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Derivative financial instruments and hedge accounting | 12 Months Ended
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Dec. 31, 2023
Derivative financial instruments and hedge accounting |
Derivative financial instruments and hedge accounting | 2 4 Derivative financial instruments and hedge accounting
| December 31, 2023 |  |  | December 31, 2022 |
(€ million) | Fair value asset |  |  | Fair value liability |  |  | Level of Fair value |  |  | Fair value asset |  |  | Fair value liability |  |  | Level of Fair value |
Non-hedging derivatives |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Derivatives on exchange rate |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
- Currency swap | 70 |  |  | 168 |  |  | 2 |  |  | 110 |  |  | 132 |  |  | 2 |
- Interest currency swap |  |  |  | 84 |  |  | 2 |  |  | 1 |  |  | 144 |  |  | 2 |
- Outright |  |  |  |  |  |  |  |  |  | 3 |  |  | 12 |  |  | 2 |
| 70 |  |  | 252 |  |  |  |  |  | 114 |  |  | 288 |  |  |  |
Derivatives on interest rate |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
- Interest rate swap | 62 |  |  | 34 |  |  | 2 |  |  | 137 |  |  | 58 |  |  | 2 |
| 62 |  |  | 34 |  |  |  |  |  | 137 |  |  | 58 |  |  |  |
Derivatives on commodities |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
- Over the counter | 2,902 |  |  | 2,103 |  |  | 2 |  |  | 9,571 |  |  | 8,663 |  |  | 2 |
- Future | 3,027 |  |  | 2,905 |  |  | 1 |  |  | 6,886 |  |  | 5,764 |  |  | 1 |
- Options | 106 |  |  | 114 |  |  | 2 |  |  |  |  |  | 2 |  |  | 1 |
- Other | 11 |  |  |  |  |  | 2 |  |  |  |  |  | 80 |  |  | 2 |
| 6,046 |  |  | 5,122 |  |  |  |  |  | 16,457 |  |  | 14,509 |  |  |  |
| 6,178 |  |  | 5,408 |  |  |  |  |  | 16,708 |  |  | 14,855 |  |  |  |
Cash flow hedge derivatives |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Derivatives on commodities |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
- Over the counter | 80 |  |  | 13 |  |  | 2 |  |  |  |  |  |  |  |  |  |
- Future |  |  |  |  |  |  |  |  |  | 339 |  |  | 192 |  |  | 1 |
| 80 |  |  | 13 |  |  |  |  |  | 339 |  |  | 192 |  |  |  |
Derivatives on interest rate |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
- Interest rate swap | 6 |  |  |  |  |  | 1 |  |  | 21 |  |  |  |  |  | 2 |
| 6 |  |  |  |  |  |  |  |  | 21 |  |  |  |  |  |  |
| 86 |  |  | 13 |  |  |  |  |  | 360 |  |  | 192 |  |  |  |
Options |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
- Other options |  |  |  | 41 |  |  | 2 |  |  |  |  |  | 144 |  |  | 3 |
|  |  |  | 41 |  |  |  |  |  |  |  |  | 144 |  |  |  |
Gross amount | 6,264 |  |  | 5,462 |  |  |  |  |  | 17,068 |  |  | 15,191 |  |  |  |
Offsetting | (2,895 | ) |  | (2,895 | ) |  |  |  |  | (5,863 | ) |  | (5,863 | ) |  |  |
Net amount | 3,369 |  |  | 2,567 |  |  |  |  |  | 11,205 |  |  | 9,328 |  |  |  |
Of which: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
- current | 3,323 |  |  | 2,414 |  |  |  |  |  | 11,076 |  |  | 9,042 |  |  |  |
- non-current | 46 |  |  | 153 |  |  |  |  |  | 129 |  |  | 286 |  |  |  |
Eni is exposed to market risk, which is the risk that changes in prices of energy commodities, exchange rates and interest rates could reduce the expected cash flows or the fair value of the assets. Eni enters into financial and commodities derivatives traded on organized markets (like MTF and OTF) and into commodities derivatives traded over the counter (swaps, forward, contracts for differences and options on commodities) to reduce this risk in relation to the underlying commodities, currencies or interest rates a nd, to a limited extent in compliance with internal authorization thresholds, with speculative purposes to profit from expected market trends. Derivative s fair values were estimated based on market quotations provided by primary info-provider or, alternatively, appropriate valuation techniques generally adopted in the marketplace. Fair values of non-hedging derivatives essentially comprised forward sale contracts of natural gas for physical delivery which were not entitled to the own use exemption, as well as derivatives for proprietary trading activities. Fair value of cash flow hedge derivatives essentially related to commodity hedges were entered into by the Global Gas & LNG Portfolio segment. These derivatives were entered into to hedge variability in future cash flows associated with highly probable future trade transactions of gas or electricity or on already contracted trades due to different indexation mechanism s of supply costs versus selling prices. A similar scheme applies to exchange rate hedging derivatives. The existence of a relationship between the hedged item and the hedging derivative is checked at inception to verify eligibility for hedge accounting by observing the offset in changes of the fair values at both the underlying commodity and the derivative. The hedging relationship is also stress-tested against the level of credit risk of the counterparty in the derivative transaction. The hedge ratio is defined consistently with the Company’s risk management objectives, under a defined risk management strategy. The hedging relationship is discontinued when it ceases to meet the qualifying criteria and the risk management objectives on the basis of which hedge accounting has