they satisfy the requirements for hedge accounting.
The Group analyzes all contracts to buy or sell non-financial assets on an ongoing basis, with a specific focus on forward purchases and sales of electricity and energy commodities, in order to determine if they shall be classified and treated in accordance with IFRS 9 or if they have been entered into for “own use”.

Offsetting financial assets and liabilities
The Group offsets financial assets and liabilities when:

• there is a legally enforceable right to set off the recognized amounts; and 
• there is the intention of settling on a net basis or realizing the asset and settling the liability simultaneously.

In a hyperinflationary economy, the Group adjusts non-monetary items, equity and items deriving from index- linked contracts up to the limit of recoverable amount, using a price index that reflects changes in general purchasing power.
The effects of initial application are recognized in equity net of tax effects. Conversely, during the hyperinflationary period (until it ceases), the gain or loss resulting from adjustments is recognized in profit or loss and disclosed separately in financial income and expense. Starting from 2018, this standard applies to the Group’s transactions in Argentina, whose economy has been declared hyperinflationary from July 1, 2018.

Non-current assets (or disposal groups) are classified as held for sale if their carrying amount will be recovered principally through a sale transaction, rather than through continuing use.
This classification criterion is applicable only when non-current assets (or disposal groups) are available in their present condition for immediate sale and the sale is highly probable.
If the Group is committed to a sale plan involving loss of control of a subsidiary and the requirements provided for under IFRS 5 are met, all the assets and liabilities of that subsidiary are classified as held for sale when the classification criteria are met, regardless of whether the Group will retain a non-controlling interest in its former subsidiary after the sale.
The Group applies these classification criteria as envisaged in IFRS 5 to an investment, or a portion of an investment, in an associate or a joint venture. Any retained portion of an investment in an associate or a joint venture that has not been classified as held for sale is accounted for using the equity method until disposal of the portion that is classified as held for sale takes place.
Non-current assets (or disposal groups) and liabilities of disposal groups classified as held for sale are presented separately from other assets and liabilities in the statement of financial position.
The amounts presented for non-current assets or for the assets and liabilities of disposal groups classified as held for sale are not reclassified or re-presented for prior periods presented.
Immediately before the initial classification of non-current assets (or disposal groups) as held for sale, the carrying amounts of such assets (or disposal groups) are measured in accordance with the accounting standard applicable to those assets or liabilities. Non-current assets (or disposal groups) classified as held for sale are measured at the lower of their carrying amount and fair value less costs to sell. Impairment losses for any initial or subsequent write-down of the assets (or disposal groups) to fair value less costs to sell and gains for their reversals are recognized in profit or loss from continuing operations.
Non-current assets are not depreciated (or amortized) while they are classified as held for sale or while they are part of a disposal group classified as held for sale. If the classification criteria are no longer met, the Group ceases to classify the non-current assets (or disposal group) as held for sale. In this case they are measured at the lower of:

• the carrying amount before the asset (or disposal group) was classified as held for sale, adjusted for any depreciation, amortization or reversals of impairment losses that would have been recognized if the asset (or disposal group) had not been classified as held for sale; and 
• the recoverable amount, which is equal to the greater of its fair value net of costs to sell and its value in use, as calculated at the date of the subsequent decision not to sell.
  

Any adjustment to the carrying amount of a non-current asset that ceases to be classified as held for sale is included in profit or loss from continuing operations. A discontinued operation is a component of the Group that either has been disposed of, or is classified as held for sale, and:

• represents a separate major business line or geographical segment;
• is part of a single coordinated plan to dispose of a separate major business line or geographical segment; or
•  is a subsidiary acquired exclusively with a view to resale. 

The Group presents, in a separate line item of the income statement, a single amount comprising the total of:

• the post-tax profit or loss of discontinued operations; and
  
• the post-tax gain or loss recognized on the measurement at fair value less costs to sell or on the disposal of the assets or disposal groups constituting the discontinued operation.
  

The corresponding amount is restated in the income statement for prior periods presented in the financial statements, so that the disclosures relate to all operations that are discontinued by the end of the current reporting period. If the Group ceases to classify a component as held for sale, the results of the component previously presented in discontinued operations are reclassified and included in profit or loss from continuing operations for all periods presented.

Some Group companies are affected by national regulations governing green certificates, guarantees of origin and energy efficiency certificates (so-called white certificates), as well as the European “Emissions Trading System”. Green certificates and guarantees of origin accrued in proportion to electricity generated by renewable energy plants and energy efficiency certificates accrued in proportion to energy savings achieved that have been certified by the competent authority are treated as non-monetary government operating grants and are recognized at fair value, under other operating profit, with recognition of an asset under other non-financial assets, if the certificates are not yet credited to the ownership account, or under inventories, if the certificates have already been credited to that account.
At the time the certificates are credited to the ownership account, they are reclassified from other assets to inventories.
Revenue from the sale of such certificates is recognized under revenue, with a corresponding decrease in inventories.
For the purposes of accounting for charges arising from such regulatory requirements, the Group uses the “net liability approach”.
Under this accounting policy, any environmental certificates received free of charge and those self-produced as a result of Group’s operations that will be used for compliance purposes are recognized at nominal value (nil). In addition, charges incurred for obtaining (in the market or in some other transaction for consideration) any missing certificates to fulfil compliance requirements for the reporting period are recognized through profit or loss on an accrual basis under other operating costs, as they represent “system charges” consequent to compliance with a regulatory requirement.

