Interim report on operations – March 31, 2012

Transcription

2012
Interim Report
on operations
March 31, 2012
Contents
0.1 Performance indicators and corporate
information
5
The A2A Group at March 31, 2012
6
Financial Highlights
8
A2A S.p.A. on the Stock Exchange
11
Corporate Boards
13
Significant events during the period
16
Summary of results, assets and liabilities and financial position of the A2A
Group
23
Significant events after March 31, 2012
0.2 Consolidated financial statements
26
Consolidated balance sheet
28
Consolidated income statement
30
Consolidated statement of comprehensive income
31
Consolidated cash flow statement
32
Consolidated statement of changes in equity
0.3 Notes to the Interim report on operations
35
General information on A2A S.p.A.
36
Interim report on operations
37
Financial statements
38
Basis of preparation
39
Changes in international accounting standards
46
Scope of consolidation
47
Consolidation policies and procedures
53
Seasonal nature of the business
54
A2A Group – Areas of activity
1
Contents
55
Geographical areas of activity
56
Results sector by sector
58
Notes to the balance sheet
74
Net debt
75
Notes to the income statement
82
Earnings per share
83
Significant non-recurring, atypical or unusual transactions
84
Guarantees and commitments with third parties
85
Other information
0.4 Attachments to the notes to the Interim report
on operations
114
1. List of companies included in the consolidated financial statements
116
2. List of shareholdings in companies carried at equity
118
3. List of companies included in the consolidated financial statements of the
Ecodeco Group
2
120
4. List of companies included in the consolidated financial statements of the
Coriance Group
122
5. List of financial assets available for sale
0.5 Interim report on operations
125
127
Macroeconomic scenario
130
Performance of the energy market
133
Energy sector
147
Heat and Services sector
152
Environment sector
157
Networks sector
173
Other Services and Corporate sector
175
Outlook for operations
176
Risks and uncertainties
0.6 Certification by the Manager in charge of
preparing accounting documents
200
Certification by the Manager in charge of preparing accounting documents
This is a translation of the Italian original “Resoconto Intermedio di gestione al 31 marzo 2012” and
has been prepared solely for the convenience of international readers. In the event of any
ambiguity the Italian text will prevail. The Italian original is available on the website www.a2a.eu
0.1
Performance
indicators and
corporate
information
The A2A Group at March 31, 2012
A2A Spa
51.00%
Delmi (3)
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
A2A Trading
A2A Energia
A2A Calore &
Servizi
Amsa
A2A Reti
Elettriche
A2A Reti
Gas
Selene
50.00%
70.00%
33.33%
98.08%
100.00%
100.00%
100.00%
100.00%
Transalpina di
Energia
A2A Alfa
Lumenergia
A2A Coriance
Ecodeco
A2A Ciclo Idrico
A2A Servizi alla
distribuzione
A2A Logistica
90.00%
61.28%
Edison (1)
50.00%
100.00%
100.00%
99.99%
Premiumgas
A2A
Montenegro
Coriance
Aprica
90.00%
20.00%
70.00%
43.70%
Edipower
Plurigas
EPCG
Varese Risorse (4)
100.00%
100.00%
39.49%
60.00%
100.00%
Aspem
Energia
Abruzzoenergia
Rudnik Uglja ad
Pljevlja
Proaris
Partenope
Ambiente
50.00%
Ergosud
50.00%
Asm Novara (3)
Aspem (4)
91.60%
100.00%
Retragas
Mincio
Trasmissione
80.00%
67.00%
74.50%
19.44%
Montichiari
ambiente
Seasm
Camuna
Energia
Metroweb
48.86%
21.94%
ASVT (2)
ACSM-AGAM
7.9%
Dolomiti Energia
50.00%
Metamer
Areas of activity
Energy
Heat & Services
Environment
Networks
Other Companies
(1) The 61.28% refers to ordinary shares held in Transalpina di Energia (TdE). The
actual stake in share capital is 60%. Note that Edison holds 50% of shares in
Edipower.
(2) 0.38% of these are held via A2A Reti Gas.
(3) There are call and put options on a further stake in the company's share capital.
(4) There are put options on a further stake in the company's share capital.
This table shows the A2A Group's most significant shareholdings. You are referred to
attachments 1,2,3,4 and 5 for full details of all shareholdings.
