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Performance of the main subsidiaries

Enel Produzione SpA

In 2009, Enel Produzione produced 68.9 TWh of power (93.7 TWh in 2008), of which 50.2 TWh from thermal generation and 18.7 TWh from hydroelectric generation. Compared with 2008, output decreased by 24.8 TWh. The decrease mainly relates to a fall in thermal generation (14.5 TWh) caused by a reduction in the output of traditional oil/gas plants and the change in the scope of the renewables plants as a result of the transfer of the hydroelectric plants located in Trento to Hydro Dolomiti Enel on July 15, 2008, and of a number of hydroelectric plants and all the geothermal plants and wind farms to Enel Green Power on December 1, 2008.

Electricity sales were made under bilateral contracts, mostly with Enel Trade and the Single Buyer (20.5 TWh, 29.7%), through the Power Exchange (47.9 TWh, 69.6%), and through subsidized energy sales (0.5 TWh, 0.7%). CO2 emissions totaled 37.2 million metric tons, while the allowance for the period was 38.2 million metric tons.

During 2009, the most important events and extraordinary operations for the company were as follows:

  • the spin-off, effective April 1, 2009, of the engineering and innovation unit to the newly formed company Enel Ingegneria e Innovazione SpA. The unit transferred comprised assets of €290.3 million and liabilities of €240.3 million, therefore Enel Produzione SpA’s equity reserves fell by €50.0 million as a result of the transfer;
  • the establishment on February 5, 2009 of Adria Link Srl (owned one-third each by Enel Produzione SpA, Acegas-Aps SpA and Tei SpA). The company will build and operate energy interconnection infrastructures between Italy and Slovenia;
  • the subscription, totaling €3.2 million, of the company’s share of Galsi SpA’s capital increase with a share premium authorized by Galsi’s extraordinary shareholders’ meetings of April 27, 2009 and October 15, 2009;
  • the sale of the company’s 100% interests in Maritza East III Power Holding BV and Martiza O&M Holding Netherlands BV to Enel Investment Holding BV for €212.0 million, a part of the reorganization of the Group’s Bulgarian subsidiaries;
  • the signing on October 20, 2009, with Società Elettrica Altoatesina SpA (SEL) of the final agreement to jointly develop the hydroelectric sector in the Autonomous Province of Bolzano. The accord follows through on the preliminary agreement of October 23, 2008, confirming the commitment of Enel Produzione and SEL to form a new company (Enel Produzione 40% and SEL 60%) for the joint operation of the concessions that have been renewed or issued to them upon the conclusion of said proceedings starting in 2011.

Revenues in 2009amounted to €6,958.1 million compared with €11,826.2 million for the previous year, and essentially break down as follows:

  • revenues from electricity sales to third parties amounted to €5,588.3 million (€9,592.8 million in 2008), a decrease of €4,004.5 million, largely as a result of the change in the scope of renewables plants, the decline in wholesale prices and lower volumes sold as a result of the contraction in demand for electricity in Italy;
  • revenues from electricity sales to Group companies came to €1,207.9 million (€1,422.4 million in 2008), a decrease of €214.5 million, mainly attributable to lower volumes sold under bilateral contracts with Enel Trade;
  • revenues from contract work in progress came to €91.9 million (€401.3 million in 2008). The decrease of €309.4 million, was mainly caused by the transfer, as from April 1, 2009, of most of the company’s orders to Enel Ingegneria e Innovazione;
  • revenues from other sales and services amounted to 67.3 million (€408.5 million in 2008), a decrease of €341.2 million from 2008 which benefited from the gain (€328.1 million) on the disposal of 51% of Hydro Dolomiti Enel Srl.

Operating costs totaled €5,988.2 million in 2009 (€9,239.7 million in 2008), a decrease of €3,251.5 million mainly attributable to:

  • thedecrease in costs for raw materials and consumables (€2,184.8 million), chiefly attributable to fuel (€1,441.6 million), mainly due to lower output by thermal plants, and electricity (€552.0 million);
  • thedecrease in costs for services (€218.2 million), both in respect of third parties and Group companies;
  • the decrease in personnel costs (€62.6 million), since the average size of the workforce fell as a result of extraordinary transactions in which Enel Produzione took part in 2008 and in 2009;
  • the decrease in depreciation, amortization and impairment losses of €907.4 million, mainly attributable to lower impairment losses (€358.4 million) and the reduction in depreciation (€548.1 million), essentially due to the reassessment of the useful life of a number of plants and the altered scope of renewables plants mentioned earlier.

Net income from commodity risk management came to €812.3 million, compared with a net charge of €594.8 million in 2008. This is mainly the result of higher net income on contracts for differences (€1,590.9 million) and on derivative contracts to hedge the exchange rate risk on commodities (€38.1 million) and the improvement in the values of derivative contracts existing at the end of the year (€76.4 million), partially offset by higher net charges realized on derivatives to hedge commodity risk (€334.5 million).

Operating income totaled €1,782.2 million, a decline of €209.5 million compared with 2008.

Net financial expense and charges in respect of equity investments amounted to €94.3 million (€297.2 million in 2008), a decrease of €202.9 million, due mainly to lower interest expense with respect to the parent company (€183.2 million) caused largely by the decline in interest rates on the intercompany current account consistent with developments in market rates and higher dividends received from subsidiaries and associates (€40.4 million).

