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  • 2001 Annual Report

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    CONTENTS

    Highlights 6Main events 7The Enel Group 10Letter to Shareholders 11Boards of Directors, Board of Statutory Auditors and Independent Auditors 15Enel and the financial markets 16

    REPORT ON OPERATIONS

    Overview and summary of results 20Regulations and tariffs for the electricity sector 26Regulations and tariffs for the gas sector 30

    Operating review Financial data by segment 34

    Generation 36Fuel Trading 42Transmission 44Distribution and sale of electricity 46Distribution and sale of gas 53

    Telecommunications 55Information technology and e-business 60

    Real estate and services 62Engineering and Contracting 64Public and art lighting 66Water 67Other activities 69

    Parent Company 72

    Research and Development 74

    Human resources 75

    Corporate Governance 81

    Environmental policy 89

    Subsequent events and management expectations of operations in 2002 91

    Other information 94

    Financial review 95

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    CONSOLIDATED FINANCIAL STATEMENTS

    Consolidated Balance Sheet 110Consolidated Income Statement 112

    Notes to the Financial Statements 114Balance Sheet - Assets 120Balance Sheet - Liabilities and Shareholders Equity 133Off Balance Sheet Items 146Income Statement 148

    Attachments Companies included in the consolidation areausing the line-by-line method at December 31, 2001 156Companies owned by CHI Energy Inc. included in the consolidation area using the line-by-line method at December 31, 2001 159Companies owned by EGI Ltd. included in the consolidation area using the line-by-line method at December 31, 2001 162Affiliated companies valued under the equity methodat December 31, 2001 163Unconsolidated subsidiaries at December 31, 2001 164Affiliated companies at December 31, 2001 165Relevant equity investments owned by Enel at December 31, 2001 pursuant to art.120 of Legislative Decree no. 58, dated February 24, 1998 166

    ReportsReport of the Board of Statutory Auditors 178Report of the Independent Auditors 179

    U.S. GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (U.S. GAAP) 182

    GLOSSARY OF SELECTED TERMS 194

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    HIGHLIGHTS

    2001 2000 restated (1)

    Income data (in millions of euro)

    Revenues 28,781 26,760

    Gross operating margin 8,536 8,215

    Operating income 3,478 3,300

    Net income 4,226 1,573

    Financial data (in millions of euro)

    Gross capital employed 47,191 48,971

    Net capital employed 43,039 42,925

    Total financial debt 21,930 24,426

    Shareholders Equity including minority interests 21,109 18,499

    Cash flow from operations 6,164 4,900

    Main ratios

    ROI (%) (2) 7.2% 6.7%

    ROE (%) (3) 21.5% 8.8%Debt to equity ratio 1.0 1.3

    Operating income/net financial expense 3.1 3.4

    Share data (euro)

    Net income per share 0.697 0.259 (4)

    Gross operating margin per share 1.408 1.355 (4)

    Operating income per share 0.574 0.544 (4)

    Net Equity per share 3.458 3.020 (4)

    Dividend per share 0.360 0.260 (4)

    Operating data

    Electricity sold on the regulated and free market (TWh) 206.0 222.0

    Energy transported for the free market (TWh) 77.2 45.2

    Net electricity generated (TWh) 169.1 182.5

    Employees at year-end 72,661 81,168 (5)

    Market indicators

    Average Brent oil price ($/barrel) 24.5 28.4

    High-sulfur content fuel oil average price ($/t) 116.0 140.5

    Average $/euro exchange rate 0.896 0.924

    Six-month Euribor rate 4.16% 4.55%

    (1) Income data for 2000 relate to the restated Consolidated Income Statement for the year, reflecting the line-by-

    line consolidation of WIND from January 1, 2000 and that of Infostrada (including the effect of the acquisition)

    from April 1, 2000.

    Restated financial data at December 31, 2000 reflect the line-by-line consolidation of WIND and Infostrada, in

    addition to the effect of its acquisition.(2) Operating income on average gross capital employed.(3) Consolidated net income on average Consolidated Shareholders Equity. ROE for 2001, net of extraordinary items,

    is equal to 8%.(4) Adjusted to take into account the number of shares resulting from the reverse stock split (6,063,075,189).(5) Includes 8,521 WIND and Infostrada employees at December 31, 2000.

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    MAIN EVENTS

    Main events occurred in 2001 are summarized below.

