Millions of euro    
 201720162017-2016
Total revenue 74,639 70,592 4,047 5.7%
Total costs 59,564 55,183 4,381 7.9%
Net income/(expense) from commodity contracts measured at fair value 578 (133) 711 -
Gross operating margin 15,653 15,276 377 2.5%
Depreciation, amortization and impairment losses 5,861 6,355 (494) -7.8%
Operating income 9,792 8,921 871 9.8%
Financial income 3,982 4,173 (191) -4.6%
Financial expense 6,674 7,160 (486) -6.8%
Total financial income/(expense) (2,692) (2,987) 295 9.9%
Share of income/(losses) of equity investments accounted for using the equity method 111 (154) 265 -
Income before taxes 7,211 5,780 1,431 24.8%
Income taxes 1,882 1,993 (111) -5.6%
Net income from continuing operations 5,329 3,787 1,542 40.7%
Net income from discontinued operations - - - -
Net income (Group and non-controlling interests) 5,329 3,787 1,542 40.7%
Net income attributable to shareholders of Parent Company 3,779 2,570 1,209 47.0%
Net income attributable to non-controlling interests 1,550 1,217 333 27.4%

Revenue

Millions of euro    
201720162017-2016
Revenue from the sale of electricity 43,433 42,337 1,096 2.6%
Revenue from the transport of electricity 9,973 9,587 386 4.0%
Fees from network operators 900 557 343 61.6%
Transfers from institutional market operators 1,635 1,462 173 11.8%
Revenue from the sale of gas 3,964 3,876 88 2.3%
Revenue from the transport of gas 570 563 7 1.2%
Gains on disposal and negative goodwill on acquisitions of subsidiaries, associates, joint ventures, joint operations and non-current assets held for sale 159 399 (240) -60.2%
Remeasurement at fair value after changes in control - 99 (99) -
Gains on the disposal of property, plant and equipment and intangible assets 43 65 (22) -33.8%
Other sales, services and revenue 13,962 11,647 2,315 19.9%
Total 74,639 70,592 4,047 5.7%

In 2017 revenue from the sale of electricity amounted to €43,433 million, an increase of €1,096 million on the previous year (+2.6%). The rise is mainly attributable to the following factors:

  • an increase of €2,317 million in revenue from electricity sales to end users. The change reflects an increase in quantities sold as well as a recovery in average prices and developments in exchange rates, which had a positive impact for all countries with the exception of Argentina. The change in the scope of consolidation also had a significant impact: the acquisition of Enel Distribuição Goiás had an impact of €1,042 million on revenue in 2017, while the deconsolidation of Slovenské elektrárne had an impact of €345 million;
  • a reduction of €2,189 million in revenue from wholesale electricity sales, mainly due to the contraction in volumes generated in Italy (€1,777 million) together with the contraction in revenue (€880 million) associated with the deconsolidation of Slovenské elektrárne at the end of July 2016. These factors were partly offset by exchange rate developments and an increase in revenue in Chile and Brazil;
  • an increase of €968 million in revenue from electricity trading, reflecting the increase in volumes handled on the foreign market, which offset the decline in revenue from trading on the Italian market.

Revenue from the transport of electricity amounted to €9,973 million in 2017, an increase of €386 million on 2016. The rise was mainly concentrated in Spain, South America and Italy. The increase in average rates on foreign markets was associated with an increase in quantities transported, especially on the free market.

Fees from network operators amounted to €900 million in 2017, an increase of €343 million on the previous year. The change mainly reflects the increase in revenue from the reimbursement of the costs of essential generation units in Italy, due to the inclusion of the Brindisi Sud plant.

Revenue from transfers from institutional market operators totaled €1,635 million in 2017, up €173 million. More specifically, the increase in transfers mainly reflected an increase in the costs of liquid fuels in the Spanish extrapeninsular area, for which the Group is entitled to reimbursement.

Revenue from the sale of gas in 2017 amounted to €3,964 million, an increase of €88 million (+2.3%) compared with the previous year. The change essentially reflected the increase in revenue in Iberia, primarily as a result of an increase in volumes sold and higher average unit prices than in 2016.

Revenue from the transport of gas in 2017 amounted to €570 million, an increase of €7 million (+1.2%), largely as a result of the increase in quantities transported in Italy.

The item gains on disposal of entities amounted to €159 million in 2017, a decrease of €240 million (-60.2%) on 2016, mainly reflecting the gain of €143 million from the disposal of the Chilean company Electrogas.

In 2016, this item mainly consisted of:

  • the gain from the disposal of GNL Quintero (an associate in which the Group had held 20%) of €173 million;
  • the gain of €124 million from the sale of Hydro Dolomiti Enel;
  • the gain of €35 million recognized by Enel Green Power Kansas from the disposal of its subsidiaries Cimarron and Lindahl;
  • recognition of a price adjustment on the Portuguese assets sold in 2015 in the amount of €30 million.

There were no gains from remeasurement at fair value after changes in control in 2017, while in 2016 they totaled €99 million, of which €95 million in respect of the adjustment to fair value of the assets and liabilities of the Group following the changes in governance arrangements and the consequent loss of control of EGPNA REP, which had prompted a remeasurement

Gains on the disposal of property, plant and equipment and intangible assets in 2017 amounted to €43 million (€65 million in 2016) and regarded ordinary disposals during the period.

Revenue under other sales, services and revenue amounted to €13,962 million in 2017 (€11,647 million the previous year), an increase of €2,315 million on 2016 (+19.9%).

The change on 2016 mainly reflects:

  • an increase of €1,312 million in revenue from the sale of fuels, especially natural gas;
  • an increase of €342 million in transfers associated with environmental certificates, mainly due to an increase in quantities handled;
  • an increase of €262 million in revenue from construction contracts, mainly reflecting works on infrastructure operated under concession arrangements within the scope of IFRIC 12 by Enel Distribuição Goiás;
  • an increase of €139 million in revenue from reimbursements and indemnities, including €100 million in respect of the arbitration proceeding undertaken by the Group with regard to the Chucas wind farm, for which the Group received that amount from the Instituto Costarricense de Electricidad (ICE);
  • an increase of €65 million in revenue from tax partnerships.

Costs

Millions of euro    
 201720162017-2016
Electricity purchases 20,011 18,514 1,497 8.1%
Consumption of fuel for electricity generation 5,342 4,738 604 12.7%
Fuel for trading and gas for sale to end users 10,906 9,061 1,845 20.4%
Materials 1,880 1,708 172 10.1%
Personnel 4,504 4,637 (133) -2.9%
Services, leases and rentals (1) 15,882 15,411 471 3.1%
Other operating expenses 2,886 2,783 103 3.7%
Capitalized costs (1,847) (1,669) (178) -10.7%
Total 59,564 55,183 4,381 7.9%

(1) Of which costs for fixed water diversion fees of €169 million in 2017 (€166 million in 2016) and costs for public land usage fees of €24 million in 2017 (€24 million in 2016).

Costs for electricity purchases increased in 2017 by €1,497 million compared with 2016, a rise of 8.1%. The increase reflects a rise in volumes purchased on the market, especially in Italy and Spain. More specifically, purchases of electricity on electricity exchanges increased by €2,026 million, notably in Italy, Iberia and South America, while costs for purchases through bilateral contracts rose by €693 million. These factors were partly offset by a reduction in purchases on local and foreign markets and as part of ancillary and balancing services totaling about €1,222 million, essentially reflecting the reduction in volumes and prices handled by Country Italy and the effect of the change in the scope of consolidation with the deconsolidation of Slovenské elektrárne.

Costs for the consumption of fuel for electricity generation amounted to €5,342 million in 2017, an increase of €604 million (+12.7%) on the previous year. The change essentially reflected an increase in purchase costs to meet the requirements of the expansion in thermal generation, especially in South America. These effects more than offset the effect of the deconsolidation of Slovenské elektrárne.

Costs for the purchase of fuel for trading and gas for sale to end users came to €10,906 million in 2017, an increase of €1,845 million on 2016. The change reflects an increase in quantities purchased and handled with rising average prices, especially in Italy and Spain.

Costs for materials in 2017 amounted to €1,880 million, an increase of €172 million on the previous year. The rise was mainly attributable to purchases of materials and equipment for works on infrastructure and networks operated under concession arrangements in Brazil, mainly due to the consolidation of Enel Distribuição Goiás. This effect was partly offset by a reduction in costs for purchases of environmental certificates.

Personnel costs in 2017 totaled €4,504 million, a decrease of €133 million (-2.9%) on 2016. The change essentially reflects:

  • a decrease in costs for early retirement incentives of €152 million, mainly attributable to the reduction of €205 million in costs compared with 2016 for incentive plans in Spain (Plan de Salida), only partly offset by the introduction of a similar plan at the newly acquired Enel Distribuição Goiás in order to enhance the efficiency of the structure (€45 million);
  • the effect of the increase in average unit costs, especially in South America, which was almost entirely offset by the reduction in the average workforce reflecting the changes noted below.

The Enel Group workforce at December 31, 2017 numbered 62,900, of whom 31,786 abroad. The Group workforce expanded by 820 in 2017. The negative balance between new hires and terminations (-2,111 employees), mainly attributable to the early retirement incentives noted earlier (44% of terminations took place in Italy), was more than offset by the changes in the scope of consolidation (+2,931) attributable to the acquisitions in 2017, especially Enel Distribuição Goiás and EnerNOC.

The overall change compared with December 31, 2016 breaks down as follows:

Balance at December 31, 2016 62,080
Hirings 2,302
Terminations (4,413)
Change in scope of consolidation 2,931
Balance at December 31, 2017 62,900

Costs for services, leases and rentals in 2017 amounted to €15,882 million, an increase of €471 million on 2016. The change during the period essentially reflects:

  • an increase of €398 million in wheeling costs, mainly in South America and Brazil in particular, in part reflecting the consolidation of Enel Distribuição Goiás, and in Italy, essentially due to the increase in transmission rates;
  • an increase of €185 million in costs for IT services in Italy and Spain;
  • an increase in costs for maintenance and other activities performed under public service concession arrangements in Brazil in the amount of €134 million;
  • a decrease of €219 million in access fees for power transmission grids, mainly in Spain as a result of the elimination of charges provisioned in 2011-2016 in respect of fees paid by generation companies for self-consumption, as well as the effect of the deconsolidation of Slovenské elektrárne (€78 million).

Other operating expenses in 2017 amounted to €2,886 million, an increase of €103 million on 2016, mainly reflecting:

  • an increase of €239 million in charges for environmental compliance, especially in Italy and Romania;
  • an increase of €137 million in costs for taxes and duties, largely reflecting the increase in thermal generation taxes in Spain and higher taxes on nuclear generation in Catalonia as a result of the introduction of the new Law 5/2017, which taxes nuclear waste. This effect was amplified by the fact that in 2016 the Group had benefitted from the reversal of previous provisions for nuclear generation taxes provided for under the previous law, which was declared unconstitutional;
  • n increase in costs for fines recorded in Argentina for failure to meeting quality standards in electricity supply services (€44 million) and for the change in the scope of consolidation associated with Enel Distribuição Goiás (€18 million);
  • a decrease of €161 million in capital losses. The item reflected the writedowns recognized in 2016 in South America following the waiver of water usage rights for a number of development projects after an analysis of their profitability and socio-economic impact;
  • the reversal of the litigation provision in 2016 in respect of the SAPE dispute in the amount of €80 million following the issue of the arbitration ruling;
  • the recognition of lower charges connected with the ruling that granted Endesa reimbursement of amounts paid to finance the “bono social” in 2016, 2015 and 2014, with a positive impact of €222 million.

In 2017, capitalized costs amounted to €1,847 million, an increase of €178 million compared with the previous year, reflecting the increase in capital expenditure.

Net income/(expense) from commodity contracts measured at fair value showed net income of €578 million in 2017 (net expense of €133 million the previous year). More specifically, the net income for 2017 was essentially attributable to net income from managing positions in cash flow hedge derivatives in the amount of €246 million (net expense of €610 million in 2016) and derivatives measured at fair value through profit or loss in the amount of €302 million (net income of €477 million in 2016).