Income taxes came to €650.9 million, for a pre-tax rate of 38.6%. Taxes were €1,146.3 million higher than in the previous year. In 2008, the income tax figure benefited by €495.4 million from the release of deferred taxes from the realignment of the statutory and tax value of assets and other elements deriving from off-balance-sheet deductions and the discharge of unaligned values resulting from extraordinary transactions, taking into account the special capital gains tax.

Net income for the year totaled €1,036.9 million (€2,189.9 million in 2008).

Capital expenditure on property, plant and equipment and intangible assets amounted to €749.5 million (€1,165.5 million in 2008).

Net capital employed at December 31, 2009 came to €11,472.0 million (€10,882.2 million at December 31, 2008) and consisted of net non-current assets of €11,595.0 million, net current assets of €662.1 million, provisions and net deferred taxes of €785.1 million.

The capital employed was covered by shareholders’ equity for €7,381.3 million (€8,777.0 million at December 31, 2008) and net financial debt for €4,090.7 million (€2,105.2 million at December 31, 2008).

The workforce at December 31, 2009 numbered 6,236, compared with 7,302 a year earlier.

Enel Green Power SpA

Enel Green Power was established on December 1, 2008 to develop and manage activities relating to the generation of energy from renewable resources in Italy and abroad. The new company is responsible for all Enel activities relating to energy generated from wind, solar, geothermal and “run-of-the-river” hydroelectric sources in Europe, North America, and Central and South America.

The reorganization of the foreign companies active in that sector (excluding those of the Endesa group) to improve the autonomous management of renewable energy resources and generation techniques was completed in the first few months of 2009.

Specifically:

  • with effect from January 1, 2009, Enel Green Power bought Enel Investment Holding BV’s interest in Green Power International BV, a holding company for foreign companies active in the renewable energy resource sector, for €1,690.0 million, an amount equal to its book value;
  • with effect from January 1, 2009, the company bought a 100% interest in Enel.si Srl, a company concerned with the development of the photovoltaic market and energy efficiency, from Enel SpA, for €9.2 million, an amount equal to its book value;
  • on February 18, 2009, and December 22, 2009, the Board of Directors of the company authorized the recapitalization of Enel Green Power International BV with the payment of €225.0 million and €160.0 million, respectively, allocated to the share premium reserve;
  • on November 20, 2009, the company signed a contract with Simest (a company that finances the expansion and promotion of Italian companies in foreign markets) to obtain funding for the Palo Viejo project to build and operate a new hydroelectric plant in Guatemala by purchasing a stake in Renovables de Guatemala SA (RDG), a company wholly-owned by the Enel Group. Specifically, Enel Green Power SpA participated in the RDG capital increase, buying a direct 51% interest for €44 million, while Simest (in its own name and on behalf of the Venture Capital Fund) purchased an 8.8% share. Consequently, Enel Green Power has a direct and indirect holding of 91.2% in RDG and is committed to acquiring the remaining stake from Simest on June 30, 2017.

Revenuesfor 2009 totaled €1,086.9 million (€106.3 million in 2008 referring to just one month of activity) and essentially consist of €874.3 million in revenues from the sale and transport of electricity and €170.5 million in revenues from the sale of green certificates.

Operating costs totaled €631.7 million and consist mainly of €300.1 million in depreciation and amortization, €156.1 million in service costs and €122.2 million in personnel costs.

Net income from commodity risk management amounted to €117.8 million. The item consists mainly of €117.6 million in net income from commodity derivatives realized at December 31, 2009.

Operating income totaled €573.0 million.

Net financial expense and charges in respect of equity investments came to €69.2 million, and are essentially comprised of the interest accrued on short-term and medium/long-term debt (€76.1 million), partially offset by income in respect of equity investments (€14.6 million).

Net income for the year amounted to €321.5 million, after income taxes of €182.3 million.

Capital expenditure on property, plant and equipment and intangible assets amounted to €343.0 million.

Net capital employed at December 31, 2009 came to €6,839.9 million, funded by shareholders’ equity of €2,290.7 million (33.5%) and net financial debt of €4,549.2 million (66.5%).

The workforce at December 31, 2009 numbered 1,668.

Enel Distribuzione SpA

Following the partial demerger, effective as of January 1, 2008, of Enel Distribuzione SpA’s sales unit in accordance with Decree Law 73/07 of June 18, 2007 (ratified with Law 125, which entered force on August 3, 2007), containing urgent measures for implementation of Community regulations concerning the liberalization of energy markets, Enel Distribuzione has engaged solely in the business of the transport and metering of electricity in Italy.

In 2009, the company distributed a total of around 240.9 TWh of electricity (256.9 TWh in 2008) to around 31 million end users (in the free and in the enhanced protection and safeguard markets). The 6.2% decline in electricity distributed reflects the contraction in demand for electricity in Italy.

The deregulation of the electricity market provided a significant impulse to growth in end users, with the transfer in 2009 of some 1,200,000 more customers from the protected market to the free market (an increase of about 37% over 2008). Given these trends, Enel Distribuzione enhanced the systems and channels used to maintain contacts with sales companies, and developed specific functions that made it possible to shorten the average time taken to issue invoices and process requests, while constantly monitoring the state of progress.