    January a reduction in tariff components covering transportation, distribution and

    sale costs (down 1.9% due to the price-cap) and fixed production costs (down20%, equivalent to about c 0.52 per kWh) becomes effective;

    new tariff plans for Enel Distribuzione clients becomes applicable, togetherwith the possibility of increasing household power capacity from 3 to 4.5 kW;

    starting from January 1, 2001, tariffs on sales of electricity to regulatedmarket customers include also the share aimed at covering the cost of fuels,previously paid to producers by the Electricity Equalization Fund;

    purchase contracts for electricity generated from plants falling under theprovisions of CIP regulation no. 6/92 were transferred to the IndependentSystem Operator (ISO) that in turn makes such energy available on the freemarket through competitive mechanisms;

    Enel, together with 10 other leading utility companies in Europe, create acommon independent platform named Eutilia for the procurement ofindustrial supplies on the Internet;

    Enelpower, in partnership with Hitachi Zosen, is awarded the construction ofa combined-cycle generation plant in Oman having a total capacity of 437MW. The contract is worth about euro 190 million;

    acquisition of the Brianza Gas and Erogasud Groups.

    February Enelpower cancels plans to acquire a direct share in Brazilian project

    development company Inepar Energia; acquisition of the Sogegas Group.

    March the Enel Group acquires from the Vodafone Group, through Enel Investment

    Holding BV, 100% of Infostrada for euro 7,250 million. The Authority forCompetition and the Market approves the acquisition subject to Enels sale ofa further 5,500 MW of generating capacity through the creation of a fourthgeneration company (GenCo). Enel appeals the decision against the LazioAdministrative Regional Court;

    Enel concludes an agreement with Acea, Romes water and electricitymunicipal utility, for the sale of Formello and Romes electricity distributionnetworks for a total amount of about euro 570 million. The sale becomeseffective on July 1, 2001;

    Enelpower and two Algerian companies, Sonatrach and Sonelgaz, sign aletter of intents for cooperation in the electricity and gas sectors;

    acquisition of gas distribution companies Sicim-Edilgeo and MetaniferaVerbanese.

    April A Decree concerning stranded costs providing for, among other things, a

    progressive reduction (decalage mechanism) in the hydroelectric surchargeis issued on April 17, 2001 by the Minister of Industry, in agreement with theItalian Treasury.

    May the Authority for Electricity and Gas issues the resolution no. 114 concerning

    stranded costs, with which it sets parameters for the determination of non-retrievable costs. Enel appeals the resolution against the Lombardy RegionalAdministrative Court claiming it would cause an unjustified reduction in theamounts of reimbursement to which generation companies would beentitled;

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    Enel, through Elettroambiente, acquires the Powerco Group, active in thewaste-to-energy, biomass and biogas fields. The operation is concluded inSeptember 2001;

    Immobiliare Rio Nuovo receives from SEI the conferral of a business unitconsisting of a first group of buildings worth euro 344 million. A 51% sharein the Immobiliare Rio Nuovo is subsequently sold to the Deutsche BankGroup;

    Enelpower wins two large orders: the construction of an electric power plantin Qatar (740 MW, worth euro 450 million) and the conversion of a plant tocombined-cycle technology on behalf of ASM Brescia (370 MW, worth euro127 million).

    June sale to the Valle dAosta Region of hydroelectric plants located in the Region

    and of a 49% share in Deval, the local electricity distribution company; acquisition of EGI Group (Energia Global International), operating in Central

    and South America in the electricity generation from renewable sourcessector;

    acquisition of Masefield Coal Ag (subsequently renamed Pragma Energy SA),one of the most active coal trading companies at the international level.

    July on July 24, the national labor contract for the electricity sector is

    underwritten. The contract has a term of four years with regards to thenormative part and two years with regards to the economical part;

    the sale of Elettrogen to Spanish Group Endesa for euro 2,687 million isconcluded on July 23. The shares are transferred on September 20, 2001;

    selection of Eurogen as the second GenCo to be sold and start of the saleprocedure;

    Enel.Hydro and Vivendi Water, together with four other companies, areawarded the management of the Integrated Water System of the LatinaProvince;

    transfer of the 100% share in Infostrada from Enel Investment Holding BV (anEnel SpA wholly-owned subsidiary) to WIND, through a capital increase of thelatter fully reserved to the transferring company, thus becoming ashareholder WI