Report and Financial Statements of Enel SpA at December 31, 2007

Report and Financial Statements of Enel SpA at December 31, 2007

Contents

RepoRt on opeRations

8 the enel structure

10 Corporate boards

13 Letter to shareholders and stakeholders

18 summary of the resolutions of the ordinary and extraordinary shareholders’ Meetings

21 enel and the financial markets

27 activity of enel spa

31 significant events in 2007

39 Results of enel spa

49 performance of the main subsidiaries

67 Human resources and organization

81 shares held by directors, members of the Board of auditors, the General Manager and managers with strategic responsibilities

83 Research and development

85 outlook and other information

CoRpoRate GoveRnanCe

162 Report on corporate governance

DeCLaRation of tHe CHief exeCutive offiCeR anD tHe ManaGeR ResponsiBLe foR tHe pRepaRation of CoRpoRate finanCiaL RepoRts

200 Declaration of the Chief executive officer and the manager responsible for the preparation of the financial reports of enel spa

finanCiaL stateMents

90 Financial statements 91 income statement 92 Balance sheet 94 statement of Cash flows 95 statement of Recognized income and expenses for the period 96 Notes to the financial statements 111 information on the income statement 118 information on the Balance sheet 145 Related parties 152 stock option plans 154 Contractual commitments and guarantees 156 Contingent liabilities and assets 158 subsequent events 159 fees of the independent auditors pursuant to article 149-duodecies of the “Consob issuers Regulation”

RepoRts

204 Report of the Board of auditors to the shareholders of enel spa

210 Report of the independent auditors

6

7Report on operations

eneL RepoRt anD finanCiaL stateMents of eneL spa at DeCeMBeR 31, 2007 RepoRt on opeRations

8

The Enel structure

9 Enel SpA

Sales

enel servizio elettrico

enel energia

enel.si

vallenergie

Infrastructure and Networks

enel Distribuzione

enel Rete Gas

enel sole

Deval

Generation and

Energy Management

enel produzione

enel trade

enel trade Hungary

enel trade Romania

nuove energie

Engineering and Innovation

enel produzione

Iberia and Latin America

endesa

enel Latin america

enel panama

enel fortuna

inelec

enel viesgo Generación

enel viesgo energía

enel unión fenosa Renovables

electra de viesgo Distribución

enel viesgo servicios

Services and Other Activities

enel servizi (1)

sfera

enelpower

enel.newHydro

enel.factor

enel.Re

International

slovenské elektrárne

enel Maritza east 3

enel operations Bulgaria

enel north america

enel Distributie Banat (formerly enel electrica Banat)

enel Distributie Dobrogea (formerly enel electrica Dobrogea)

enel energie

Blue Line

enel Romania (formerly enel servicii)

enel servicii Comune

Rusenergosbyt

severenergia (formerly enineftegaz)

enel france

enel erelis

enelco

international Windpower

Wind parks of thrace

international Wind parks of thrace (1) as from January 1, 2007 Dalmazia trieste and Cise

were merged into enel servizi.

eneL RepoRt anD finanCiaL stateMents of eneL spa at DeCeMBeR 31, 2007 RepoRt on opeRations

10 Corporate boards

secretary

Claudio Sartorelli

Directors

Giulio Ballio Augusto Fantozzi Alessandro Luciano Fernando Napolitano Francesco Taranto Gianfranco Tosi Francesco Valsecchi

Chairman

Franco Fontana

auditors

Carlo Conte Gennaro Mariconda

alternate auditors

Giancarlo Giordano Paolo Sbordoni

Chief executive officer and General Manager

Fulvio Conti

Chairman

Piero Gnudi

KPMG SpA

Board of Directors

Board of Auditors

Independent auditors

11

Powers

Board of Directors The Board is vested by the bylaws with the broadest powers for the ordinary and

extraordinary management of the Company, and specifically has the power to carry

out all the actions it deems advisable to implement and attain the corporate purpose.

Chairman of the Board of Directors The Chairman is vested by the bylaws with the powers to represent the Company

legally and to sign on its behalf, presides over Shareholders’ Meetings, convenes

and presides over the Board of Directors, and ascertains that the Board’s resolutions

are carried out. Pursuant to a Board resolution of November 30, 2005, the Chairman

has been vested with a number of additional non-executive powers.

Chief Executive Officer The Chief Executive Officer is also vested by the bylaws with the powers to represent

the Company legally and to sign on its behalf, and in addition is vested by a Board

resolution of November 30, 2005 with all powers for managing the Company, with

the exception of those that are otherwise assigned by law or the bylaws or that the

aforesaid resolution reserves for the Board of Directors.

eneL RepoRt anD finanCiaL stateMents of eneL spa at DeCeMBeR 31, 2007 RepoRt on opeRations

12

13

Dear shareholders and stakeholders,

In 2007 Enel experienced a year of extraordinary growth and expansion on the

international energy scene. Last year not only did we achieve and exceed all the

operational and financial goals we set ourselves, with the acquisition of Endesa

and the completion of the public tender offer for OGK-5 in Russia, Enel also became

the second largest electricity group in Europe with installed capacity at the end

of 2007 of 75.5 GW and 51.6 million customers in 21 countries on 4 continents.

In an environment of increasing integration of markets, the acquisitions carried out

give Enel the size to play a leading role, reduce regulatory and business risk,

and expand growth potential and efficiency. The growth abroad and the constant

search for excellence and efficiency in all our Divisions made a decisive contribution

to improving Group results: in 2007 the gross operating margin rose by 25%

compared with the previous year, while Group net income, equal to €3,977

million, rose by 31%. This performance enables us to maintain our dividend policy.

Enel is successfully continuing its drive for efficiency and growth, further

strengthening its role as a leading integrated operator in the European

electricity and gas market.

Our Company has the human, technical and financial resources it needs to

achieve the excellence and leadership goals we have set ourselves.

From an organizational point of view, the three Domestic Divisions and the

International Division have been joined, as from December, by the “Iberia and

Latin America” Division and the “Engineering and Innovation” Division.

This new organization will make it possible – by using the specific skills in

our various business areas – to accelerate the integration and organic growth of

the newly acquired companies and to make available to the entire Group, in Italy

and abroad, our technical expertise in engineering, research and innovation.

The consolidation and integration of Enel’s international acquisitions, the

improvement in the generation mix in Italy, the integration in the upstream

and mid-stream gas sector, the development of new technologies and nuclear

power generation are the strategic priorities of the Group for the coming years.

In parallel, we will pursue initiatives to optimize our portfolio in order to

strengthen the Group’s financial position, which in the last year has been

affected by our international expansion and the development of operations.

Letter to shareholders and stakeholders

eneL RepoRt anD finanCiaL stateMents of eneL spa at DeCeMBeR 31, 2007 RepoRt on opeRations

14 Sales Division On July 1, 2007 the process of liberalizing the Italian energy market was completed:

now, in addition to businesses, all Italian households are free to choose their

supplier of electricity and gas.

From the very first day, the Sales Division was ready to help customers benefit

from the opening of the market, with advanced solutions such as the “dual energy”

option, with the combined supply of electricity and gas.

In just six months, between July and December 2007, some 600,000 residential

customers have signed up for Enel Energia’s offers.

The more 1,200,000 customers in the small and medium-sized enterprise segment,

an increase of 108% on the previous year, and our strengthened position (up

16% on 2006) with major industrial customers confirm Enel’s leadership among

business customers.

Enel also maintains its position as the number t