Operations
Net electricity generation
| Millions of kWh | ||||
|---|---|---|---|---|
| 2017 | 2016 | Change | ||
| Thermal | 32,421 | 37,609 | (5,188) | -13.8% |
| Hydroelectric | 14,025 | 16,052 | (2,027) | -12.6% |
| Geothermal | 5,758 | 5,832 | (74) | -1.3% |
| Wind | 1,188 | 1,298 | (110) | -8.5% |
| Other sources | 126 | 122 | 4 | 3.3% |
| Total net generation | 53,518 | 60,913 | (7,395) | -12.1% |
In 2017 net electricity generation amounted to 53,518 million kWh, a decline of 12.1% or 7,395 million kWh compared with 2016. Specifically, the decrease in thermal generation (down 5,188 million kWh) is the result of the reduced competitiveness of the coal plants and the lower output of the combined-cycle plants, including the Termini Imerese and Priolo Gargallo plants in Sicily, which were placed at a disadvantage by the new interconnection with the mainland that entered into operation in 2016.
The decrease in hydroelectric generation (down 2,027 million kWh) was instead due to poorer water conditions compared with the prior year.
Contribution to gross thermal generation
| Millions of kWh | ||||||
|---|---|---|---|---|---|---|
| 2017 | 2016 | Change | ||||
| Fuel oil | 10 | - | 88 | 0.2% | (78) | -88.6% |
| Natural gas | 8,396 | 23.9% | 9,601 | 23.6% | (1,205) | -12.6% |
| Coal | 26,139 | 74.5% | 30,286 | 74.7% | (4,147) | -13.7% |
| Other fuels | 534 | 1.6% | 592 | 1.5% | (58) | -9.8% |
| Total | 35,079 | 100.0% | 40,567 | 100.0% | (5,488) | -13.5% |
Gross thermal production in 2017 totaled 35,079 million kWh, a decrease of 5,488 million kWh (-13.5%) compared with 2016. Looking at the mix of fuels used shows that the decline is due mainly to the reduced use of coal-fired and combined-cycle plants as a result of developments noted above.
Net efficient generation capacity
| MW | ||||
|---|---|---|---|---|
| al 31,12,2017 | al 31,12,2016 | Change | ||
| Thermal plants (1) | 13,613 | 13,752 | (139) | -1.0% |
| Hydroelectric plants | 12,425 | 12,423 | 2 | - |
| Geothermal plants | 761 | 761 | - | - |
| Wind farms | 772 | 728 | 44 | 6.0% |
| Other | 81 | 97 | (16) | -16.5% |
| Total | 27,652 | 27,761 | (109) | -0.4% |
(1) 741 MW of which unavailable due to long-term technical issues (1,225 MW at December 31, 2016).
Net efficient capacity in 2017 totaled 27,652 MW, a decrease of 109 MW compared with the previous year. The change mainly reflects the closing of Section 6 of the Genoa coal plant.
Electricity distribution and transport networks
| 2017 | 2016 | Change | ||
|---|---|---|---|---|
| High-voltage lines at year end (km) | 13 | 13 | - | - |
| Medium-voltage lines at year end (km) | 353,808 | 352,607 | 1,201 | 0.3% |
| Low-voltage lines at year end (km) | 795,397 | 792,367 | 3,030 | 0.4% |
| Total electricity distribution network (km) | 1,149,218 | 1,144,987 | 4,231 | 0.4% |
| Electricity transported on Enel’s distribution network (millions of kWh) (1) | 227,322 | 224,100 | 3,222 | 1.4% |
(1) The figure for 2016 reflects a more accurate measurement of amounts transported.
Electricity transported on the Enel network in Italy for 2017 increased by 3,222 million kWh (+1.4%), going from 224,100 million kWh in 2016 to 227,322 million kWh in 2017. The change is essentially in line with the increase in electricity demand in Italy.
Electricity sales
| Millions of kWh | ||||
|---|---|---|---|---|
| 2017 | 2016 | Change | ||
| Free market: | ||||
| - business-to-consumer | 12,475 | 11,257 | 1,218 | 10.8% |
| - business-to-business | 44,735 | 35,024 | 9,711 | 27.7% |
| - safeguard-market customers | 2,052 | 2,021 | 31 | 1.5% |
| Total free market | 59,262 | 48,302 | 10,960 | 22.7% |
| Regulated market: | ||||
| - enhanced-protection-market customers | 43,958 | 45,837 | (1,879) | -4.1% |
| TOTAL | 103,220 | 94,139 | 9,081 | 9.6% |
Electricity sold in 2017 came to 103,220 million kWh for an overall increase of 9,081 million kWh compared with the prior year. The trend essentially reflects the greater volumes sold on the free market, focusing mainly on business customers, as a result of new commercial policies.
