ENI SPA | CIK:0001002242 |

ifrs-full:DisclosureOfBorrowingsExplanatory

29 Long-term debt and current portion of long-term debt

The following table reflects long-term debt and current portion of long-term debt as of December 31, 2017 by maturity:

Long-term debt and current portion of long-term debt of  €22,465 million (€23,843 million at December 31, 2016) decreased by €1,378 million. The decrease comprised new issuance of  €1,842 million net of repayments made for €2,973 million and, as decrease, currency translation differences relating foreign subsidiaries and debt denominated in foreign currency recorded by euro-reporting subsidiaries for €236 million.

Eni entered into long-term borrowing facilities with the European Investment Bank. These borrowing facilities are subject to the maintenance of a minimum level of credit rating. According to the agreements, should the Company lose the minimum credit rating, new guarantees could be required to be agreed upon with the European Investment Bank. In addition, Eni entered into long and medium-term facilities subject to the maintenance of certain financial ratios based on the Consolidated Financial Statements of Eni with Citibank Europe Plc, whose non-compliance allows the bank to request an early repayment. At December 31, 2017, debts subjected to restrictive covenants amounted to €1,664 million (€1,953 million at December 31, 2016). Eni was in compliance with those covenants.

Ordinary bonds of  €17.965 million (€19,003 million at December 31, 2016) consisted of bonds issued within the Euro Medium Term Notes Program for a total of  €16,963 million and other bonds for a total of €1,002 million.

The following table provides a breakdown of ordinary bonds by issuing entity, maturity date, interest rate and currency as of December 31, 2017:

As of December 31, 2017, ordinary bonds maturing within 18 months of  €2,199 million were issued by Eni SpA for €1,795 million and by Eni Finance International SA for €404 million. During 2017, new bonds of  €1,817 million were issued by Eni SpA for €1,403 million and Eni Finance International SA for €414 million.

The following table provides a breakdown of convertible bonds issued by Eni SpA as of December 31, 2017:

The non-dilutive equity-linked bond issued provides for by a redemption value linked to the market price of Eni’s shares. The bondholders have “conversion” rights at certain times and/or in the presence of certain events, while the bonds will be cash-settled. Accordingly, to hedge its exposure, Eni purchased cash-settled call options relating to Eni shares that will be settled on a net cash basis. The convertible bond is measured at amortized cost. The conversion option, embedded in the financial instrument issued, and the call option on Eni’s shares acquired are valued at fair value with effects recognized through profit and loss.

The following table provides a breakdown by currency of long-term debt, its current portion and the related weighted average interest rates.

As of December 31, 2017, Eni retained undrawn long-term committed borrowing facilities of €5,802 million (€6,236 at December 31, 2016), of which €750 million due in 2018. Those facilities bore interest rates reflecting prevailing conditions on the marketplace.

Eni has in place a program for the issuance of Euro Medium Term Notes up to €20 billion, of which €16.8 billion were drawn as of December 31, 2017.

Fair value of long-term debt, including the current portion of long-term debt amounted to €23,764 million (€25,358 million at December 31, 2016):

Fair value of financial debt was calculated by discounting the expected future cash flows at discount rates ranging from -0.2% to 2.5% (-0.2% and 2.6% at December 31, 2016).

Information on net borrowings

In assessing its capital structure, Eni uses net borrowings, which is a non-GAAP financial measure. Eni calculates net borrowings as total finance debt (short-term and long-term debt) derived from its Consolidated Financial Statements prepared in accordance with IFRS as issued by the IASB less: cash, cash equivalents, held-for-trading securities and other financial assets, and certain highly-liquid investments not related to operations including, among others, non-operating financing receivables and available-for-sale securities not related to operations. Held-for-trading securities and other financial assets are part of a strategic reserve of liquidity that management has established by reinvesting proceeds from the Group disposal plans and is intended to provide a certain degree of financial flexibility in case of a prolonged price downturn, tight financial markets or in view of other Company’s purposes. Non-operating financing receivables consist mainly of deposits with banks and other financing institutions and deposits in escrow. Available-for-sale securities not related to operations consist primarily of government bonds and securities from financing institutions. These assets are generally intended to absorb temporary surpluses of cash as part of the Company’s ordinary management of financing activities.

Management believes that net borrowings is a useful measure of Eni’s financial condition as it provides insight about the soundness of Eni’s capital structure and the ways by which Eni’s operating assets are financed. In addition, management utilizes the ratio of net borrowings to total shareholders’ equity including non-controlling interest (leverage) to assess Eni’s capital structure, to analyze whether the ratio between finance debt and shareholders’ equity is well balanced according to industry standards and to track management’s short-term and medium-term targets. Management continuously monitors trends in net borrowings and trends in leverage in order to optimize the use of internally-generated funds versus funds from third parties. The measure calculated in accordance with IFRS that is most directly comparable to net borrowings is total debt (short-term and long-term debt). The most directly comparable measure, derived from IFRS reported amounts, to calculate leverage is the ratio of total debt to shareholders’ equity (including non-controlling interest). Eni’s presentation and calculation of net borrowings and leverage may not be comparable to that of other companies.

Financial assets held for trading of  €6,012 million (€6,166 million at December 31, 2016) are disclosed in note 9 — Financial assets held for trading.

Available-for-sale securities of  €207 million (€238 million at December 31, 2016) were held for non-operating purposes and related to Eni Insurance DAC.

Current financing receivables of  €209 million (€385 million at December 31, 2016) were held for non-operating purposes.

Changes in gross borrowings were as following: