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Sustainability-Linked Financing Framework SUSTAINABILITY-LINKED FINANCING FRAMEWORK October 2020 Contents: 1. Introduction / 1-4 2. Rational for establishing a Sustainability-Linked Financing (SLF) Framework / 6-7 3. Alignment with the Sustainability-Linked Bond Principles, 2020 and Sustainability-Linked Loan Principles, 2020 / 9-19 3.1 Key Performance Indicators (KPIs) 3.2 Sustainability Performance Targets (SPTs) 3.3 Financial characteristics 3.4 Reporting 3.5 Verification Appendix / 21-23 1. Introduction 1. Introduction 1 Introduction Enel and its subsidiaries (the “Group” or the “Enel Group”) Enel is the first utility in the world that has replaced 1. are a multinational energy group deeply committed to the conventional electromechanical meters with so-called renewable energies sector and to researching and developing “smart meters”, being modern electronic meters that enable new environmentally friendly technologies. consumption levels to be read real time and contracts to be In 2019, 57% of the electricity the Enel Group produced was managed remotely. free of carbon dioxide emissions, making it one of the world’s At the end of 2019, 44.7 million Enel customers had an major producers of clean energy. Further, Enel has committed electronic meter and 13.1 million end users had second to fully decarbonize its energy mix by 2050. In September generation meters (CE2G) developed and installed by Enel. 2019, Enel further enhanced its commitment by setting a new target for 2030, with which it undertook to reduce direct CO2 Enel’s 2020-2022 Plan was built working along the two global emissions per kWh (Scope 1) by 70% compared with 2017. trends: decarbonisation and electrification. eq This target is fully aligned with the Paris Agreement and The digital transformation of Enel large network business and certified by the Science Based Target Initiative as compliant with the platformisation of all Enel customer-related activities are the Well Below 2 Degrees pathway. key enablers of this plan, boosting efficiencies and introducing additional services. The Enel Group renewables business is operated through Enel Green Power S.p.A. (“EGP”) and its subsidiaries and Endesa and Enel Chile. The Enel Group has developed and maintain the largest and most diversified portfolio of quality investment opportunities in the renewable energy business. 1. Introduction 2 Enel has centred its strategy around the achievement of Sustainable Development Goals (“SDGs”) across all of its activities, with SDG 13 on Climate Action as the cornerstone of the strategy. The Group engages in Decarbonisation of both production and consumption, while pursuing Electrification of end users to tackle climate change as well as providing access to affordable and clean energy, in line with SDG 7. Key enablers of decarbonisation and electrification are Infrastructures and Networks, in line with SDG 9 on Industry, Innovation and Infrastructure as well as Ecosystems and Platforms, in line with SDG 11 on Sustainable Cities and Communities. Total organic capex for 2020-2022 amounts to €28.7bn, an 11% increase vs. the previous plan (€25.9bn). More than 90% of the Group’s total capex plan for 2020-2022 addresses SDG 7, 9 and 11, all contributing to the achievement of SDG 13. 1. Introduction 3 More specifically: Decarbonisation Enel is planning to invest €14.4bn in decarbonisation, ~€14bn will be devoted to SDG 7, supported by the e.g. more than 50% of its total capex, in order to increase the decarbonisation process driven by the new Global Power Group’s renewable capacity, while progressively replacing its Generation business line and accelerated by the Retail unit; conventional generation fleet and supporting Enel’s target to fully decarbonise its technology mix by 2050. ~€12.0bn will address SDG 9, and will be deployed to reinforce Enel’s investments in decarbonisation are expected to the resiliency as well as improve digitalisation, efficiency and contribute €1.4bn to Group Ordinary EBITDA growth over quality of networks; the plan period. In particular: €12.5bn will be invested in renewables, of which €11.5bn will address growth of capacity, ~€1.0bn will be invested in SDG 11, mainly on new which is set to increase by 14.1 GW by 2022 (70% already electrification-oriented services, such as demand response, secured at the end of H1 2020), reaching around 60 GW of total storage and electric mobility managed capacity. Through its overall investment plan, Enel’s Moreover, it is confirmed Enel’s commitment towards coal Ordinary EBITDA is expected to reach phase-out by 2030. By the end of the plan period, Enel is €20.1bn in 2022, up 12% vs. €17.9bn in 2019 expected to reduce its global production from coal by around 74% compared to 2018. Likewise, the share of renewables on total capacity is due to reach 60% in three years, driving upwards the generation fleet’s profitability, as well as increasing CO2–free production to 68% in 2022. 