5
Financial Highlights (1)
Revenues
Gross operating income
Net income
6
Income statement figures
1,957 Millions of euro
271 Millions of euro
76 Millions of euro
01 01 2012
03 31 2012
01 01 2011
03 31 2011
Revenues
1,957
1,745
Operating expenses
Millions of euro
(1,541)
(1,321)
Labour costs
(145)
(146)
271
278
Depreciation, amortization, provisions and write-downs
(88)
(131)
Net operating income
183
147
Financial balance
(54)
(10)
Other non-operating income
–
–
Other non-operating expenses
–
(1)
Income before tax
129
136
Income taxes
(55)
(40)
8
(9)
(6)
(2)
Net result from non-current assets sold or held for sale
Minorities
Net income for the period pertaining to the Group
Gross operating income / revenues
(1) These figures are the performance indicators as required in CESRN/05/178/B.
76
85
13.8%
15.9%
Financial Highlights
Balance sheet figures
03 31 2012
12 31 2011
Millions of euro
Net capital employed
7,612
7,614
Total equity attributable to the Group and minorities
3,658
3,593
(3,954)
(4,021)
Consolidated net financial position
Consolidated net financial position / Equity attributable to the Group and
minorities
1.08
1.12
Consolidated net financial position / Average market capitalization
1.75
1.31
7
Financial data
01 01 2012
03 31 2012
01 01 2011
03 31 2011
Net cash from operating activities
155
207
Net cash used in investing activities
(63)
(45)
92
162
03 31 2012
12 31 2011
Millions of euro
Free cash flow
Key figures for A2A S.p.A.
Share capital (euro)
1,629,110,744
1,629,110,744
Number of ordinary shares (par value 0.52 euro)
3,132,905,277
3,132,905,277
Number of treasury shares (par value 0.52 euro)
26,917,609
26,917,609
Key indicators
03 31 2012
03 31 2011
1.338%
1.367%
118.33
105.19
1.31
1.37
Average price of Brent crude (euro/bbl)
90.23
76.88
Average price of coal (euro/ton)
76.56
90.14
Average six-month Euribor
Average price of Brent crude (US$/bbl)
Average exchange rate euro/US$ (*)
(*) Source: Italian Foreign Exchange Office
A2A on the Stock Exchange
8
Capitalisation at March 31, 2012 (millions of euro)
1,884
Average capitalisation in 1st quarter 2012 (millions of euro)
2,259
Average volumes in 1st quarter 2012
10,422,612
Average price in 1st quarter 2012 (*)
0.721
Maximum price in 1st quarter 2012 (*)
0.793
Minimum price in 1st quarter 2012 (*)
0.598
Number of shares
(*) Euro per share
Source: Bloomberg
A2A forms part of the following indices
FTSE MIB
STOXX Europe 600
EUROSTOXX
Down Jones Italy
WisdomTree
S&P Developed Ex-US
Ethical Indices
ECPI Ethical Index EMU
Axia Sustainable Index
Solactive Climate Change Index
FTSE ECPI Italia SRI Benchmark
Source: Bloomberg
3,132,905,277
Shareholding (*)
9
(*) Stakes higher than 2% (updated at March 31, 2012)
Source: CONSOB
Rating
Current
Standard & Poor’s
Medium/long Term rating
BBB
Short Term Rating
A–2
Outlook
Moody’s
Medium/long Term rating
Outlook
Rating updated at April 17, 2012
Source: rating agencies
Negative
Baa1 (on review
for downgrade)
Negative
A2A in the 1st quarter 2012
10
A2A vs FTSE MIB
Source: Bloomberg
Corporate Boards
SUPERVISORY BOARD
CHAIRMAN
Graziano Tarantini
DEPUTY CHAIRMAN
Rosario Bifulco
DIRECTORS
Adriano Bandera
Giambattista Brivio
Bruno Caparini
Gianni Castelli
Alberto Cavalli
Stefano Grassani
Enrico Mattinzoli
Marco Miccinesi
Massimo Perona
Norberto Rosini
Franco Tamburini
Antonio Matteo Taormina
MANAGEMENT BOARD
CHAIRMAN
Giuseppe Sala
DEPUTY CHAIRMAN
Vittorio Cinquini
DIRECTORS
Franco Baiguera
Mario Cocchi
Francesco Randazzo
Renato Ravanelli
Paolo Rossetti
Carlo Secchi
11
Corporate Boards
GENERAL MANAGERS
CORPORATE AND MARKET AREA
Renato Ravanelli
TECHNICAL-OPERATIONS AREA
Paolo Rossetti
12
Significant events during the
period
A2A S.p.A. confirmed in the ECPI Ethical EMU Equity index.