During 2009, the most important corporate events and extraordinary operations for the company were as follows:

  • the sale to Terna, on April 1, 2009, at a price of €1,152 million, of the entire share capital of Enel Linee Alta Tensione (ELAT), a company set up by Enel Distribuzione on November 21, 2008. With effect as of January 1, 2009, Enel Distribuzione transferred the business unit consisting of high-voltage lines and the related legal relationships to ELAT;
  • the acquisition, effective as of September 1, 2009, for a total of €0.7 million, of the business unit related to the distribution of electricity in the city of Telti (OT), with some 1,000 customers served;
  • the sale to F2I Reti Italia Srl, on September 30, 2009, for €515.7 million, of the majority (80%) stake in Enel Rete Gas SpA;
  • the sale, in December 2009, to Enel Investment Holding BV, for a total of €460.0 million, of the 20% equity interest held in Enel Romania and the 51% stakes held in Enel Distributie Banat, Enel Distributie Dobrogea and Enel Energie, in implementation of the plan to reorganize the Group’s equity investments in Romania.

In addition, on March 17, 2009, the Board of Directors of Enel Distribuzione SpA voted to request a 20-year loan of €800.0 million from Cassa Depositi e Prestiti to finance investments in the 2009-2011 period. The loan was secured by Enel SpA with the issue of a demand guarantee to meet the obligations assumed by Enel Distribuzione SpA in the transaction.

Revenues for 2009 totaled €7,151.7 million (compared with €6,619.8 million in 2008) and relate essentially to:

  • revenues from the transport of electricity, including the effect of the equalization mechanisms, amounted to €5,684.3 million (€5,379.5 million in 2008). Compared with the prior year, this was an increase of €304.8 million, essentially due to the positive price effect following the rate updates for the new 2008-2011 regulatory period;
  • other revenues of €1,467.4 million (€1,240.3 million in 2008), an increase of €227.1 million over the previous year due essentially to the net gain on the sale of Enel Linee Alta Tensione Srl to Terna.

Operating costs, in the amount of €4,095.4 million (€3,760.3 million in 2008), posted an increase of €335.1 million, mainly due to the increase in personnel costs (€185.2 million) related essentially to retirement incentives, lower capitalized costs (€134.4 million) related to the decline in investment in property, plant and equipment and higher energy transport costs (€71.6 million), due mainly to the sale of the high-voltage lines.

Operating income for 2009 totaled €3,056.3 million (€2,859.5 million as at December 31, 2008), up €196.8 million over 2008.

Net financial expense and charges in respect of equity investments amounted to €181.6 million (€252.5 million in 2008), a €70.8 million decline due essentially to the reduction in interest expense on the intercompany current account (€62.6 million) related to the decline in the average debtor position, as well as to the reduction in interest expense on long-term debt (€51.7 million), following the decline in average debt and the generalized reduction in interest rates. Lower gains on equity investments (€25.2 million) partially offset these factors.

Net income for the year from continuing operations came to €2,052.9 million (€2,051.4 million for 2008), net of income taxes for the year of €821.8 million (€555.6 million in 2008).

The net loss for the year from discontinued operations, in the amount of €55.9 million, was due to the loss, net of the related tax effect, connected with the sale of the equity investment in Enel Rete Gas SpA to F2i Reti Italia.

Capital expenditure on property, plant and equipment and intangible assets amounted to €1,071.3 million (€1,364.9 million in 2008).

Net capital employed came to €11,622.3 million, funded by shareholders’ equity of €9,123.5 million (78.5%) and net financial debt of €2,498.8 million (21.5%).

The workforce at December 31, 2009, numbered 19,229, compared with 19,905 at December 31, 2008.

Enel Servizio Elettrico SpA

Incorporated on September 13, 2007 pursuant to Decree Law 73 of June 18, 2007, containing urgent measures for implementation of Community regulations concerning the liberalization of energy markets (ratified with Law 125 of August 3, 2007), Enel Servizio Elettrico SpA received, as of January 1, 2008, assets, liabilities and relationships relating to electricity sales to end users spun off from Enel Distribuzione SpA.

The corporate purpose of Enel Servizio Elettrico is the exercise of activities relating to the sale of electricity to enhanced protection customers, namely residential customers and small businesses (with fewer than 50 employees and an annual turnover of €10 million or less) on low-voltage connections. Until April 30, 2008, the company had also been selling electricity to safeguard market end users, namely customers other than residential users and small companies that have not selected a supplier in the free market, or are without a supplier. In accordance with Resolution 337/2007 of the Authority for Electricity and Gas, these customers were assigned on the basis of a tender to free market electricity vendors as from May 1, 2008.

Demand for electricity in Italy in 2009 amounted to 316.8 TWh, 6.7% less with respect to the previous year.

Electricity sold in the period by Enel Servizio Elettrico amounted to 71.0 TWh, all for the enhanced protection service.

In the final months of 2009 the company began negotiations with several lending institutions and factoring companies to assess the possible non-recourse assignment of its receivables. These negotiations led to the completion of the following transactions:

  • agreement with Unicredit Factoring for the non-recourse transfer of receivables due from government departments;
  • >    agreement with Ifitalia- BNP Paribas Group for the non-recourse transfer of receivables pertaining to a list of 38 clients, including central and local government entities;
  • the non-recourse transfer of receivables due from government entities through a securitization transaction in collaboration with Banca IMI – Intesa San Paolo Group.