1. Introduction 4 Enel has drawn up a roadmap with medium-term targets Ecosystems and Platforms certified by the Science Based Targets initiative (SBTi), Enel X will invest €1.1bn to address the increased demand for foreseeing a 70% reduction of direct GHG emissions per kWh value-added services brought about by decarbonisation and by 2030 vs. 2017 levels, reaching around 125 g/kWh. electrification and leveraging on the enhanced role of customers who are increasingly at the core of the power system, with an Electrification expected Ordinary EBITDA contribution in the 2020-22 period of ~€1.2bn of investments will address the electrification of around €0.4 billion. consumption. These investments are expected to contribute around €400m to Group Ordinary EBITDA growth over the plan period. Enabling Infrastructures ~€11.8bn will be spent on networks. Around half of the 2020- 2022 capex is expected to address further improvements in efficiency and service quality, with around 40% focused on grid digitalisation through connections and smart meters. In 2020-2022, Enel will continue to invest in grid digitalisation, increasing second-generation smart meters installed from 13.1 million in 2019 to about 29 million in 2022. Enel’s investments in networks are due to contribute €700m to Group Ordinary EBITDA growth over the plan period. 2. Rational for establishing a Sustainability-Linked Financing (SLF) Framework 2. Rational for establishing a Sustainability-Linked Financing (SLF) Frameework 6 Rational for establishing a Sustainability-Linked Financing (SLF) Framework 2. Over the years, Enel has been a leading player in sustainable general corporate purposes debt, incentivizing the achievement finance, and has led key innovation over recent years. of pre-determined Sustainability Performance Targets (SPTs) within a pre-determined timeline. Enel was an early issuer of green bonds, and was amongst the largest corporate issuers of green bonds at the time. Enel’s SDG-Linked Bonds issued in September 2019 marked the Enel placed very successful green bonds and met continuous beginning of the Sustainability-Linked Bond Market. growing investor demand for its green bonds. Enel then expanded the range of its Sustainability-Linked Financing instruments in 2020 with SDG-Linked Loans Nevertheless, as a company whose strategy and business and Revolving Credit Facilities, as well as a Sustainable model are clearly sustainable, Enel decided to issue in 2019 Development Goal (“SDG”) 7 (Affordable and Clean Energy) an innovative general corporate purpose financing product Target Guaranteed Euro-Commercial Paper Programme, which creates financial incentives for the company to fulfil showcasing how sustainability can be integrated across the its sustainable business in order to progress the evolution of financing tools of the company. sustainable capital markets. Enel wishes to foster best market practices and present a The approach consisted in linking the sustainability strategy of unified and coherent suite of Sustainability-Linked Financing Enel (or its subsidiaries) as issuer or borrower to the terms of instruments to the market and to the subsidized and 2. Rational for establishing a Sustainability-Linked Financing (SLF) Frameework 7 development financing space. Enel has thus decided to establish a Sustainability-Linked Financing Framework. Though Enel’s instruments under this framework will be mainly focused on contributing to SDG 7 and SDG 13, Enel believes it is important for the development of the market to name this framework “Sustainability-Linked Framework”, hence adopting a name aligned to the principles established in the loan and, more recently, in the bond markets. 3. Alignment with Sustainability-Linked Bond Principles 2020 and Sustainability-Linked Loan Principles 2020 3. Alignment with Sustainability-Linked Bond Principles 2020 and Sustainability-Linked Loan Principles 2020 9 Alignment with Sustainability-Linked Bond Principles 2020 and Sustainability-Linked Loan Principles 2020 3. This Framework has been established in accordance with the Substantially similar core components are outlined under the Sustainability-Linked Principles (SLBP) 2020 as administered by Sustainability Linked Loan Principles 2020, published by the ICMA1. LMA in connection with sustainability linked loans2. The following five components form the basis of Enel’s SLF This Framework covers the following financing instruments: framework: Sustainability-Linked Bonds, Sustainability-Linked Loans and the Sustainable Development Goal (“SDG”) 7 (Affordable and Clean 1 selection of Key Performance Indicators (KPIs) Energy) Target Guaranteed
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