Strategy and objectives

In 2010, Enel reached important milestones that have consolidated its role as an international player in the electricity sector. Despite the continuing instability and uncertainty in the global economy, Enel was able to generate large and growing cash flows, even beating the record results posted in 2009 thanks to our market diversification and the crucial contribution of Latin America and our other international operations.

Thanks in part to efficiency enhancement programs and post-acquisition operational synergies, in 2010 Enel became the leading European utilities group in terms of gross operating margin (€17.5 billion) and posted net income of about €4.4 billion. The Group’s balance sheet was further strengthened with the listing of Enel Green Power, the Group company that operates in the renewables business, on the Milan and Spanish stock exchanges. This proved to be the largest initial public offering made in Italy and Europe since 2007. In addition, careful management of operating cash flow and the leveraging of certain non-strategic assets through a selective disposal plan, including the Group’s high voltage transmission network and Endesa’s gas distribution network in Spain, contributed to the full achievement of the net debt reduction target. Net debt stood at less than €45 billion at the end of 2010, a €6 billion decrease from the previous year. Given these results, the debt/gross operating margin ratio at the end of 2010 came to 2.6, among the strongest ratios in the industry.

The Group’s financial position has also been strengthened thanks to the success of the largest pan- European bond issue ever carried out by an Italian company for private retail investors in Italy, France, Belgium, Luxembourg and Germany, with demand almost five times greater than the bonds on offer.

At the end of 2010, the average maturity of the Group’s debt is almost seven years and, taking account of hedges, 93% of this debt is fixed rate: the soundness of the capital structure is the result of the Group’s strict financial discipline, implemented without any negative impact on the Company’s business development opportunities.
Based on the excellent results achieved, Enel’s business plan confirms the effectiveness of the strategic priorities adopted after the stage of international expansion, namely:

• leadership in core markets;
• strengthening and organic growth in renewables in Latin America, Russia and Eastern Europe;
• consolidation, integration and operational excellence;
• leadership in innovation

This priorities can ensure growth in operating income while maintaining a solid financial balance.

This approach, supplemented by a well-crafted corporate social responsibility policy, will allow Enel to exploit the potential of its asset portfolio and continue to create value for all stakeholders.