Liabilities related to employee benefits paid upon or after ceasing employment in connection with defined benefit plans or other long-term benefits accrued during the employment period are determined separately for each plan, using actuarial assumptions to estimate the amount of the future benefits that employees have accrued at the reporting date (using the projected unit credit method). More specifically, the present value of the defined benefit obligation is calculated by using a discount rate determined on the basis of market yields at the end of the reporting period on high-quality corporate bonds. If there is no deep market for high-quality corporate bonds in the currency in which the bond is denominated, the corresponding yield of government securities is used.
The liability, net of any plan assets, is recognized on an accrual basis over the vesting period of the related rights. These appraisals are performed by independent actuaries. If the plan assets exceed the present value of the related defined benefit obligation, the surplus (up to the limit of any cap) is recognized as an asset. 
As regards the liabilities/(assets) of defined benefit plans, the cumulative actuarial gains and losses from the actuarial measurement of the liabilities, the return on the plan assets (net of the associated interest income) and the effect of the asset ceiling (net of the associated interest) are recognized in other comprehensive income when they occur. For other long-term benefits, the related actuarial gains and losses are recognized through profit or loss. In the event of a change being made to an existing defined benefit plan or the introduction of a new plan, any past service cost is recognized immediately in profit or loss.
In addition, the Group is involved in defined contribution plans under which it pays fixed contributions to a separate entity (a fund) and has no legal or constructive obligation to pay further contributions if the fund does not hold sufficient assets to pay all employee benefits relating to employee service in the current and prior periods. Such plans are usually aimed to supplement pension benefits due to employees post-employment. The related costs are recognized through profit or loss on the basis of the amount of contributions paid in the period.

Liabilities for benefits due to employees for the early termination of employee service arise out of the Group’s decision to terminate an employee’s employment before the normal retirement date or an employee’s decision to accept an offer of benefits in exchange for the termination of employment. The event that gives rise to an obligation is the termination of employment rather than employee service. Termination benefits are recognized at the earlier of the following dates:

• when the entity can no longer withdraw its offer of benefits; and
• when the entity recognizes a cost for a restructuring that is within the scope of IAS 37 and involves the payment of termination benefits.

The liabilities are measured on the basis of the nature of the employee benefits. More specifically, when the benefits represent an enhancement of other post-employment benefits, the associated liability is measured in accordance with the rules governing that type of benefits. Otherwise, if the termination benefits due to employees are expected to be settled wholly before 12 months of the close of the period in which the benefits are recognized, the entity measures the liability in accordance with the requirements for short-term employee benefits; if they are not expected to be settled wholly before 12 months of the close of period in which the benefits are recognized, the entity measures the liability in accordance with the requirements for other long-term employee benefits. 

The Group undertakes share-based payment transactions settled with equity instruments as part of the remuneration policy adopted for the Chief Executive Officer/General Manager and for key management personnel.
The most recent long-term incentive plans provide for the grant to recipients of an incentive represented by an equity component (settled with equity instruments) and a monetary component (paid in cash), which will accrue if specific conditions are met. The monetary component is classified as a cash-settled transaction if it is based on the price (or value) of the equity instruments of the company that issued the plan or, in other cases, as another longterm employee benefit.
In order to settle the equity component through the bonus award of Enel shares, a program for the purchase of treasury shares to support these plans was approved. For more details on share-based incentive plans, please see note 53 “Share-based payments”.
For the equity component, the Group recognizes the services rendered by employees as personnel expenses over the period in which the conditions for remaining in service and for achieving certain results must be satisfied (vesting period) and indirectly estimates their value, and the corresponding increase in a specific equity item, on the basis of the fair value of the equity instruments (i.e., the issuer shares) at the grant date. This fair value is based on the observable market price of the share, taking account of the terms and conditions under which the shares were granted (with the exception of vesting conditions excluded from the measurement of fair value).
The overall expense recognized is adjusted at each reporting date until the vesting date to reflect the best estimate available to the Group of the number of equity instruments for which the service and performance conditions other than market conditions will be satisfied, so that the amount recognized at the end is based on the effective number of equity instruments that satisfy the service and performance conditions other than market conditions at the vesting date.
No expense is recognized for awards which ultimately do not vest because the performance conditions other than market conditions and/or the service conditions have not been satisfied. Conversely, the transactions are considered to have vested irrespective of whether the market or non-vesting conditions are satisfied, provided that all other vesting conditions are met.
If the incentive based on equity instruments is paid in cash, the Group recognizes the services rendered by employees as personnel expenses over the vesting period and a corresponding liability measured at the fair value of the liability incurred. Subsequently, and until its extinction, the liability is remeasured at fair value at each reporting date, considering the best possible estimate of the incentive that will vest, with changes in fair value recognized under personnel expenses. If the right to receive the monetary incentive does not vest because one or more conditions are not met, the related liability is reversed.

Provisions are recognized where there is a legal or constructive obligation as a result of a past event at the end of the reporting period, the settlement of which is expected to result in an outflow of resources whose amount can be reliably estimated. Where the impact is significant, the accruals are determined by discounting expected future cash flows using a pre-tax discount rate that reflects the current market assessment of the time value of money and, if applicable, the risks specific to the liability.
If the provision is discounted, the periodic adjustment of the present value for the time factor is recognized as a financial expense.
When the Group expects some or all charges to be reimbursed, the reimbursement is recognized as a separate asset, but only when the reimbursement is virtually certain. Where the liability relates to decommissioning and/or site restoration in respect of property, plant and equipment, the initial recognition of the provision is made against the related asset and the expense is then recognized in profit or loss through the depreciation of the asset involved.
Where the liability regards the treatment and storage of nuclear waste and other radioactive materials, the provision is recognized against the related operating costs. A liability for restructuring refers to a program planned and controlled by management that materially changes the scope of a business undertaken by the Group or the manner in which the business is conducted. Such a liability is recognized when a constructive obligation is established, i.e., when the Group has approved a detailed formal restructuring plan and has started to implement the plan or has announced its main features to those affected by it. Provisions do not include liabilities in respect of uncertain income tax treatments that are recognized as tax liabilities. The Group could provide a warranty in connection with the sale of a product (whether a good or service) from contracts with customers in the scope of IFRS 15, in accordance with the contract, the law or its customary business practices. In this case, the Group assesses whether the warranty provides the customer with assurance that the related product will function as the parties intended because it complies with agreed-upon specifications or whether the warranty provides the customer with a service in addition to the assurance that the product complies with agreed-upon specifications.
After the assessment, if the Group establishes that an assurance warranty is provided, it recognizes a separate warranty liability and corresponding expense when transferring the product to the customer, as additional costs of providing goods or services, without attributing any of the transaction price (and therefore revenue) to the warranty. The liability is measured and presented as a provision.
Otherwise, if the Group determines that a service warranty is provided, it accounts for the promised warranty as a performance obligation in accordance with IFRS 15, recognizing the contract liability as revenue over the period the warranty service is provided and the costs associated as they are incurred.
Finally, if the warranty includes both an assurance element and a service element and the Group cannot reasonably account for them separately, then it accounts for both of the warranties together as a single performance obligation.
In the case of contracts in which the unavoidable costs of meeting the obligations under the contract exceed the economic benefits expected to be received under it (onerous contracts), the Group recognizes a provision as the lower of the excess of unavoidable costs of meeting the obligations (i.e., costs that relate directly to the contract, whether incremental or resulting from an allotment of other costs) under the contract over the economic benefits expected to be received under it and any compensation or penalty arising from failure to fulfil it.
Changes in estimates of accruals to the provisions addressed here are recognized through profit or loss in the period in which the changes occur, with the exception of those in the costs of decommissioning, retiring and/or restoration resulting from changes in the timetable and costs necessary to extinguish the obligation or from a change in the discount rate. These changes increase or decrease the carrying amount of the related assets and are taken to profit or loss through depreciation. Where they increase the carrying amount of the assets, it is also determined whether the new carrying amount of the assets is fully recoverable. If this is not the case, a loss equal to the unrecoverable amount is recognized through profit or loss. Decreases in estimates are recognized up to the carrying amount of the assets. Any excess is recognized immediately in profit or loss.
For more information on the estimation criteria adopted in determining provisions for retiring and/or restoration of property, plant and equipment, especially those associated with decommissioning nuclear power plants and storage of waste fuel and other radioactive materials, please see note 2.1 “Use of estimates and management judgment”.