initially been applied. The effects of the measurement at fair value of cash flow hedge derivatives are given in note 2 6 – Equity. Information on hedged risks, the hedging policies are disclosed in note 2 8 – Guarantees, commitments and risks - Risk factors. Eni entered into sustainability-linked interest rate swaps with leading banking institutions which provide for a cost adjustment mechanism linked to the achievement of certain sustainability targets. At December 31, 202 3, the fair value of these contracts amounted to positive €15 million. In 202 3, t he exposure to the exchange rate risk deriving from securities denominated in U.S. dollars included in the strategic liquidity portfolio amounting to €2,562 million was hedged by using, in a fair value hedge relationship, posi tive exchange differences for €75 million resulting on a portion of bonds denominated in U.S. dollars amounting to €2,135 million. The offsetting of financial derivatives primarily related to Eni Global Energy Markets SpA. During 20 2 3, there were no transfers between the different hierarchy levels of fair value. Hedging derivative instruments are disclosed below:
| December 31, 2023 |  |  | December 31, 2022 |
(€ million) | Nominal amount of the hedging instrument |  |  | Change in fair value (effective hedge) |  |  | Change in fair value (ineffective hedge) |  |  | Nominal amount of the hedging instrument |  |  | Change in fair value (effective hedge) |  |  | Change in fair value (ineffective hedge) |
Cash flow hedge derivatives |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Derivatives on commodity |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
- Over the counter | 310 |  |  | 147 |  |  | 6 |  |  | 83 |  |  | (4 | ) |  |  |
- Future |  |  |  | (23 | ) |  |  |  |  | 1,350 |  |  | (3,912 | ) |  | 275 |
- Other |  |  |  |  |  |  |  |  |  |  |  |  | 9 |  |  |  |
| 310 |  |  | 124 |  |  | 6 |  |  | 1,433 |  |  | (3,907 | ) |  | 275 |
Derivatives on interest rate |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
- Interest rate swap | 128 |  |  | (19 | ) |  |  |  |  | 127 |  |  | 24 |  |  |  |
| 128 |  |  | (19 | ) |  |  |  |  | 127 |  |  | 24 |  |  |  |
| 438 |  |  | 105 |  |  | 6 |  |  | 1,560 |  |  | (3,883 | ) |  | 275 |
The breakdown of the underlying asset or liability by type of risk hedged under cash flow hedge is provided below:
| December 31, 2023 |  |  | December 31, 2022 |
(€ million) | Change of the underlying asset used for the calculation of hedging ineffectiveness |  |  | CFH reserve |  |  | Reclassification adjustments |  |  | Change of the underlying asset used for the calculation of hedging ineffectiveness |  |  | CFH reserve |  |  | Reclassification adjustments |
Cash flow hedge derivatives |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commodity price risk |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
- Planned sales | (169 | ) |  | 56 |  |  | (436 | ) |  | 4,059 |  |  | (499 | ) |  | (4,666 | )
| (169 | ) |  | 56 |  |  | (436 | ) |  | 4,059 |  |  | (499 | ) |  | (4,666 | )
Derivatives on interest rate |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
- hedged flows | (19 | ) |  | (6 | ) |  |  |  |  | (15 | ) |  | 16 |  |  | (11 | )
| (19 | ) |  | (6 | ) |  |  |  |  | (15 | ) |  | 16 |  |  | (11 | )
| (169 | ) |  | 50 |  |  | (436 | ) |  | 4,044 |  |  | (483 | ) |  | (4,677 | )
More information is reported in note 2 8 — Guarantees, Commitments and Risks — Financial risks. Effects recognized in other operating profit (loss) Other operating profit (loss) related to derivative financial instruments on commodity was as follows:
(€ million) | 2023 |  |  | 2022 |  |  | 2021 |
Net income (loss) on cash flow hedging derivatives | 6 |  |  | 275 |  |  | (51 | )
Net income (loss) on other derivatives | 472 |  |  | (2,011 | ) |  | 954 |
| 478 |  |  | (1,736 | ) |  | 903 |
Net income (loss) on cash flow hedging derivatives related to the ineffective portion of the hedging relationship on commodity derivatives was recognized through profit and loss. Net income (loss) on other derivatives included the fair value measurement and settlement of commodity derivatives which could not be elected for hedge accounting under IFRS because they related to net exposure to commodity risk and derivatives for trading purposes and proprietary trading. Effects recognized in finance income (loss)
(€ million) | 2023 |  |  | 2022 |  |  | 2021 |
Derivatives on exchange rate | (63 | ) |  | (70 | ) |  | (322 | )
Derivatives on interest rate | 2 |  |  | 81 |  |  | 16 |
Options |  |  |  | 2 |  |  |  |
| (61 | ) |  | 13 |  |  | (306 | )
Net financial income from derivative financial instruments was recognized in connection with the fair value valuation of certain derivatives which lacked the formal criteria to be treated in accordance with hedge accounting under IFRS, as they were entered into for amounts equal to the net exposure to exchange rate risk and interest rate risk, and as such, they cannot be referred to specific trade or financing transactions. Exchange rate derivatives were entered into in order to manage exposures to foreign currency exchange rates arising from the pricing formulas of commodities. More information is disclosed in note 36 – Transactions with related parties.

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