Average number of customers
| 2017 | 2016 | Change | ||
|---|---|---|---|---|
| Free market: | ||||
| - business-to-consumer | 5,938,899 | 5,266,409 | 672,490 | 12.8% |
| - business-to-business | 1,580,305 | 1,420,466 | 159,839 | 11.3% |
| - safeguard-market customers | 33,013 | 45,695 | (12,682) | -27.8% |
| Total free market | 7,552,217 | 6,732,570 | 819,647 | 12.2% |
| Regulated market: | ||||
| - enhanced-protection-market customers | 18,867,841 | 20,044,065 | (1,176,224) | -5.9% |
| TOTAL | 26,420,058 | 26,776,635 | (356,577) | -1.3% |
Natural gas sales
| Millions of m3 | ||||
|---|---|---|---|---|
| 2017 | 2016 | Change | ||
| Business-to-consumer | 2,910 | 2,815 | 95 | 3.4% |
| Business-to-business | 1,901 | 1,776 | 125 | 7.0% |
| Total | 4,811 | 4,591 | 220 | 4.8% |
Gas sales in 2017 totaled 4,811 million cubic meters, an increase of 220 million cubic meters compared with the previous year, essentially attributable to sales to business customers.
Performance
| Millions of euro | ||||
|---|---|---|---|---|
| 2017 | 2016 | Change | ||
| Revenue | 38,781 | 37,045 | 1,736 | 4.7% |
| Gross operating margin | 6,863 | 6,618 | 245 | 3.7% |
| Operating income | 4,470 | 4,270 | 200 | 4.7% |
| Capital expenditure | 1,812 | 1,894 (1) | (82) | -4.3% |
(1) Does not include €7 million regarding units classified as “held for sale“.
The following tables break down performance by type of business in 2017.
Revenue
| Millions of euro | ||||
|---|---|---|---|---|
| 2017 | 2016 | Change | ||
| Generation and Trading | 19,919 | 19,403 | 516 | 2.7% |
| Infrastructure and Networks | 7,584 | 7,237 | 347 | 4.8% |
| Renewables | 1,822 | 1,796 | 26 | 1.4% |
| End-user markets | 16,256 | 15,323 | 933 | 6.1% |
| Services | 1,314 | 1,207 | 107 | 8.9% |
| Eliminations and adjustments | (8,114) | (7,921) | (193) | -2.4% |
| Total | 38,781 | 37,045 | 1,736 | 4.7% |
Revenue in 2017 amounted to €38,781 million, an increase of €1,736 million compared with the same period of 2016 (+4.7%), the result of the following main factors:
- an increase of €516 million in revenue from Generation and Trading (+2.7%) compared with 2016. This development in primarily attributable to:
- an increase of €1,337 million in revenue from the sale of fuels on the domestic and international wholesale markets, essentially due to the increase in intermediation business;
- an increase of €971 million in revenue from trading on international energy markets due essentially to a growth in quantities handled (+33.9 TWh) of proprietary trading conducted on the European electricity exchanges (particularly in France and Germany) against a background of rising prices;
- a €293 million increase in revenue from fees from the Regulatory Authority for Energy, Networks and the Environment (ARERA) for transactions on the Power Exchange, mainly attributable to the cost reimbursement scheme for essential generation units;
- a €80 million increase in revenue from the sale of CO2 emissions allowances and green certificates, owing to rising prices for allowances;
- a €1,982 million decline in revenue from the sale of electricity, essentially related to the lower quantities generated. More specifically, the change is mainly attributable to the decrease in revenue from the sale of electricity by way of bilateral agreements to other national resellers (€1,989 million), only partly offset by increased revenue from sales on the Power Exchange (€47 million);
- a €124 million reduction in gains on extraordinary transactions, which in 2016 included the gain on the sale of the equity investment in Hydro Dolomiti Enel;
- an increase of €347 million (+4.8%) in revenue from Infrastructure and Networks operations, largely reflecting:
- an increase in contributions from the Energy & Environmental Service Fund for white certificates (in the amount of €347 million) due to the increase in volumes purchased, but especially to the rise in the unit contribution, which reached record highs in the 2nd Half of 2017;
- an increase of €10 million in rate revenue, mainly reflecting the rise in transmission rates (ARERA Resolution 779/2016), only partly offset by the reduction in distribution rates, the negative effect of the equalization mechanisms and the abolition, starting from January 1, 2017, of the equalization mechanism for revenue from domestic customers. In addition, there was an increase in revenue relating to changes in the “regulatory lag” (ARERA Resolution 654/2015);
- a €26 million increase (+1.4%) in revenue from Renewables generation, the result of higher average sales prices, which more than offset the lower volumes generated;
- an increase of €933 million (+6.1%) in revenue from End-user markets for electricity, essentially reflecting:
- an increase of €783 million in revenue on the free market for electricity mainly as a result of higher volumes sold (+11.0 TWh);
- an increase of €80 million in revenue on the regulated market for electricity attributable to the increase in rate revenue and revenue from marketing, partly offset by the decrease in volumes sold (-1.9 TWh) and in the number of customers served;
- a €4 million increase in revenue from the sale of natural gas to end users due to increased volumes sold and higher average sale prices. These effects were only partly offset by the positive effect of prior-period items, which was €56 million lower than in 2016;
- the increases in connection fees and in revenue from the cost reimbursement system for safeguard-market service providers (totaling €40 million).