The Group recognizes revenue from contracts with customers at an amount that reflects the consideration at which the Group expects to be entitled in exchange for those goods or services, using the five-step model envisaged by IFRS 15:

• identify the contract with the customer (step 1) as from when the contract is legally enforceable. If the criteria envisaged for step 1 are not met, any consideration received from the customer is generally recognized as an advance;
• identify the performance obligations in the contract (step 2), that is, all goods or services promised in the contract, separating them into performance obligations to account for separately, if they are both capable of being distinct and distinct within the context of the contract, or, as an exception, as a single performance obligation, if they are a series of distinct goods or services that are substantially the same and that have the same pattern of transfer to the customer over time. For each distinct good or service identified, the Group determines whether it acts as a principal or agent. When the Group acts as agent, it recognizes revenue (corresponding to any fee or commission) on a net basis;
• determine the transaction price at inception of the contract (step 3) considering:
  • the amount of consideration to which the Group expects to be entitled in exchange for transferring goods or services to a customer, excluding amounts collected on behalf of third parties (e.g., some sale taxes and value-added taxes);
  • variable consideration, non-cash consideration received from a customer, consideration payable to a customer and a significant financing component. The transaction price is updated each reporting period for any changes in circumstances;
    
• allocate the transaction price (step 4) at contract inception to each separate performance obligation, including any option to acquire additional goods or services that represents a material right (deferring the relative revenue until those future goods or services are transferred or the option expires), generally on the basis of the relative stand-alone selling price of each distinct good or service promised in the contract;
• recognize revenue (step 5), when (or as) each performance obligation is satisfied by transferring the promised good or service to the customer.
  

The Group does not disclose the information about the remaining performance obligations in existing contracts if the performance obligation is part of a contract that has an original expected duration of one year or less and if the Group recognizes revenue in the amount to which it has a right to invoice the customer. 

More information on the application of this revenue recognition model is provided in note 2.1 “Use of estimates and management judgment” and in note 11.a “Revenue from sales and services”.  

The Group recognizes revenue other than that deriving from contracts with customers mainly referring to:

• revenue from the sale of energy commodities based on contracts with physical settlement, which do not qualify for the own use exemption and therefore is recognized at FVTPL in accordance with IFRS 9;
• changes in the fair value of settled contracts to sell energy commodities with physical settlement, which do not qualify for the own use exemption and therefore are recognized at FVTPL in accordance with IFRS 9;
• operating lease revenue accounted for on an accrual basis in accordance with the substance of the relevant lease agreement.

Other operating income primarily includes gains on disposal of assets that are not an output of the Group’s ordinary activities and government grants.
Government grants, including non-monetary grants at fair value, are recognized where there is reasonable assurance that they will be received and that the Group will comply with all conditions attaching to them as set by the government, government agencies and similar bodies whether local, national or international.
When loans are provided by governments at a below-market rate of interest, the benefit is regarded as a government grant. The loan is initially recognized and measured at fair value and the government grant is measured as the difference between the initial carrying amount of the loan and the funds received. The loan is subsequently measured in accordance with the requirements for financial liabilities. Government grants are recognized in profit or loss on a systematic basis over the periods in which the Group recognizes as expenses the costs that the grants are intended to compensate.
Where the Group receives government grants in the form of a transfer of a non-monetary asset for the use of the Group, it accounts for both the grant and the asset at the fair value of the non-monetary asset received at the date of the transfer.
Capital grants, including non-monetary grants at fair value, i.e., those received to purchase, build or otherwise acquire non-current assets (for example, an item of property, plant and equipment or an intangible asset), are deducted from the carrying amount of the asset and are recognized in profit or loss over the depreciable/amortizable life of the asset as a reduction in the depreciation/amortization charge. If there is insufficient information to enable adequate attribution to the fixed assets to which they refer, capital grants are recognized as deferred income under other liabilities, and credited to profit or loss on a systematic basis over the useful life of the asset.

Financial income and expense from derivatives include:

• income and expense from derivatives measured at fair value through profit or loss on interest rate and currency risk;
• income and expense from fair value hedge derivatives on interest rate risk;
• income and expense from cash flow hedge derivatives on interest rate and currency risks.

For all financial assets and liabilities measured at amortized cost and interest-bearing financial assets classified as at fair value through other comprehensive income, interest income and expense are recognized using the effective interest rate method.
Interest income is recognized to the extent that it is probable that the economic benefits will flow to the Group and the amount can be reliably measured.
Other financial income and expense include also changes in the fair value of financial instruments other than derivatives.

Dividends are recognized when the unconditional right to receive payment is established.
Dividends and interim dividends payable to the Parent’s shareholders and non-controlling interests are recognized as changes in equity in the period in which they are approved by the Shareholders’ Meeting and the Board of Directors, respectively.