Revenuesfor 2009 totaled €11,296.1 million and relate mainly to revenues of €10,541.1 million from the sale and transport of electricity and fees of €431,1 million for connection to electricity grids. The decline in revenues of €2,495.5 million compared with 2008 was largely attributable to the decrease in revenues from the sale and transport of electricity in connection with the reduction in quantities sold and in average revenues covering generation costs, in line with the decrease in the purchase price of electricity.

Operating costs amounted to €11,248.6 million and include €6,789.7 million for the purchase of electricity, mainly from the Single Buyer for the supply of enhanced protection customers (€6,779.2 million) and €3,911.1 million in costs for services from Group companies, referring essentially to electricity transport (€3,254.9 million) and network connection services (€429.5 million). The €2,561.5 million decrease in operating costs compared with the previous year is mainly due to the decline in purchases of electricity from the Single Buyer (€1, 794.8 million) and from Group companies (€450.7 million).

The company posted an operating profit of €47.5 million, an improvement of €81.2 million over 2008.

Net financial expense and charges in respect of equity investments came to €9.7 million, the net result of financial expense of €28.8 million, financial income of €18.6 million and income from equity investments of €0.5 million. Net financial expense declined by €20.5 million, mainly due to €32.9 million of interest accrued on the intercompany current account held with the parent company, partially offset by higher penalty interest received (€13.1 million).

Net income for 2009 came to €14.7 million after taxes for the period amounting to €23.0 million.

Capital expenditure on property, plant and equipment and intangible assets totaled €21.9 million.

Net capital employed at December 31, 2009, came to negative €516.4 million and included net non-current assets of €71.9 million, negative net current assets of €577.1 million, net deferred tax assets of €131.5 million and provisions of €142.7 million.

Net liquidity totaled €572.0 million, an improvement of €953.0 million.

The workforce at December 31, 2009 came to 2,953, compared with 3,227 at December 31, 2008.

Enel Energia SpA

Enel Energia is the company responsible for the sale of electricity on the free and safeguard markets and the sale of natural gas to end-users. In particular, Enel Energia is leader in the free market in Italy for the sale of electricity, and provides integrated services and products for electricity and gas supplies for both companies and households.

As regards the safeguard market, the procedures for assigning the electricity supply service are set out in the decree of the Ministry for Economic Development issued on November 23, 2007, and a subsequent ministerial decree issued on February 8, 2008.

In 2009, Enel Energia strengthened its leadership in the Italian free market by focusing on the combined sale of electricity and gas. The company closed 2009 with around 2.8 million free-market electricity customers and around 2.8 million gas customers.

In November, the wholly owned subsidiary Amiagas Srl was merged into the company, effective for accounting and tax purposes as of January 1, 2009. The merger generated a merger deficit of about €1.4 million.

In the latter part of 2009, Enel Energia SpA began negotiations with a number of banks and factoring companies in order to assess the options for the without-recourse assignment of part of its receivables.

These negotiations led to the following transactions:

  • agreement with Unicredit Factoring for the non-recourse assignment of receivables from government bodies and 32 private-sector customers (large corporations);
  • agreement with Ifitalia (BNP Paribas Group) for the non-recourse assignment of receivables from central and local government bodies and from 8 private-sector customers (large corporations);
  • the non-recourse securitization of receivables due from government bodies in collaboration with Banca IMI - Intesa Sanpaolo Group;
  • agreement with MPS Leasing & Factoring for the non-recourse assignment of receivables from 25 private-sector customers (large corporations).

Revenues from sales and services amounted to €9,963.6 million (€10,383.6 million in 2008) and refer mainly to the sale of electricity (€5,487.7 million) and gas (€1,866.2 million) as well as transport revenues of €2,524.1 million. This marked a decline of €420.0 million compared with 2008, due essentially to the decline in volumes of gas sold to business customers.

Operating costs, amounting to €9,186.9 million (€10,913.9 million in 2008), relate mainly to electricity purchases of €4,306.5 million, gas purchases of €1,524.0 million, and service costs of €3,027.6 million. The €1,727.0 million decrease from the previous year is due mainly to the decline in provisioning as a result of the lower quantities sold to customers, as well as to the lower purchase prices.

Net charges from commodity risk management came to €904.9 million (compared with net income of €611.9 million in 2008) and include €916.0 million for the net charge realized on positions closed during the year and €11.1 million in net unrealized gains from the measurement of derivative contracts on commodities as at December 31, 2009.

The operating loss, in the amount of €109.9 million (compared with operating income of €118.4 million in 2008), represents a decline in performance of €228.3 million compared with the previous year.

Net financial expense and charges in respect of equity investments amounted to €22.3 million (€61.9 million in 2008), a decrease of €39.6 million due essentially to the decline in interest expense accruing on an intercompany current account held with Enel SpA, as a result of the change in the average debtor position with the parent company compared with the previous year.

The net loss for the year, after taxes for the period of €28.7 million, came to €103.6 million (compared with net income of €37.1 million in 2008).

Capital expenditure on property, plant and equipment and intangible assets amounted to €62.1 million.

Net capital employed at December 31, 2009, came to €1,603.9 million (€783.4 million at December 31, 2008), funded by shareholders’ equity of €849.7 million (53.0%) and net financial debt of €754.2 million (47.0%).

The workforce at December 31, 2009, numbered 990, compared with 924 at December 31, 2008.

Enel Trade SpA

In 2009, Enel Trade managed the procurement of fuels for Enel Group power plants and natural gas for Enel Energia SpA.

The company also traded in energy products in domestic and international markets as well as provided shipping services and sold electricity to Enel Energia and non-Group wholesalers.

It engaged in proprietary trading of electricity commodities in the leading international markets. Enel Trade also carried out hedging operations on behalf of Enel Group companies to protect against fluctuations in the price of energy commodities and continued to acquire CO2 allowances and green certificates needed for the Group’s generation companies to comply with the applicable regulations.

In 2009, the company sold 151.3 TWh of electricity (129.1 TWh in 2008), of which 63.7 TWh was to Enel Group companies, 25.4 TWh to non-Group Italian entities and 62.2 TWh to non-Group foreign entities. The company also traded 20.2 million tons of oil equivalent (Mtoe) of fuel (26.0 Mtoe in 2008), of which 15.6 Mtoe with Group companies and 4.6 Mtoe with non-Group entities. Finally, the company also sold CO2 allowances (EUAs/CERs) corresponding to 7.9 million metric tons of carbon dioxide.

During 2009, the most important corporate events and extraordinary operations involving the company were as follow:

  • on November 17, 2009, the Board of Directors of the company approved the liquidation of the wholly-owned subsidiary Enel Comercializadora de Gas SA, a Spanish company active in transforming and selling gas in Spain;
  • in November 2009, the company signed an agreement with Grove Energy Limited and Grove Energy Srl, parent companies of the Canadian company Stratic Energy Corporation (Stratic), to purchase its gas assets including approximately 0.7 billion cubic meters of gas and several exploration licenses. The acquisition encompassed Stratic’s entire gas portfolio in Italy and other Italian exploration rights;
  • in 2009, the company formed a joint venture with Spanish company Repsol Exploración Argelia SA (Repsol) and Dutch company GdF Suez E&P Projects Algeria BV (GdF-Suez) to participate in the tender sponsored by Algeria’s National Agency for the Valorisation of Hydrocarbon Resources (Alnaft) to award a license to explore the South East Illizi perimeter. Repsol, possessing 52.5%, is acting as representative of the joint venture, while Enel Trade and GdF–Suez hold 27.5% and 20.0% interests, respectively;
  • the company formed a joint venture with Total E&P Egypt which was admitted, in May 2009, to take part in the International Bid Round launched by Egyptian Natural Gas Holding Company (EGAS) in 2008 for the awarding of an exploration license for the Nile delta;
  • on June 19, 2009, jointly with Enel SpA, the company signed a settlement agreement with Eni SpA concerning the connection contributions paid by Enel SpA to Snam SpA (from 1991 to 1999) and adjustments pertaining to corrections of metering documentation for the Montalto di Castro thermal plant (relating to several months in 2004, 2006 and 2007) and the Treviso city-gate (for the period January to September 2003). In relation to the connection contributions, under the settlement agreement Eni SpA is required to pay Enel Trade a lump sum of €77.6 million, paid in two installments in 2009. Eni SpA was also required, with regard to the corrections to the metering documentation, to issue the related credit notes totaling €10.3 million to Enel Trade within one month of the signing of the agreement;
  • on May 12, 2009, the company signed a three-year supply agreement (2010-2012) for coal with two companies of the Thai Group Banpu (PT Trubaindo Coal Mining and PT Indominco Mandiri). The contract calls for supplying 1.5 million metric tons of coal per year starting from January 1, 2010. The purpose is to ensure a steady medium-term supply of a top-quality product (in terms of yield).

Revenues from sales and services in 2009 came to €14,835.0 million (€16,732.7 million in 2008), a decrease of €1,897.7 million compared with the previous year, due mainly to lower revenues from the sale of fuel (€2,005.9 million) as a result of the decline in international prices, along with a reduction in quantities sold.

Operating costs totaled €14,490.0 million (€16,647.7 million in 2008), a decrease of €2,157.7 million, due essentially to a reduction costs for the purchase of fuels (€2,336.8 million), consistent with the decline in related revenues and largely the result of falling purchase prices.

Net income from commodity risk management came to a positive €68.3 million, compared with a positive €44.0 million for the previous year, and refers to contracts for differences of €11.1 million and other contracts on energy and petroleum commodities for €57.2 million.

Operating incomecame to €492.8 million, up €360.0 million from 2008.

Net financial expense and charges in respect of equity investments amounted to €24.5 million (€38.3 million in 2008). The net improvement of €13.8 million essentially refers to exchange rate differences (up €34.0 million) and the management of exchange rate derivatives using derivative contracts signed with the parent company Enel SpA (down €17.9 million).

Income taxes came to €181.1 million and reflect a tax rate of 38.7%, compared with 43.3% for the previous year.

Net income for 2009amounted to €287.2 million, compared with €53.6 million in 2008.

Net capital employed at December 31, 2009 came to €281.6 million, down €70.1 million compared with the value at end-2008, and is composed of net non-current assets of €64.7 million, net current assets of €241.8 million and provisions of €24.9 million.

Shareholders’ equity came to €414.9 million and the net financial position is positive for €133.3 million (net financial debt of €186.8 million at December 31, 2008).

The workforce at December 31, 2009 numbered 293 compared with 256 a year earlier.

 

Enel Energy Europe SL

The company, established by Enel SpA on March 22, 2006, is engaged in the acquisition, holding and management of equity investments in other companies, both in Spain and abroad.

