Enel is at the forefront of the energy transition and business sustainability thanks to a strategy whose priorities are the development of renewable energy, digitalization and the fight against climate change. Enel aims to achieve the complete decarbonization of electricity production by 2050, in line with the “science-based targets” and as a way of contributing to the achievement of United Nations SDG 13.
The strategy is based on a long-term vision that translates into concrete objectives that involve all business activities:
- decarbonization of the energy mix - Enel is committed to developing the renewable potential in all the countries in which it operates, evaluating development opportunities in new countries with the aim of installing 7.8 GW of additional renewable capacity and reducing thermal capacity by 7.3 GW by 2020. This is in addition to the target of reducing CO2 emissions by 25% (2020 vs 2007);
- development of new products and services for consumer energy efficiency - New active demand management systems that increase the efficiency of service to consumers by developing innovative services and cutting-edge energy technologies;
- promotion of electricity in the transport and housing construction sectors - Measures to increase the penetration of electricity (for example, electric mobility and heat pumps) reduce dependence on fossil fuels, while relying on new digital solutions and the potential of an intelligent infrastructure to increase the efficiency of the system.
Enel is also committed to digitizing resources and processes and increasing connectivity, with a total investment of over 5 billion euro over the next three years. For more information, see the chapters: “Strategy and Sustainability Plan”, “Technologies and Innovability” and “Digital-e”.
In line with the Group’s financial strategy, two green bonds were issued in January 2017 and January 2018 for a total value of 2.5 billion euro, as instruments to fund projects conducive to the transition to “low-carbon economy”. Efforts to reduce emissions and their regulation must not have an impact on the workforce and on the various stakeholders in the transition phase (“just transition”).
Enel launches its second green bond on the European market
On January 9 2017, Enel Finance International (EFI) successfully placed on the European market its first green bond. The issue totals 1,250 million euro and provides for repayment in one instalment at maturity on September 16, 2024, as well as the payment of a fixed-rate coupon of 1%, payable annually in arrears in the month of September. The issue price has been set at 99.001% and the effective yield to maturity is equal to 1.137%. EFI committed to report information on projects financed through the proceeds of the issue. This commitment is complied with in the green bond report, included as an appendix to this Sustainability Report.
On January 9, 2018 EFI carried out a new issue, successfully placing its second green bond on the European market, once again for institutional investors and backed by a guarantee issued by Enel SpA. The issue amounts to a total of 1,250 million euro, to be repaid in a single instalment at maturity on September 16, 2026 and the payment of a fixed-rate coupon equal to 1.125%, payable annually in arrears in the month of September as from 2018. The issue price has been set at 99.184% and the effective yield at maturity is equal to 1.225%. The green bond was listed on the regulated market of the Irish Stock Exchange and on the regulated market of the Luxembourg Stock Exchange and was admitted to trading on the multilateral trading system “ExtraMOT PRO” organized and managed by Borsa Italiana.
The transaction has received subscriptions amounting to more than 3 billion euro, with the significant participation of Socially Responsible Investors (“SRI”), enabling the Enel Group to continue to diversify its investor base. The net proceeds of the issue – carried out under Enel and EFI “Euro Medium-Term Note Program” – will be used to finance and/or refinance, in whole or in part, the eligible green projects of the Enel Group identified and/or to be identified in accordance with the “Green Bond Principles” published by the International Capital Market Association (ICMA).
The transaction is consistent with:
- the financial strategy of the Enel Group set out in the 2018-2020 Strategic Plan, which among other things envisages the refinancing of 10 billion euro through 2020, including the issue of green bonds as instruments dedicated to the financing of projects to spur the transition to the low-carbon economy;
- the commitment made by Enel on December 11, 2017 on the Paris 2017 Climate Finance Day, together with 8 other industrial companies issuing green bonds, to continue to develop the green bond market, today one of the most dynamic segments of sustainable finance.
In this regard, it should be noted that the Enel Group has prepared and published a new Green Bond Framework, which was updated following the presentation of the 2018-2020 Strategic Plan last November, in order to facilitate transparency and the commitments made by the Group with regard to green bonds. In addition, in June 2017 the Enel Group set up a Green Bond Committee to oversee the implementation of the Green Bond Framework and the process of allocating the proceeds of green bond issues.
The new Green Bond Framework and the second party opinion prepared by the independent advisor Vigeo Eiris for this issue are available to the public on the Enel website (http://www.enel.com/investors/fixed-income/main-programs/greenbond).
The transaction was led by a syndicate of banks comprising Banca IMI, BNP Paribas, Crédit Agricole CIB, HSBC, ING Bank, J.P. Morgan, Mediobanca, Natixis, SMBC Nikko, Société Générale, UBI Banca and UniCredit Bank as joint-bookrunners.
Enel believes that it is essential to engage in dialogue with the local community and to include in the circular economy model also resources that have since been rendered unproductive by technological deveopment. The conversion plans for 23 power plants in Italy, through the Futur- e project, is seen as an international benchmark for the ability to generate new social and work opportunities (https://corporate.enel.it/en/futur-e).
From linear economy to circular economy: the Enel model
In a world with finite resources, a linear model that provides for the extraction of raw materials, the production and consumption of goods and the generation and disposal of waste is proving to be unsustainable. In this context, the application of the principles of the circular economy may once again be a driver of change to be addressed in the Open Power vision.