Current income taxes
Current income taxes for the year, which are recognized under “Income tax liabilities” net of payments on account, or under “Tax assets” where there is a credit balance, are determined using an estimate of taxable income and in conformity with the applicable regulations.
Such liabilities and assets are determined using the tax rates and tax laws that are enacted or substantively enacted by the end of the reporting period in the countries where taxable income has been generated.
Current income taxes are recognized in profit or loss with the exception of current income taxes related to items recognized outside profit or loss that are recognized in equity. 

Deferred tax
Deferred tax liabilities and assets are calculated on the temporary differences between the carrying amounts of liabilities and assets in the financial statements and their corresponding amounts recognized for tax purposes on the basis of tax rates in effect on the date the temporary difference will reverse, which is determined on the basis of tax rates that are enacted or substantively enacted as at the end of the reporting period.
Deferred tax liabilities are recognized for all taxable temporary differences, except when such liability arises from the initial recognition of goodwill or in respect of taxable temporary differences associated with investments in subsidiaries, associates and joint ventures, when the Group can control the timing of the reversal of the temporary differences and it is probable that the temporary differences will not reverse in the foreseeable future.
Deferred tax assets are recognized for all deductible temporary differences, the carry forward of tax losses and any unused tax credits. For more information concerning the recoverability of such assets, please see the appropriate section of the discussion of estimates.
Deferred taxes and liabilities are recognized in profit or loss, with the exception of those in respect of items recognized outside profit or loss that are recognized in equity. Deferred tax assets and deferred tax liabilities are offset only if there is a legally enforceable right to offset current tax assets with current tax liabilities and when they relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities which intend either to settle current tax liabilities and assets on a net basis, or to realize the assets and settle the liabilities simultaneously, in each future period in which significant amounts of deferred tax liabilities or assets are expected to be settled or recovered.

Uncertainty over income tax treatments
In defining “uncertainty”, it shall be considered whether a particular tax treatment will be accepted by the relevant taxation authority. If it is deemed probable that the tax treatment will be accepted (where the term “probable” is defined as “more likely than not”), then the Group recognizes and measures its current/deferred tax asset or liabilities applying the requirements in IAS 12.

Conversely, when the Group feels that it is not likely that the taxation authority will accept the tax treatment for income tax purposes, the Group reflects the uncertainty in the manner that best predicts the resolution of the uncertain tax treatment. The Group determines whether to consider each uncertain tax treatment separately or together with one or more other uncertain tax treatments based on which approach provides better predictions of the resolution of the uncertainty. In assessing whether and how the uncertainty affects the tax treatment, the Group assumes that a taxation authority will accept or not an uncertain tax treatment supposing that the taxation authority will examine amounts it has a right to examine and have full knowledge of all related information when making those examinations. The Group reflects the effect of uncertainty in accounting for current and deferred tax using the expected value or the most likely amount, whichever method better predicts the resolution of the uncertainty.
Since uncertain income tax positions meet the definition of income taxes, the Group presents uncertain tax liabilities/assets as current tax liabilities/assets or deferred tax liabilities/assets.

The Group has applied the following standards, interpretations and amendments that took effect as from January 1, 2022:

• “Amendments to IFRS 3 - Reference to the Conceptual Framework” issued in May 2020. The amendments are intended to replace a reference to the definitions of assets and liabilities provided by the Revised Conceptual Framework for Financial Reporting issued in March 2018 (Conceptual Framework) without significantly changing its provisions. The amendments also add to IFRS 3 a requirement that, for transactions and other events within the scope of “IAS 37 - Provisions, contingent liabilities and contingent assets” or “IFRIC 21 - Levies”, an acquirer applies IAS 37 or IFRIC 21 (instead of the Conceptual Framework) to identify the liabilities it has assumed in a business combination. Finally, the amendments clarify the existing guidelines in IFRS 3 for contingent assets acquired in a business combination, specifying that, if it is not sure that an asset exists at the acquisition date, the contingent asset shall not be recognized. 
• “Amendments to IAS 16 - Property, Plant and Equipment: Proceeds before Intended Use”, issued in May 2020. The amendments prohibit a company from deducting from the cost of property, plant and equipment amounts received from selling items produced while the company is preparing the asset for its intended use. Instead, a company will recognize such sales proceeds and related cost in profit or loss.
• “Amendments to IAS 37 - Onerous Contracts - Costs of Fulfilling a Contract”, issued in May 2020. The amendments specify which costs an entity includes in determining the cost of fulfilling a contract for the purpose of assessing whether the contract is onerous. To this end, the cost of fulfilling a contract comprises the costs that relate directly to the contract. These consist of the incremental costs of fulfilling that contract or the allotment of other costs that relate directly to fulfilling contracts. 
• “Annual improvements to IFRS Standards 2018-2020”, issued in May 2020. The document mainly comprises amendments to the following standards:
  • First-Time Adoption of International Financial Reporting Standards”; the amendment simplifies the application of IFRS 1 by an investee (subsidiary, associate or joint venture) that becomes a first-time adopter of IFRS Standards after its parent has already adopted them. More specifically, if the investee adopts the IFRSs after its parent and applies IFRS 1.D16 (a), then the investee can elect to measure the cumulative translation differences for all foreign operations at the amounts that would be included in the parent’s consolidated financial statements, based on parent’s date of transition to the IFRSs; 
  • “IFRS 9 - Financial Instruments”; with regard to fees included in the “10 per cent” test for derecognition of financial liabilities, the amendment clarifies the fees that an entity includes when assessing whether the terms of a new or modified financial liability are substantially different from the terms of the original financial liability. In determining those fees paid net of fees received, the borrower shall include only fees paid or received between the borrower and the lender, including fees paid or received by either the borrower or lender on the other party’s behalf; 
  • “IFRS 16 - Leases”; the International Accounting Standards Board amended Illustrative Example 13 accompanying “IFRS 16 - Leases”. Specifically, the amendment eliminates the potential for confusion in the application of IFRS 16 created by the way in which Illustrative Example 13 had illustrated the requirements for lease incentives. The example had included a reimbursement relating to leasehold improvements without explaining whether the reimbursement qualified as a lease incentive. The amendment removes the illustration of a reimbursement relating to leasehold improvements from the example; 
  • “IAS 41 - Agriculture”; the amendment removes the requirement for entities to exclude cash flows for taxation when measuring fair value. Accordingly, entities shall use pre-tax cash flows and a pre-tax rate to discount those cash flows.