Depreciation, amortization and impairment losses in 2017 amounted to €5,861 million, a decrease of €494 million, almost entirely attributable to impairment. More specifically, the impairment losses recognized in 2016 mainly regarded the writedown of water usage rights for the development of projects involving the Neltume and Choshuenco rivers in Chile for which procedural difficulties have been identified (€273 million), as well as writedowns recognized following impairment testing of the Enel Green Power Romania CGU (€130 million) and the Nuove Energie CGU (€92 million). In 2017, the adjustment mainly regards the impairment of the geothermal assets of the German investee Erdwärme (€42 million).

In addition to the foregoing, another development was the increase in writedowns of trade receivables and other receivables net of reversals in the amount of €70 million, due essentially to the increase in net adjustments in Argentina and Brazil, due to the deterioration of economic conditions, and in Italy as a result of the risk of default in respect of a number of traders.

Operating income in 2017 amounted to €9,792 million, an increase of €871 million.

Net financial expense, amounted to €2,692 million in 2017, a decrease of €295 million, mainly reflecting:

  • a decline of €255 million in impairment losses on financial receivables, almost entirely attributable to the adjustment to fair value of the financial receivable arising from the disposal of 50% of Slovak Power Holding, which in 2016 involved the recognition of charges of €220 million and a positive adjustment in 2017 of €34 million;
  • a decrease of €199 million in net interest expense, mainly due to the Group’s refinancing strategy, exploiting the maturing of more expensive bonds and refinancing at much lower market rates;
  • a decrease of €96 million in charges for the accretion of other provisions, associated with the reduction of €58 million in charges in respect of the provision for early retirement incentives, largely in Spain, and with the decrease of €48 million in charges for the decommissioning provision following the deconsolidation of Slovenské elektrárne;
  • an increase of €45 million in income on equity investments, due essentially to the gain on the disposal of the interest in the Indonesian company Bayan Resources (€52 million).

These factors were only partly offset by:

  • an increase in financial expense recognized by Enel Finance International (€109 million) as a result of the early redemption of bonds under the “make whole call option” option provided for in the original loan contract;
  • a decrease in capitalized interest (€75 million), mainly due to the deconsolidation of Slovenské elektrárne;
  • an increase in financial expense of a regulatory nature connected with the acquisition of Enel Distribuição Goiás (€55 million) and an increase in charges on revolving credit lines (€37 million);
  • an increase of €218 million in net charges on financial derivatives (hedging both interest and exchange rates), almost entirely offset by an increase of €203 million in net exchange gains as a result of developments in exchange rates.

The share of income/(losses) of equity investments accounted for using the equity method in 2017 showed net income of €111 million, compared with net losses of €154 million in 2016. The change of €265 million is essentially attributable to the writedown of the 50% stake in Slovak Power Holding (€246 million), which in 2016 had been written down by €219 million following changes of the reference parameters used to determine the price formula included in the agreements with EPH and, conversely, in 2017 increased by €27 million to take account of net income for the year.

Income taxes in 2017 amounted to €1,882 million, equal to 26.1% of taxable income, while taxes in 2016 totaled €1,993 million, equal to 34.5% of taxable income. The decrease of €111 million in taxes compared with the previous year essentially reflected:

  • a decrease in current taxes in Italy as a result of the reduction of the IRES (corporate income tax) rate from 27.5% to 24%;
  • the adjustment of the deferred taxation of companies resident in the United States following the tax reform approved in December 2017, which reduced the corporate tax rate from 35% to 21% (€173 million);
  • the recognition of deferred tax assets in Argentina as a result of the improvement in the profit outlook for companies resident there (€60 million).

These decrease in taxes were partly offset by the increase in pre-tax income in 2017 compared with the previous year and the change in the weight of operations subject to different tax rates from the theoretical rates (in 2016 the gains on Hydro Dolomiti Enel and GNL Quintero, as well as writedowns of assets associated with Slovak Power Holding; in 2017, the gain on the disposal of Electrogas).