Gross operating margin
| Millions of euro | ||||
|---|---|---|---|---|
| 2017 | 2016 | Change | ||
| Generation and Trading | 239 | (70) | 309 | - |
| Infrastructure and Networks | 3,467 | 3,620 | (153) | -4.2% |
| Renewables | 1,054 | 1,031 | 23 | 2.2% |
| End-user markets | 2,007 | 1,932 | 75 | 3.9% |
| Services | 96 | 105 | (9) | -8.6% |
| Total | 6,863 | 6,618 | 245 | 3.7% |
The gross operating margin in 2017 came to €6,863 million, an increase of €245 million compared with 2016 (+3.7%). More specifically, the change is essentially attributable to:
- the €309 million increase in the margin from Generation and Trading. Net of the difference in gains of €124 million on the sale of the interest in Hydro Dolomiti Enel recognized in 2016, the margin would have risen by €433 million due essentially to:
- the improvement in the trading margin, which reflected the benefits of the price review agreements involving a number of gas supply contracts (€311 million);
- the CO2 provisioning transaction in 2016, which had a negative impact of €279 million;
- the provisions during the previous year related to charges for reclamation work at the sites of the closed generation plants included in the Futur-E project (€160 million);
- a decrease of €250 million in the margin on the Ancillary Services Market;
- a decrease in the volume of electricity generated;
- a reduction of €153 million in the margin from Infrastructure and Networks operations (-4.2%), largely due to:
- a decrease of €66 million in the margin on electricity transport, primarily reflecting the aforementioned reduction in distribution rates and in equalization mechanisms, only partly offset by the positive effect of higher transmission rates and the change in the regulatory lag. In addition there was the positive effect of priorperiod items (€20 million);
- an increase of €60 million in allocations to the provisions for risks and charges, reflecting the reversal in 2016 of provisions following the Antitrust Authority’s decision to dismiss the proceedings (no. A486) it had begun in 2015 (€47 million) and in part to the provision for a lump-sum payment of the energy discount benefit in 2015 (€44 million). In addition there was an increase in provisions allocated during the period following ARERA Decision 40/2017 and the increase in the provision for exceptional weather events;
- higher operating costs;
- an increase of €23 million in the margin from Renewables generation as a result of the same factors affecting revenue, only partly offset by the reversal of the provision following the execution of the memorandum of understanding with the Region of Sardinia for the disposal of the hydroelectric plants on the Tirso River (€54 million);
- an increase of €75 million in the margin from End-user markets (+3.9%), mainly attributable to:
- a €64 million rise in the margin on the free market for electricity and gas (of which €83 million for the gas component), owing to the increase in quantities sold for both commodities (electricity and gas);
- the increase in €23 million in the margin on the regulated market for electricity, mainly as a result of an increase in revenue from marketing, only partly offset by lower volumes sold.
Operating income
| Millions of euro | ||||
|---|---|---|---|---|
| 2017 | 2016 | Change | ||
| Generation and Trading | - | (460) | 460 | - |
| Infrastructure and Networks | 2,319 | 2,596 | (277) | -10.7% |
| Renewables | 745 | 751 | (6) | -0.8% |
| End-user markets | 1,361 | 1,333 | 28 | 2.1% |
| Services | 45 | 50 | (5) | -10.0% |
| Total | 4,470 | 4,270 | 200 | 4.7% |
Operating income amounted to €4,470 million, up €200 million (including an increase of €45 million in depreciation, amortization and impairment losses) compared with €4,270 million in operating income recognized in 2016. More specifically, in addition to the increase in the gross operating margin, it reflected:
- the increase in net writedowns of trade receivables, owing to a deterioration in the recoverability of receivables for electricity sales to traders and regulated-market customers;
- higher depreciation, mainly for network infrastructure;
- the recognition in 2016 of impairment on the goodwill and assets of Nuove Energie due to the change in a number of measurement parameters in the midstream gas business.
Capital expenditure
| Millions of euro | ||||
|---|---|---|---|---|
| 2017 | 2016 | Change | ||
| Generation and Trading | 115 | 119 (1) | (4) | -3.4% |
| Infrastructure and Networks | 1,275 | 1,278 | (3) | -0.2% |
| Renewables | 227 | 304 | (77) | -25.3% |
| End-user markets | 139 | 133 | 6 | 4.5% |
| Services | 56 | 60 | (4) | -6.7% |
| Total | 1,812 | 1,894 | (82) | -4.3% |
(1) Does not include €7 million regarding units classified as “held for sale“.
Capital expenditure in 2017 amounted to €1,812 million, down €82 million compared with the previous year. More specifically, the change is attributable to:
- a decrease in investment in Infrastructure and Networks operations equal to €3 million, mainly for digital meter replacement work under the Open Meter plan approved by ARERA Resolution 222/2017/R/eel. This increase in activity was more than offset by lower investment in service quality, which had been brought forward in 2016;
- an increase of €6 million in capital expenditure in End-user markets;
- a €4 million decrease in investment in Generation and Trading;
- a €77 million reduction in investment in Renewables, mainly on hydroelectric, biomass and wind plants.