During 2009, the most important corporate events and extraordinary operations regarding the company were as follows:

  • the acquisition from Acciona, completed on June 25, 2009, of the additional stake in Endesa. More specifically, on February 20, 2009, an agreement was signed for the purchase of the 25.01% stake in Endesa held, directly and indirectly, by Acciona. This agreement, which was realized in part by way of the early exercising of the put option by Acciona prior to the scheduled date (March 2010), enabled Enel Energy Europe to hold a 92.06% stake in Endesa, Spain’s leading electricity company;
  • the recapitalization of the company on April 21, 2009 and with effect from January 1, 2009, which was carried out by way of the sole shareholder, Enel SpA, waiving a portion of its financial receivable on the intercompany current account in the amount of €12,300.0 million, with €500.0 million allocated to increasing share capital and €11,800.0 million to increasing available equity reserves;
  • the transfer, approved by the shareholders on June 8, 2009, of the company’s registered office in Madrid (Spain) and subsequent listing of the company with the Registro Mercantil de Madrid on June 16, 2009, as a Sociedad Limitada (SL), as well as the adoption of the new articles of association adapted to Spanish legislation concerning SLs and the appointment of a new administrative body.

Net operating costs, totaling €0.1 million (€16.9 million in 2008), declined by €16.8 million due essentially to the reduction in costs for services incurred in 2009 compared with the same period of the previous year. More specifically, in 2008, costs incurred were related to the delivery of assistance and consulting services (€14.3 million) relating to the valuation of the assets of the Endesa Group (Endesa Europa) sold to E.ON, in the consequent compulsory tenders for a number of Endesa subsidiaries in Latin America, and other legal costs (€1.6 million).

As a result of the above, the company posted an operating loss of €0.1 million.

Net financial income and income from equity investments totaled €4,381.6 million (compared with net financial expense of €719.0 million in 2008), and essentially reflect the income from equity investments of €4,673.8 million and net financial expense of €292.2 million. Compared with 2008, this is an improvement of €5,100.6 million due mainly to the total dividends for 2008 approved by Endesa shareholders on June 30, 2009 (€4,186.4 million), as well as to the 2009 interim dividends approved by the Endesa board of directors on December 14, 2009 (€487.4 million), and lower net financial expense (€821.5 million) recognized in 2009 related essentially to the decrease in average debt to the parent company following, primarily, the waiving of a portion of the parent company’s receivable on the intercompany current account.

Net income for 2009 came to €4,381.6 million.

Net capital employed at December 31, 2009, amounted to €37,944.6 million and comprises net non-current assets of €37,740.9 million, which reflects the value of the equity investment in Endesa (a 92.06% interest), and positive net current assets of €203.7 million.

At December 31, 2009, shareholders’ equity totaled €19,333.9 million, an increase of €16,681.6 million from December 31, 2008, related to the €4,381.6 million in net income and the recapitalization of the company cited above (€12,300.0 million).

Net financial debt at December 31, 2009 totaled €18,610.7 million.

The workforce at December 31, 2009, numbered 2 people (compared with zero at December 31, 2008).

 

Enel Investment Holding BV

The company, which is registered in the Netherlands, operates as a holding company for equity investments in the electricity and energy sectors and in utility companies in general.

In 2009, the company was involved in a number of reorganizations of the Enel Group’s foreign equity investments and was involved in numerous Group international acquisition initiatives. Specifically:

 

  • with effect from January 1, 2009, as part of the reorganization of the Enel Group companies operating in the renewable energy resources sector, the company sold to Enel Green Power SpA, for €1,690.0 million corresponding to its book value, its equity investment in Enel Green Power International BV, a holding company for investments held in foreign companies operating in the renewable energy resources sector;
  • on March 25, 2009, the company subscribed 9.15% of the share capital of the newly formed Romanian company Energo Nuclear SA for about €3 million. The purpose in making this investment is to participate in the Cernavoda 3&4 Project for developing, financing, building and operating two additional 720 MW nuclear power plants in Cernavoda, Romania;
  • on May 21, 2009, the company took sole ownership of the Romanian company Enel Productie Srl (formerly Global Power Investment Srl) for €0.03 million, corresponding to the remaining 15% of that company’s share capital. Enel Productie Srl seeks to develop a project to build a 700/900 MW coal plant in the Galati region of Romania;
  • on September 23, 2009, the sale to Gazprom of 51% of the share capital of SeverEnergia, a Russian company wholly owned to that date by the Dutch company Artic Russia BV, over which Enel Investment Holding (40%) and Eni (60%) exercised joint control, for a total of $1.6 billion. As a result of this sale, Enel Investment Holding’s indirect interest in SeverEnergia fell to 19.6%;
  • on October 30, 2009, as the final step in the reorganization of the foreign companies operating in the renewable energy resources sector, the company sold the entire share capital of the French company Enel Erelis Sas to Enel Green Power International BV for €27.5 million, corresponding to its book value;
  • on November 5, 2009, the Board of Directors of Enel Investment Holding BV approved the reorganization plan for the Group’s Romanian companies, excluding those operating in the renewable energy resources sector. Consequently, Enel SpA transferred to Enel Investment Holding BV its holdings in the following companies at book value:
    • Enel Romania (80%), a company that provides services to the other Romanian Group companies, for €0.04 million on December 18, 2009;
    • Enel Distributie Muntenia SA (64.4%), a company that distributes electricity, for €738.0 million on December 29, 2009;
    • Enel Energie Muntenia SA (64.4%), a company that sells electricity, for €130.3 million on December 29, 2009.