In Enel’s vision, circular economy is based on 5 principles that define how and where it is applied:
Enel has launched several projects that enhance a circular approach, including:
- Futur-e: an all-round circular economy project, starting from the closure of 23 thermal plants in order to rethink the use of each plant, transforming it into a new opportunity for the area in which it is located. This important redevelopment is managed through calls for tenders that reward the circularity of the proposals as a way to help relaunch the competitiveness and sustainability of the entire country;
- Circular Procurement: an effective approach to circularity cannot be limited only to the sector covered by the Company, but must also include suppliers in its model. For this reason, Enel’s Global Procurement has started a process of tracking what has been purchased in and out of its business to obtain thorough knowledge of the flows in terms of components, environmental impact and recyclability of products (see the chapter “Sustainable supply chain”);
- Electric mobility: using electric vehicles reduces energy consumption and eliminates local emissions. When the energy used comes from renewable sources, the impact on the environment is completely eliminated. Enel is committed to developing a true ecosystem that fosters the spread of e-mobility.
To improve the circularity of its business, Enel has developed a measurement model, CirculAbility Model©, based on the five pillars of circularity and aimed at providing a summary value of the circularity of products, services and assets. This model is still in testing and will make it possible to measure and compare the circularity of the various businesses in the Company, in turn increasing their effectiveness in terms of circularity and sustainability.
Sharing experiences and good practices makes it possible to enhance everyone’s commitment to spreading a circular approach.
The Alliance for Circular Economy was created from this vision on November 29, 2017, as promoted by Enel and Intesa Sanpaolo. The manifesto was also signed by Novamont, Costa Crociere, Salvatore Ferragamo Group, Bulgari, Fater and Eataly, thus reaffirming the vision that adopting circular economy is an opportunity for development and growth in all sectors.
Enel is also a member of the “Support to Circular Economy Financing” group of experts, which brings together members of the European Investment Bank, public and private sector, including NGOs, and whose task is to support the European Commission in the development and financing of circular economy in the different member states. In 2017, the group of experts started working on the preparation of guidelines to facilitate the funding of circular economy in the EU.
Further details on Enel’s commitment to circular economy are available at the following link: https://corporate.enel.it/en/ circular-economy-sustainable-future. The section aims to disseminate the circular principles and to describe some circular application in Enel, as well as to display a few success stories from small and medium-sized Italian companies and large companies. In this study and evaluation process, a scientific committee has been created, also involving environmental groups (Legambiente), Enea and Accenture Strategy. Please refer to pages 194-195 for targets related to circular economy.
Development of renewable capacity and reduction of thermal capacity
Net installed capacity
At the end of December 2017, the Group’s net installed capacity was around 85 GW, up compared to 2016 by around 2 GW, mainly due to the entry into operation of new renewable hydroelectric, wind and solar plants in Brazil, solar plants in Peru and wind farms in the United States. The additional capacity from renewable sources (renewables and hydroelectric) amounts to about 2.8 GW in 2017. Today, the Group has, all over the world, plants powered by renewable sources for around 38 GW of installed capacity, which is about 45% of the Group’s total power generation capacity.
Enel has also worked as operator in joint ventures with both the BSO model (Build, Sell and Operate) and through acquisitions of company shares. The managed capacity includes renewable plants in Italy, the United States and Canada. Considering a managed capacity of 2.6 GW, the total capacity is thus equal to around 88 GW (32% hydroelectric, 15% other renewables, 14% oil & gas, 17% CCGT, 18% coal and 4% nuclear).
As for electricity production, 43% of the energy produced by the Group in 2017 is zero emissions. Production in 2017, equal to about 250 TWh, decreased by about 12 TWh compared to 2016, mainly due to the removal from the Group’s consolidation perimeter of plants in Slovakia (including 2 nuclear, 2 thermal and various hydroelectric plants), one plant in Belgium (CCGT) and some plants in the United States (hydroelectric, wind and geothermal).
With regard to non-renewable sources, thermal production recorded a slight decrease (-0.7 TWh compared to 2016) due to the removal from consolidation of the thermal plants in Belgium and Slovakia; within this production, there was a change in the production mix compared to 2016, with an increase in the use of combined cycles (+4.1 TWh compared to 2016), which partly offset the lower coal and oil & gas production.
In the renewables sector, there was a decrease in hydroelectric production (-4.7 TWh compared to 2016) mainly due to lower water availability in Europe (Italy and Spain), as well as the aforementioned removal from the consolidation perimeter of the hydroelectric plants in Slovakia and in the United States. Production from other renewable sources, on the other hand, recorded an overall increase of 1.5% over the previous year due to higher wind and solar power production in Brazil and Chile and solar power in South Africa.
Natural events have influenced the production mix in different countries in different ways. For example, in Spain, the decrease in hydroelectric production favored greater thermal production, both from coal and combined cycle; in Colombia, on the other hand, heavy rains between January and June favored hydroelectric production.
The production facilities have produced a total of about 82 TWh from renewable sources in 2017, which represents over 32% of the energy produced by Enel during the year, thus avoiding the emission of about 52 million tons of CO2. into the atmosphere. The nuclear facility has made it possible to avoid releasing an additional 19 million tons of CO2.
Considering also the managed production of around 7 TWh, the total value is around 257 TWh (22% hydroelectric, 13% other renewables, 11% oil & gas, 17% CCGT, 27% coal, 10% nuclear).