The application of the amendments for 2022 did not have a material impact on these consolidated financial statements.

As from July 1, 2018, the Argentine economy has been considered hyperinflationary based on the criteria established by “IAS 29 - Financial reporting in hyperinflationary economies”. This designation is determined following an assessment of a series of qualitative and quantitative circumstances, including the presence of a cumulative inflation rate of more than 100% over the previous three years.
For the purposes of preparing the consolidated financial statements at December 31, 2022, and in accordance with IAS 29, certain items of the statements of financial position of the investees in Argentina have been remeasured by applying the general consumer price index to historical data in order to reflect changes in the purchasing power of the Argentine peso at the reporting date for those companies.
Bearing in mind that the Enel Group acquired control of the Argentine companies on June 25, 2009, the remeasurement of the non-monetary financial statement figures was conducted by applying the inflation indices starting from that date. In addition to being already reflected in the opening statement of financial position, the accounting effects of that remeasurement also include changes during the period. More specifically, the effect of the remeasurement of non-monetary items, the equity items and the income statement items recognized in 2022 was recognized in a specific line of the income statement under financial income and expense. The associated tax effect was recognized in taxes for the year.

In order to also take account of the impact of hyperinflation on the exchange rate of the local currency, the income statement balances expressed in the hyperinflationary currency have been translated into the Group’s presentation currency (euro) applying, in accordance with IAS 21, the closing exchange rate rather than the average rate for the year in order to adjust these amounts to present values.

The cumulative changes in the general price indices from December 31, 2018 until December 31, 2022 are shown in the following table:

In 2022, the application of IAS 29 generated net financial income (gross of tax) of €290 million.
The following tables report the effects of IAS 29 on the balance at December 31, 2022 and the impact of hyperinflation on the main income statement items for 2022, differentiating between that concerning the revaluation on the basis of the general consumer price index and that due to the application of the closing exchange rate rather than the average exchange rate for the period, in accordance with the provisions of IAS 21 for hyperinflationary economies.

The move towards “net zero” is under way worldwide and the processes of decarbonization and electrification of the global economy are crucial to avoiding the serious consequences of an increase in temperatures of over 1.5 °C.

With this outlook, the Group has set its strategic guidelines as follows:

• allocate capital to support a decarbonized electricity supply;
• enable the electrification of customers’ energy demand;
• leverage the creation of value along the value chain;
• bring forward achievement of the sustainable “net-zero” goals to 2040.

Considering the risks related to climate change and the commitments established under the Paris Agreement, the Group has decided to achieve the carbon neutrality objectives in advance and reflect its impact on assets, liabilities, and profit or loss, highlighting its significant and foreseeable impacts as required under the Conceptual Framework of the international accounting standards.
In this regard, in accordance with the provisions of the document published by the IFRS Foundation on November 20, 2020, the Group provides explicit information in the notes to these consolidated financial statements regarding how climate change is reflected in our accounts.
For a more effective and comprehensive communication concerning climate change disclosures prepared as part of the notes to these consolidated financial statements, we have mapped this disclosure as shown below, providing references to the various sections where issues associated with climate change are addressed.

Within the European area, the Enel Group has decided to dispose of important business lines, particularly in Russia, Romania and Greece, leading to their assets being reclassified as discontinued operations for the purposes of “IFRS 5 - Non-current assets held for sale and discontinued operations”.
The consolidated income statement reports the profit/ (loss) result from discontinued operations in a separate line.
In accordance with the provisions of IFRS 5, which governs the presentation in the financial statements of profit or loss and the disclosures to be provided in the explanatory note on non-current assets held for sale and discontinued operations, the income statement below reports the results of discontinued operations for 2022 and 2021.
The items are shown net of intercompany transactions which have been completely eliminated.
The figures for 2021, presented for comparative purposes only, pursuant to “IFRS 5 - Non-current assets held for sale and discontinued operations”, have been restated to ensure they are uniform and comparable with those for 2022.

In accordance with the provisions of IFRS 5, the facts and circumstances that led to the reclassification are described below.

Russia
On June 16, 2022, Enel SpA signed two separate agreements with PJSC Lukoil and the Closed Combined Mutual Investment Fund “Gazprombank-Frezia” for the sale of the entire stake held in PJSC Enel Russia, equal to 56.43% of the share capital of the latter.

Following the agreements of June 16, 2022, on October 12, 2022, Enel SpA finalized the sale of the entire stake held in PJSC Enel Russia, equal to 56.43% of the share capital of the latter, to PJSC Lukoil and the Closed Combined Mutual Investment Fund “Gazprombank-Frezia”, for a total of about €137 million. The transaction was closed with the fulfillment of the conditions to which the sale was subject, including authorization of the operation by the President of the Russian Federation pursuant to paragraph 5 of Decree 520 of August 5, 2022.
Upon completion of the sale, Enel sold all power generation assets in Russia, which include approximately 5.6 GW of conventional capacity and approximately 300 MW of wind capacity at various stages of development, ensuring continuity for its employees and customers.
The overall transaction had a negative impact on the Group’s profit of about €1,551 million, mainly reflecting the release of the translation reserve of €1,054 million, and the value adjustment of about €497 million.

For more information, please see the section on “Business combinations”. 

Romania
On December 14, 2022, Enel SpA entered into an Exclusivity Agreement with Greek company Public Power Corporation SA (PPC) in relation to the potential disposal of all the equity stakes held by Enel Group in Romania. In this regard, the value of the net assets of Enel Romania was adjusted to the expected sale price, with recognition of a value adjustment of €696 million. On February 4, 2023, Enel SpA, following the announcement released on December 14, 2022, announced that the period of exclusive negotiations with Greek company PPC in relation to the potential disposal of all the equity stakes held by Enel Group in Romania had been extended.