 

By acquiring the equity investments in Enel Distributie Muntenia SA and Enel Energie Muntenia SA, Enel Investment Holding also assumed the obligations relating to the call option granted by Enel SpA to Electrica (totaling €179.4 million, of which €152.5 million relating to Enel Distributie Muntenia SA and €26.9 million relating to Enel Energie Muntenia SA) on all the shares held by the company, currently or in the future, in Electrica Muntenia Sud, recognized, in view of its nature, against the cost of the equity investments.

 

  • in December 2009, Enel Distribuzione SpA sold to Enel Investment Holding BV its holdings in the following companies:
  • Enel Romania (20%), for €0.01 million;
  • Enel Distributie Dobrogea SA (51%), a company that distributes electricity, for €160.0 million;
  • Enel Distributie Banat SA (51%), a company that distributes electricity, for €220.0 million;
  • Enel Energie SA (51%), a company that sells electricity, for €80.0 million.

 

In acquiring Enel Distributie Banat SA and Enel Distributie Dobrogea SA, Enel Investment Holding BV also obtained an indirect stake in the Romanian company Enel Servicii Comune Srl, which provides support services to other Enel Group companies in Romania and which is owned by Enel Distributie Banat SA (50%) and Enel Distributie Dobrogea SA (50%);

 

  • on December 29, 2009, the reorganization of the Bulgarian Enel Group companies, excluding those operating in the renewal energy resources sector, was completed, following which Enel Investment Holding BV purchased the entire shareholding in the following Dutch companies from Enel Produzione SpA:
  • Maritza East III Power Holding BV, which holds 73% of the Bulgarian company Enel Maritza East 3 AD, for €204.0 million; Enel Maritza East 3 AD owns the 980 MW lignite-fired Maritza plant in the Stara Zagora region of Bulgaria;
  • Maritza O&M Holding Netherlands BV, which holds 73% of the Bulgarian company Enel Operations Bulgaria AD, for €8.0 million; Enel Operations Bulgaria AD operates and maintains the Maritza plant.

 

Operating costs for 2009 came to €19.5 million (€79.9 million in 2008) and consist mostly of depreciation, amortization and impairment losses of €17.8 million arising from the writedown of the equity investment in Enelco proportionately to its stake in that company (75%).

Net financial expense and charges in respect of equity investments totaled €10.7 million and consist of:

 

  • net financial expense of €18.9 million, referring mainly to the financial expense in respect of the parent company for the debtor balance on the intercompany current account (€10.5 million), as well as the negative exchange rate differences recognized (€6.8 million);
  • net income in respect of equity investments for €8.2 million, largely due to dividend payments received from Res Holding BV (€7.7 million).

 

The net loss for the year came to €30.2 million (loss of €230.4 million in 2008).

Net capital employed at December 31, 2009 amounted to €4,883.9 million (€5,045.2 million at December 31, 2008) and is composed of net non-current assets of €5,269.0 million, relating mainly to equity investments, and net current assets of a negative €385.1 million.

Shareholders’ equity is €3,916.8 million (€2,964.0 million at December 31, 2008), up €952.8 million from December 31, 2008, mainly due to the increases in the reserves upon the transfer of the Romanian companies by Enel SpA (€868.3 million) and the rise in the fair values of the AFS equity investments in Echelon Corp. and PT Bayan Resource.

Net financial debt, amounting to €967.1 million (€2,081.2 million at December 31, 2008), refers essentially to the company’s debtor position of €1,119.3 million in respect of the parent company (debtor position of €2,167.6 million at December 31, 2008).

The workforce at December 31, 2009 numbered 3.

Enel Finance International SA

The company, headquartered in Luxembourg, functions as a holding company for equity investments and financial assets, both with other Group companies and third parties.

During 2009, the company:

 

  • received complete repayment of the revolving lines of credit granted in 2008 to Enel Latin America Llc, Enel Productie Srl and Enel Green Power International BV, while those granted in Enel Green Power Romania Srl and Enel Rus Llc in 2008 have been almost entirely repaid;
  • increased up to €270.0 million and €145.0 million the revolving credit lines, granted in 2007, to Enel France SA and Enel Erelis Sas, respectively, both falling due on December 31, 2010. They were utilized in the amounts of €248.2 million and €70.2 million, respectively, at the end of 2009;
  • increased the revolving credit line granted in 2008 to Enel Investment Holding BV by €60.0 million up to €88.0 million and this amount was utilized completely at December 31, 2009. A second line of credit in the amount of €56.0 million was granted to Enel Investment Holding on September 28, 2009 of which €23.5 million was utilized at end-2009.

 

On November 30, 2009, the company granted a new loan to Enel Energy Europe SL for €10,000.0 million, with maturity at November 30, 2012, and on December 17, 2009, a loan to Enel Unión Fenosa Renovables SA for €17.5 million, with maturity at August, 31, 2013.

In 2007, the company signed the multi-tranche Credit Facility Agreement 2007 with Enel SpA, Mediobanca (Banca di Credito Finanziario SpA) and other banks for a total original amount of €35 billion, of which €7,513.1 million was attributable to Enel Finance International SA at December 31, 2008. In 2009, to finance the purchase of an additional 25.01% interest in Endesa from Acciona, the credit line was increased to €3,021.5 million for Enel Finance International SA’s use (Credit Facility Agreement 2009 – “facility C increase”). As a result of advance, mandatory and voluntary repayments, totaling €6,673.4 million, the liability under the Credit Facility Agreement is attributable to the company in the amount of €3,861.2 million at December 31, 2009.

