Disclosures on the fair value of assets and liabilities

In these consolidated financial statements, certain items are measured at fair value, which is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

Following amendments to IFRS 13, which entered force as from the current year, a number of specific disclosure requirements concerning such items have been introduced.

The following tables summarize the individual components of the consolidated balance sheet that have been measured at fair value, with a breakdown of the levels of the fair value hierarchy (as defined in the international accounting standards) to which they belong.

7.1 Assets

The following table reports the value of assets measured at fair value, broken down by level of fair value inputs.

Millions of euro Notes Fair value Level 1 Level 2 Level 3 
  at Dec. 31, 2013   
Investment property (1)  216  - - 216 
Equity investments in other entities  20  183  174 
Service concession arrangements  20  618  - 618  -
Securities held to maturity  27  128  128  - -
Financial investments in funds or portfolio management products measured at fair value through profit or loss  27  24  24  - -
Cash flow hedge derivatives (current and non-current):  6         
- interest rates  40  - 40  -
- exchange rates  439  - 439  -
- commodities  22  21  -
Fair value hedge derivatives (current and non-current):  6         
- interest rates  49  - 49  -
Trading derivatives (current and non-current):  6         
- interest rates  - -
- exchange rates  46  - 46  -
- commodities  2,131  617  1,514  -
Inventories measured at fair value  22  498  420  - 78 
Assets held for sale  28  198  - 3 195 
Securities available for sale  27  17  14  -

(1) Asset not measured at fair value.

Investment property

The value of investment property, presented in the table as measured using Level 3 inputs, was calculated with the assistance of appraisals provided by independent experts who used different valuation techniques depending on the specific features of the individual properties. The fair value rose by €9 million compared with the previous year.

Equity investments in other entities

The fair value of investment in listed companies was determined on the basis of the market price on the closing date of the year. That of unlisted companies was determined on the basis of a valuation, considered reliable, of significant balance-sheet aggregates. There was no change in the Level 3 fair value compared with 2012.

Service concession arrangements

Service concession arrangements regard electricity distribution activities in the Brazilian market by Ampla and Coelce, which are measured in accordance with IFRIC 12. The fair value was estimated as the net replacement cost based on the most recent available data on rates and the general price index for the Brazilian market.

Securities held to maturity

Securities held to maturity are composed of bonds. The following table reports changes in securities measured using Level 3 inputs.

Millions of euro
Balance at January 1, 2013
Gain/(Loss) through profit or loss (4) 
Subscriptions -
Balance at December 31, 2013 -

Securities classified under Level 3 comprise promissory notes issued in 2012.

Financial derivatives

The fair value was determined on the basis of official prices for instruments traded on regulated markets. For instruments not traded on regulated markets the fair value was determined by discounting expected cash flows on the basis of the market yield curve at the reference date and converting the amounts in currencies other than the euro at period-end exchange rates. The balance of those measured using Level 1 inputs regards positions in futures on CO2, on Brent listed on the Intercontinental Exchange (ICE) and on gas listed on the main natural gas spot markets (NBP, TTF, NCG, PEG, etc.).

Inventories measured at fair value

The value of inventories measured using Level 3 inputs was calculated with the assistance of appraisals provided by independent experts who used different valuation techniques depending on the specific features of the individual cases.

Assets held for sale/Liabilities held for sale

Assets and liabilities held for sale mainly regard Marcinelle Energie, and the associated fair value was calculated as the estimated realizable value.

Securities available for sale

There was no change in the Level 3 fair value compared with 2012.

7.2 Liabilities

The following table reports the value of liabilities measured a fair value, broken down by level of fair value inputs.

Millions of euro Notes Fair value Level 1 Level 2 Level 3 
  at Dec. 31, 2013   
Cash flow hedge derivatives (current and non-current):  6         
- interest rates  426  - 426  -
- exchange rates  2,081  - 2,081  -
- commodities  163  102  61  -
Fair value hedge derivatives (current and non-current):  6         
- exchange rates  - -
Trading derivatives (current and non-current):         
- interest rates  73  - 73  -
- exchange rates  34  - 34  -
- commodities  2,013  1,070  942 
Liabilities for acquisition of equity investments  36  37  -   37 
Liabilities for put options granted to non-controlling shareholders  36  801  - - 801
Bonds: (1)  27         
- fixed rate    39,517  31,662  7,856 -
- floating rate  8,131  4,365  3,766 -
Bank loans: (1)  27         
- fixed rate    976  - 976 -
- floating rate  9,026  - 9,026 -
Other loans: (1)  27         
- fixed rate    1,153  - 1,153 -
- floating rate  605  - 605 -
Short-term payables to banks (1)  27  150  - 150 -
Commercial paper (1)  27  2,202  - 2,202 -
Cash collateral and other financing on derivatives  27  119  - 119 -
Other short-term financial debt (1)  27  58  - 58 -
Liabilities held for sale  28  - - 8

(1) Liabilities not measured at fair value.

Trading derivatives

The balance of Level 3 items regards the embedded derivative (identified as such in note 6 of these consolidated financial statements) on the price of gas in the energy purchase contract agreed by Slovenské elektrárne in Slovakia.

The measurement of the contract was carried out in two steps.

The first step involved determining the market value of the energy acquired, while in the second step a Monte Carlo simulation was used to determine the value of the contract. The fair value of the contract is equal to the difference between the average of the value obtained in the simulation and the market value of the energy acquired.

The following table reports changes in the item in 2013.

Millions of euroEmbedded derivatives of Slovenské elektrárne
Opening balance at January 1, 2013 48 
(Gain)/Loss through profit or loss (47) 
Closing balance at December 31, 2013

The profit taken to the income statement is associated with Slovenské elektrárne’s termination of the embedded derivative on the price of gas (€48 million) and the opening of a new embedded derivative position on the price of aluminum, entered into by the same company in December 2013.

Medium and long-term loans

In the case of transactions directly observable and quoted on the market, fair value is determined using official prices (market approach). In cases where such variables are not present, the valuation techniques are adopted as appropriate for each category of financial instrument (income and cost approaches).

Liabilities for acquisition of equity investments

The liability regards the debt for the purchase of a number of companies in North America, whose fair value was determined on the basis of the contractual conditions of the agreements between the parties.

Liabilities for put options granted to non-controlling shareholders

Of the overall liability, €778 million is accounted for by the liability in respect of the options on Enel Distributie Muntenia and Enel Energie Muntenia and was determined in relation to the vesting conditions specified in the associated contracts. The remainder of €23 million regards the liability in respect of the put options on Renovables de Guatemala and Maicor Wind, whose fair value was determined using the binominal option pricing model (BOPM) and the discounted cash flow model (DCF). There were no changes in the Level 3 fair values compared with the previous year.