Greece
Enel Green Power has begun the process of finding a potential investor interested in a partnership for the management and development of Enel Green Power Hellas within the Stewardship business model.
The status of the negotiations under way suggest that a sale is highly probable. Accordingly, the requirements established by “IFRS 5 - Non-current assets held for sale and discontinued operations” have been met for the classification of the Greek assets as “discontinued operations”.
For more details on the financial position by business line and geographical area of assets classified as discontinued operations, please see the section “Performance by primary segment (Business Line) and secondary segment (Geographical Area)”.

The details of cash flows relating to discontinued operations are provided below, as already separately shown in the cash flows statement. 

The 2021 consolidated income statement and statement of consolidated comprehensive income have been adjusted to take account of the presentation of discontinued operations as required by the “IFRS 5 - Non-current assets held for sale and discontinued operations”.
For more details, please refer to the note “Discontinued operations”.

The figures presented in the comments and the tables of the notes to these consolidated financial statements at December 31, 2022 are uniform and comparable with each other.

Figures at December 31, 2021 for the Business Line Enel X have been adjusted to take account of the transfer of certain net assets and related revenue and expenses to the new Business Line Enel X Way, which are shown under “Holding, Services and Other”. This change affected segment reporting but did not produce any changes in the overall figures for the Group, although a number reclassifications of values were made within the various business lines.
The figures presented in the comments and the tables of the notes to these consolidated financial statements at December 31, 2022 are uniform and comparable with each other.

In the two periods under review, the consolidation scope changed as a result of a number of transactions. 

• On January 8, 2021, 100% of Tynemouth Energy Storage was sold for €1 million. The sale did not have any significant impact on profit or loss.
• On January 20, 2021, Enel Green Power Bulgaria was sold for a total €35 million. The sale did not have any significant impact on profit or loss.
• On March 10, 2021, Enel Green Power Italia acquired 100% of e-Solar Srl, the owner of a photovoltaic project with an authorized capacity of 170.11 MW, for €2.7 million.
• On March 29, 2021, Enel X Srl acquired 100% of CityPoste Payment SpA, an Italian company that offers consumers access to payment services through both physical and digital channels, enabling them to carry out numerous types of transactions with private- and public-sector entities.
• In the 1st Quarter of 2021, the consolidation scope changed with the global consolidation of Australian renewable energy companies previously accounted for using the equity method due to a change in governance arrangements at the companies, without the acquisition of an additional interest. The purchase price allocation process was completed in December 2021 and essentially confirmed the carrying amount of the net assets acquired following an impairment loss of about €9 million.
• On May 13, 2021, EGP Solar 1 LLC was sold for a total of about €4 million.
• In the first nine months of 2021, Enel Green Power España acquired 100% of 30 renewables companies for a total of €86 million.
• On September 8, 2021, Genability was sold by Enel X North America for about €6 million.
• The purchase price allocation process for Viva Labs AS, acquired on September 17, 2020 by Enel X International, was completed in September, following which the carrying amounts recognized at the acquisition date were confirmed.
  

• In addition to the above changes in the consolidation scope, the following transactions, although they do not represent transactions involving the acquisition or loss of control, gave rise to a change in the interest held by the Group in the investees:
• on March 15, Enel SpA launched a partial voluntary tender offer for up to a maximum of 7,608,631,104 shares of Enel Américas, equal to 10% of the share capital at that date. The offer period began on March 15 and ended on April 13, 2021.The tender offer was subject to the effectiveness of the merger of EGP Américas SpA into Enel Américas SA, which took place on April 1, 2021. The total price was €1,271 million. Following completion of the partial voluntary tender offer and the completion of the EGP Américas merger, Enel owns about 82.3% of the outstanding share capital of Enel Américas;
• on November 24, Enel Green Power RSA 2 (Pty) Ltd sold a stake in the investments held in Oyster Bay Wind Farm, Garob Wind Farm, Aced Renewables Hidden Valley and Soetwater Wind Farm for a total of ZAR 340 million, corresponding to about €19 million. Following the transaction, the Group’s interest in those companies decreased from 60% to 55%;
• on December 3, Enel SpA finalized the sale of the entire stake held in Open Fiber SpA, equal to 50% of the latter’s share capital, to Macquarie Asset Management and CDP Equity SpA for a total of about €2,733 million. The capital gain realized by the Group on a consolidated basis came to about €1,763 million.

• On January 3, 2022, Enel Produzione SpA acquired 100% of ERG Hydro Srl (subsequently renamed Enel Hydro Appennino Centrale Srl and merged into Enel Produzione SpA on December 1, 2022), owner of generation plants with an installed capacity of about 527 MW and an annual output of approximately 1.5 TWh, for a consideration of about €1,267 million; in December 2022, the identification of the fair value of the acquired assets and liabilities was completed, with the recognition of goodwill of approximately €349 million.
• On February 17, 2022, Enel Green Power España acquired 100% of Stonewood Desarrollos SLU for about €14 million representing the licenses acquired for the development and construction of photovoltaic systems. The acquisition had no impact on profit or loss.
• On March 3, 2022, Enel X Germany sold its entire stake in Cremzow KG and Cremzow Verwaltungs for about €12 million.
• On June 30, 2022, Enel Green Power SpA sold to Al Rayyan Holding LLC (controlled by the Qatar Investment Authority) 50% of its stake in EGP Matimba NewCo 1 Srl, indirect owner of six companies in South Africawith an installed capacity of about 740 MW, for about €108 million, which has been paid in full.
• On July 25, 2022, Enel X Srl sold to Mooney SpA, for about €140 million, settled in the form of financial receivables, its entire stakes in Enel X Financial Services, CityPoste Payment, PayTipper and Junia Insurance and their subsidiaries.
• On August 24, 2022, Enel Brasil SA, a subsidiary of Enel Américas, closed the sale of its entire stake in CGTF - Central Geradora Termelétrica Fortaleza SA to ENEVA SA for a consideration of about €89 million. The transaction had a negative impact on profit or loss of about €210 million, including impairment losses on assets of €73 million, a capital loss of €135 million and transaction costs connected with the sale of €2 million.
• In the first nine months of 2022, Enel Green Power Romania acquired 100% of Prowind Windfarm Bogdanesti, Prowind Windfarm Deleni, Prowind Windfarm Ivesti and Prowind Windfarm Viisoara for a total of about 35 million.
• On October 12, 2022, Enel finalized 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 “Gazprombank-Frezia”, for a total of about €137 million. The transaction had a negative impact on reported Group profit of around €1.5 billion, mainly reflecting the release of a currency translation.
• On December 9, 2022, Enel Chile SA finalized the sale of its entire 99.09% stake in the share capital of listed Chilean power transmission company Enel Transmisión Chile SA to Sociedad Transmisora Metropolitana SpA, controlled by Inversiones Grupo Saesa Ltda, for about €1.3 billion. The transaction generated a capital gain of about €1.1 billion.
• On December 22, 2022, Enel closed the sale of a 50% quota in its wholly-owned subsidiary Gridspertise Srl to the international private equity fund CVC Capital Partners Fund VIII for a total of approximately €300 million. The transaction had a positive impact on profit or loss of about €520 million.
• On December 23, 2022, Enel Green Power India Private Limited finalized an agreement with Norfund following which the latter made an investment in Avikiran Surya India Private Limited by subscribing shares issued by the company totaling 49% of the paid-up share capital. The transaction had a negative impact of about €4 million on profit or loss, of which €2 million from the remeasurement at fair value of the residual interest and a capital loss of €2 million.
• On December 29, 2022, Enel Brasil SA, a subsidiary of Enel Américas SA, finalized the sale of its entire stake in the Brazilian power distribution company Celg Distribuição SA - Celg-D (Enel Goiás), equal to about 99.9% of the latter’s share capital, to Equatorial Participações e Investimentos SA, a subsidiary of Equatorial Energia SA, for a total of about €1.5 billion (of which about €269 million for the equity portion and about €1.2 billion as repayment of intercompany loans). The transaction had a negative impact on profit or loss of about €1 billion.