As regards the “Euro Commercial Paper Programme” (ECP Programme), totaling up to €4.0 billion, that the company launched in 2005 and for which it is issuer and Enel SpA the guarantor, the total commercial paper issued and not repaid at December 31, 2009 came to €3,852.9 million.

In 2009, the company renewed the €25 billion Global Medium-Term Notes program in which Enel Finance International and Enel SpA are issuers. At December 31, 2009, the program had been used for the issue in 2007 of multi-tranche bonds totaling $3.5 billion and ¥20.0 billion, equal to a total of €2.6 billion, as well as the issue in 2009 of multi-tranche bonds in euros, pounds sterling and dollars, equal to a total of just under €10 billion.

In 2009, as a result of the greater funding received through the increase of the Credit Facility Agreement (the “facility C increase”) and bond issues, the company granted to the parent company a €3,021.5 million bridge loan (subsequently increased to €9,450.0 million). This loan was completely repaid at December 31, 2009.

Finally, mention should be made of the two loans granted to the parent company on January 1, 2008, for €2,644.3 million and €7,865.0 million, both with a maturity of 5 years, as well as the granting of a short-term revolving credit line of up to €4,000.0 million on January 1, 2008. The credit line was extended in 2009 until June 29, 2010 and utilized for €536.0 million at December 31, 2009.

Net other charges, amounting to €1.4 million, are in line with 2008 (€1.1 million) and consist of operating (€1.1 million) and personnel (€0.3 million) costs.

Net financial expense and charges in respect of equity investments, totaling €74.1 million (€21.8 million in 2008), grew by €52.3 million as a result of the increase in financing activities carried out by the company, as well as dividends for 2008 amounting to €39.7 million received from Enel Ireland Finance Ltd.

Net income for the year amounted to €63.3 million (€17.8 million in 2008), after income taxes for the year of €9.4 million.

Total funding requirements at December 31, 2009, came to €51.5 million, down €1,237.8 million from December 31, 2008 (€1,289.3 million at December 31, 2008), largely a result of the reimbursement of €1,230.1 million on January 12, 2009 in respect of the shareholders’ equity held in the company’s direct subsidiary, Enel Ireland Finance Ltd, deemed to exceed actual need. On December 8, 2009, Enel Ireland Finance was placed in liquidation.

The funding requirements were completely covered by shareholders’ equity of €1,504.1 million (€1,440.8 million at December 31, 2008), while the net financial position is positive in the amount of €1,452.6 million (net positive financial position of €151.5 million at December 31, 2008).

The workforce at December 31, 2009 numbered 4 (3 at the end of 2008).

 

Enel Servizi Srl

Enel Servizi's mission is to handle, on a comprehensive, unified basis, the sourcing and purchasing of goods, works and services, administrative and accounting activities, the administrative management of personnel, the management and optimization of the property portfolio and the management of ICT systems on behalf of all Group companies.

In 2009, in line with the strategy described above, the company acquired a 100% stake in Sfera Srl from Enel SpA at a price of €10.4 million, which is equal to the corresponding carrying amount of the investment. Sfera Srl is the Group company that manages personnel training. At the end of November 2009, the related merger instrument was signed for the merger of Sfera Srl into Enel Servizi Srl with effect from May 1, 2010, with the accounting and tax effects being retroactive from January 1, 2010.

On July 9, 2009, the Board of Directors of Enel SpA also approved the plan to establish a fund to be seeded by Group properties not used in operations and hired Fimit SGR to set up and manage the fund. Following this decision, the Board of Directors of Enel Servizi approved the seeding of the fund with its own properties not used in operations for a total of about €180 million and granted Fimit SGR the related mandate. As at December 31, 2009, the transaction had not yet been completed, given that not all of the authorizations required by law to create the new fund had been obtained.

Revenues for 2009 totaled €1,031.1 million (€1,106.8 million in 2008), a decline of €75.7 million due mainly to the decrease in revenues from the sale of land and buildings and of hardware and software, smaller gains on the sale of buildings and lower revenues from services.

Operating costs came to €997.0 million (€1,055.0 million in 2008), a decrease of €58.0 million. Compared with 2008, there was a reduction in costs for the purchase of raw materials (€30.9 million), particularly for hardware and software, as well as a decline in personnel expenses (€20.1 million) due mainly to lower costs for retirement incentives and lower accruals to provisions for risks and charges (€8.9 million).

Operating income totaled €34.1 million (€51.8 million in 2008).

Net financial expense amounted to €13.2 million (€22.1 million in 2008) and refers essentially to interest expense accrued on long-term loans (€6.5 million) and to the financial expense in respect of the accretion of provisions for employees (€6.4 million).

Net income for 2008, after income taxes of €16.7 million, came to €4.2 million (€5.5 million in 2008).

Capital expenditure on property, plant and equipment and intangible assets amounted to €75.0 million.

Net capital employed totaled €657.2 million and is made up of net non-current assets of €672.4 million, net current assets of €170.3 million, and other provisions and net deferred tax assets of €185.5 million. The total is funded by shareholders’ equity of €496.8 million and net financial debt of €160.4 million.

The workforce at December 31, 2009, numbered 4,030 at December 31, 2009, compared with 4,265 at December 31, 2008.