Taxonomy

European Union (EU) taxonomy provides a standardised, science-based classification system for identifying environmentally sustainable economic activities. It acts as an important facilitator to support sustainable investment and accelerates the decarbonisation of the European economy, while giving investors security and transparency and supporting companies in planning a roadmap toward net zero emissions.

At Endesa we are fully committed to reporting on the application of the European Union Taxonomy Regulation (article 8 of the regulation and subsequent delegated acts specifying to a greater extent the content, methodology and presentation of information to be disclosed by both non-financial and financial entities).

While the Taxonomy Regulation requires that companies declare compliance with the taxonomy from January 2022, we have already became pioneers in this area and beginning to report on its implementation on the 2021 Capital Market Day.

We also support the different taxonomy thresholds defined on the basis of climate and environmental science, as the overall life cycle intensity limit of 100 g of CO2eq/ kWh to measure the substantial contribution to climate change mitigation established for most power generation technologies, being derived from a robust and scientific analysis process.

However, there are activities which, while not necessarily qualifying for the EU taxonomy, are essential to promoting the well-being of Europeans, especially in the short and medium term, while contributing to the sustainable development of Europe in the long term.

Implementation process

We have deployed a five-step process to analyse the applicability of the EU taxonomy throughout the value chain, within the global Enel process. This process involved relevant functions at the corporate level and all lines of business. These five steps are:

Eligibility of Endesa's activities

Through the above process, we have classified all our economic activities along the value chain according to the following three categories: eligible-aligned, eligible-non-aligned, ineligible.

General results

In 2022, the degree of alignment of our economic activities with EU taxonomy, as a result of our contribution to the objective for climate change mitigation without harming other environmental objectives and respecting minimum social guarantees, was as follows:

Revenue

• 10.9% of revenue was generated by eligible business activities aligned with EU taxonomy, compared to 17.5% in 2021.
• There was a high increase in absolute terms in turnover in 2022 compared to 2021. This increase was mainly based on an increase in eligible-non-aligned activities such as power generation from gaseous fuels and ineligible activities such as trading and retailing of electricity and gas, mainly due to the increase in prices due to the market situation (energy price of €168/MWh in 2022 vs €113/MWh in 2021) and higher production with CCGT technology. Revenue from ineligible activities (generation from fuel-oil and coal) also increased in 2022 while the turnover for aligned eligible activities decreased in 2022 due to lower hydroelectric production and lower revenue from distribution activities. For these reasons, turnover decreased by 6% in 2022. 

Fixed operating expenses (OPEX)

• 41.2% of operating expenses were generated by eligible business activities aligned with EU taxonomy, compared to 38.4% in 2021.
• With regard to OPEX, no substantial changes were identified to report between the 2022 and 2021 figures.

Gross Operating Income (EBITDA)

• 47.9% of gross operating income was generated by eligible business activities aligned with EU taxonomy, compared to 66.7% in 2021.
• The percentage of EBITDA for aligned eligible activities decreased in 2022 compared to 2021. In absolute terms, EBITDA increased compared to the previous year, but this was due to an increase in eligible-non-aligned activities mainly due to higher production from gaseous fuels and non-eligible activities such as trading and retailing of gas and electricity.

Investments (CAPEX)

• 76.4% of investment was generated by eligible business activities aligned with EU taxonomy, compared to 70.4% in 2021.
• The increase in the percentage of CAPEX in 2022 compared to the 2021 figure was mainly due to an increase in investments in renewable generation, mainly in photovoltaic technology.