In addition to the above changes in the consolidation scope, the following transactions, although they do not represent transactions involving the acquisition or loss of control, gave rise to a change in the interest held by the Group in the investees:

• on March 1, 2022, the merger between Emgesa SA ESP (acquiring entity), Codensa SA ESP, Enel Green Power Colombia SAS ESP and ESSA 2 (merged entities) was completed. The new name of the surviving company is Enel Colombia SA ESP. Following the transaction, the Group’s stake in Emgesa SA ESP (now Enel Colombia SA ESP) increased from 39.89% to about 47.18%;
• on March 24, 2022, Enel X International Srl finalized an agreement with a holding company controlled by Sixth Cinven Fund and a holding company controlled by Seventh Cinven Fund to indirectly acquire about 79.4% of the share capital of Ufinet Latam SLU (for €1,320 million) and at the same time sold 80.5% of the share capital of that company to Seventh Cinven Fund (for €1,186 million). Enel X International also received about €207 million from Ufinet as a distribution of available reserves. Consequently, Enel X International now holds an indirect stake of 19.5% in Ufinet, of which it had previously held 20.6%. The transaction generated a positive net cash flow of about €73 million and had a positive impact on operating performance of about €220 million;
• on June 15, 2022, Enel Kansas LLC sold 50% of its stake in Rocky Caney Holdings LLC for about €34 million. Following the transaction, the interest of Enel Kansas LLC in Rocky Caney Holdings LLC decreased from 20% to 10%. The transaction generated a capital gain of about €7 million;
• on June 16, 2022, EGPNA REP Holdings LLC sold 50% of its stake in EGPNA Renewable Energy Partners LLC for about €60 million. Following the transaction, EGPNA REP Holdings LLC holds 10% of EGPNA Renewable Energy Partners LLC. The transaction generated a capital loss of about €7 million;
• on July 14, 2022, Enel, acting through its wholly-owned subsidiary Enel X, acquired 50% of the share capital of Mooney SpA. Based on an enterprise value of 100% for Mooney of €1,385 million, Enel X paid a total of about €225 million (including price adjustment) for the equity portion and about €125 million for the purchase of an existing claim of Schumann Investments SA against Mooney;
• on December 2022, Enel Green Power Hellas SA sold the entire stake held in associated companies of the CyNotes to the consolidated financial statements 331 clades. The transaction did not have a significant impact on profit or loss;
• on December 6, 2022, Enel X Chile SpA sold its entire stake in Sociedad de Inversiones K Cuatro SpA, Suministradora de buses K Cuatro SpA and Enel X AMPCI Ebus Chile SpA for about €35 million (uncollected as of December 31, 2022). The transaction did not have a significant impact on profit or loss;
• on December 30, 2022, Enel Green Power Canada Inc. sold its 49% stake in Pincher Creek LP and Riverview LP for about €56 million. The transaction did not result in the loss of control in the companies.

On January 3, 2022, Enel Produzione SpA acquired 100% of ERG Hydro Srl (subsequently renamed Enel Hydro Appennino Centrale Srl and merged into Enel Produzione SpA on December 1, 2022), owner of generation plants with an installed capacity of about 527 MW and an annual output of approximately 1.5 TWh, for about €1,267 million. At December 2022, the identification of the fair value of the acquired assets and liabilities was completed, with the recognition of goodwill of €349 million.

On March 24, 2022 Enel X International Srl sold 1.1% of Ufinet.

The financial effects of the transaction are as follows.

Following the transaction, the residual investment in Ufinet was classified under other investments measured at fair value through other comprehensive income. Previously it had been accounted for using the equity method.

On June 30, 2022, Enel Green Power SpA sold to Al Rayyan Holding LLC (controlled by the Qatar Investment Authority) 50% of its stake in EGP Matimba NewCo 1 Srl, indirect owner of six projects in South Africa, for about €108 million, which has been paid in full.

Following the transaction, the residual equity investment in EGP Matimba 1 and its subsidiaries was classified among equity-accounted investments and it was remeasured at fair value with a negative impact on profit or loss of about €2 million. Following this remeasurement, the value of the residual equity investment is €108 million.

On July 25, 2022, Enel X Srl sold to Mooney SpA, for about €140 million, settled in the form of financial receivables, its entire stakes in Enel X Financial Services, CityPoste Payment, PayTipper and Junia Insurance and their subsidiaries.

The transaction produced a capital gain of €67 million. 

On August 24, 2022, Enel Brasil SA, a subsidiary of Enel Américas, sold its entire stake in CGTF - Central Geradora Termelétrica Fortaleza SA to ENEVA SA for €89 million. During 2022, in line with the provisions of “IFRS 5 - Non-current assets held for sale and discontinued operations”, the net assets of CGTF - Central Geradora Termelétrica Fortaleza SA were classified as held for sale and their value was adjusted to the expected sale price in the amount of €73 million.

With the closing of the sale, a capital loss of about €135 million was recognized, mainly due to the release of the translation reserve, plus other transaction costs of €2 million and the associated tax impact of €37 million.

On October 12, 2022, Enel finalized the sale of the entire stake held in PJSC Enel Russia, equal to 56.43% of the share capital of the latter, to PJSC Lukoil and the Closed Combined Mutual Investment Fund “Gazprombank-Frezia”, for a total of about €137 million. The sale had an overall negative impact on profit or loss of about €1,551 million, mainly due to the release of the translation reserve, in the amount of about €1,054 million. The financial effects of the transaction are as follows.

For more information on the transaction, please see the section “Discontinued operations”

On December 9, 2022, Enel Chile SA finalized the sale of its entire 99.09% stake in the share capital of listed Chilean power transmission company Enel Transmisión Chile SA to Sociedad Transmisora Metropolitana SpA, controlled by Inversiones Grupo Saesa Ltda, for a total amount of €1,342 million. The financial effects of the transaction are as follows.

The transaction had a tax effect of €347 million. 

On December 22, 2022, Enel SpA, acting through Enel Grids Srl, closed the sale of a 50% quota in its wholly-owned subsidiary Gridspertise Srl to the international private equity fund CVC Capital Partners Fund VIII for a total of approximately €300 million. The financial effects of the transaction are as follows. 

Following the transaction, the residual investment in in Gridspertise Srl and its subsidiaries was accounted using the equity method. After fair value measurement, the value of the residual investment is €259 million. The transaction had a tax effect of €8 million.

On December 29, 2022, Enel Brasil SA, a subsidiary of Enel Américas SA, finalized the sale of its entire stake in the Brazilian power distribution company Celg Distribuição SA - Celg-D (Enel Goiás), equal to about 99.9% of the latter’s share capital, to Equatorial Participações e Investimentos SA, a subsidiary of Equatorial Energia SA, for a total of about €1,548 million, of which €269 million for the equity portion and €1,279 million as repayment of intercompany loans. The financial effects of the transaction are as follows. 

The sale had a negative impact on profit or loss of about €1,035 million, of which about €208 million mainly attributable to the release of the OCI reserve and €827 million in respect of impairment losses (of which €85 million relating to goodwill).
The sale generated transaction costs of €4 million and a tax effect of €8 million.

During 2022, the Enel Group constantly monitored the effects of the international crisis on its business activities in Russia (with particular regard to provisioning of materials, services and labor), also assessing developments in market variables (e.g., exchange rates, interest rates). The Enel Group also took account of developments connected with the counter-sanctions envisaged by Russia targeting investments held in the country.
In addition, the Enel Group assessed the indirect impacts of the war in Ukraine on business activities, the financial situation and economic performance in the main euro-area countries in which it operates, with particular regard to shortages of raw materials from the areas affected by the conflict and the generalized increase in commodity prices. In consideration of the various recommendations of national and supranational supervisory bodies⁽⁴⁶⁾ concerning this issue and in a constantly evolving scenario, characterized by considerable regulatory uncertainty and high and volatile prices, the Enel Group is constantly monitoring the macroeconomic and business variables that enable a best estimate of the potential impacts associated with regulatory changes, sanctions and restrictions on asset holdings, as well as on suppliers and contracts applicable to the Enel Group.

In this regard, it should be noted that no significant impacts related to the Russia-Ukraine conflict have emerged at December 31, 2022. 

(46) ESMA Public Statements no. 71-99-1864 of March 14, 2022 and no. 32-63-1277 of May 13, 2022 and no. 32-63-1320 of October 28, 2022; CONSOB warning notices in the weekly notices of March 9-14, 2022 and March 10-21, 2022, and no. 3/22 of May 19, 2022.

On June 16, 2022, Enel SpA signed two separate agreements with PJSC Lukoil and the Closed Combined Mutual Investment Fund “Gazprombank-Frezia” for the sale of the entire stake held in PJSC Enel Russia, equal to 56.43% of the share capital of the latter, for a total of about €137 million.

During the 2nd Quarter of 2022, in order to reduce the risk for Enel SpA of the measures issued by the European Union, the United States and Russia regarding Russian sanctions and counter-sanctions, a number of measures have been taken to terminate Enel SpA’s management and coordination role with Enel Russia. These measures included: (i) the designation by Enel of only independent directors, of Russian nationality, at the recent election of the company’s board of directors; (ii) the appointment of a new general manager, also of Russian nationality, who reports exclusively to the board of directors; (iii) the termination, where possible, of intercompany contracts; (iv) the modification of the organizational structure of the Enel Group in order to terminate reporting by the staff or business functions of Enel Russia to their Enel counterparts; and (v) the consequent interruption of any reporting flows between Enel SpA and Enel Russia.

The transaction was closed and the consideration paid in October 2022, following the fulfillment of certain conditions to which the sale is subject, including approval of the transaction by the President of the Russian Federation in accordance with paragraph 5 of Decree 520 of August 5, 2022.

The accounting effects of the sale of the PJSC Enel Russia Group are shown in note 8 “Main acquisitions and disposals during the year”.

It should also be noted that the Enel Group continues to hold the following equity investments in Russia:

• Enel Green Power Rus LLC (a 100% indirect subsidiary of Enel SpA), a company that provides services for the development of renewable projects and which holds 100% interests in four renewable generation companies;
• Enel X Rus LLC (a 99% indirect subsidiary of Enel SpA);
• an investment, equal to 49.5%, in a joint venture (Rusenergosbyt LLC) operating in the End-user Markets Business Line. 

The representation of financial position and performance by business line and geographical area presented here is based on the approach used by management in monitoring Group performance for the two years being compared.