ECPI has confirmed that A2A S.p.A. has been included in the ECPI Ethical EMU Equity index on
the basis of its end-of-year analysis. The index uses screening methodologies to select and
analyze the top 150 listed companies in the EMU (Economic and Monetary Union) area.
Companies are selected from the most capitalized ones that best fulfil sustainability
requirements using a methodology based on a series of indicators reflecting environmental,
social and corporate governance. characteristics. A2A S.p.A. has been listed in this index since
2008.
A2A S.p.A.: 95 million euro loan from EIB to expand district heating
business
On January 13, 2012, A2A S.p.A signed a 95 million euro loan from the European Investment
Bank (EIB); the money will be invested in projects to expand district heating networks in the
Greater Milan area (in the city centre of Milan, Novate Milanese and Sesto San Giovanni in
particular). The projects will aim to maximize the quantity of heat generated by existing wasteto-energy and co-generation plants and to increase the amount of heat generated by A2A
Group renewable sources. The European Investment Bank concurred, on the basis of its
lending principles, with the investment plan that the Group plans to implement over the fiveyear period from 2011-2015 to optimize and expand the district heating network and heat
generated.
The EIB's opinion is that the projects are in line with its lending strategy in the energy sector,
given that they will optimize the heat production mix and reduce consumption of fossil fuels,
thereby contributing to reaching EU objectives. The 15-year loan will allow A2A S.p.A to extend
the average duration of its debt and diversify its sources.
13
Delmi S.p.A.: sale of Transalpina di Energia S.r.l. (TdE) shareholding to
EDF S.A. gets unanimous approval
On January 30, 2012, the Shareholders' Committee, the Shareholders' Meeting and Board of
Directors of Delmi S.p.a. unanimously approved the proposal to sell the company's share in
Transalpina di Energia S.r.l. (61%-owned subsidiary of Edison S.p.A) to EDF S.A. and for Edison
S.p.a. and Alpiq S.A. to purchase 70% of Edipower S.p.A., in line with agreements reached on
December 26, 2011.
On February 15, 2012, A2A S.p.A, Delmi S.p.A., EDF S.A., Edison S.p.A. and Alpiq S.A. signed the
final contracts as part of the preliminary agreement reached on December 26, 2011 to
reorganize the shareholding structure of Edison S.p.A. and Edipower S.p.A.
More specifically, Delmi S.p.A. will acquire 70% of Edipower S.p.A. from Edison S.p.A. (50%)
and Alpiq S.A. (20%) for the total cost of 804 million euro. EDF S.A. will acquire from Delmi
S.p.a. 50% of Transalpina di Energia S.r.l., a company that it already owns the remaining 50% of
and which in turn owns 61.3% of capital with voting rights of Edison S.p.A., for the total cost of
14
704 million euro. The main details of an agreement whereby Edison S.p.A. will supply gas to
Edipower S.p.A. have been agreed; this agreement will cover 50% of Edipower S.p.A.'s
requirements for a period of 6 years at market conditions. Closing is expected no later than
June 30, 2012. The entire operation depends on confirmation from Consob that the tender
offer, following EDF S.A.'s takeover of Edison S.p.A, is not greater than 0.84 euro per share.
The operation is also subject to approval of the relevant Antitrust authorities.
A2A S.p.A appoints Chairman and Member of Management Board
On February 17, 2012, the A2A S.p.A. Supervisory Board met at a meeting chaired by the lawyer
Graziano Tarantini and, in accordance with the company's articles of association, appointed
Carlo Secchi a member of the A2A S.p.A. Management Board.
The Supervisory Board also appointed Giuseppe Sala, member of the A2A S.p.A Management
Board, as Chairman of the Management Board. The resulting Management Board will remain
in office until the first meeting of the Supervisory Board, after its scheduled renewal at the
Shareholders' Meeting on May 29, 2012.
A2A S.p.A: shareholding in e-Utile S.p.A. sold
A2A S.p.A. sold its 49% stake in e-Utile S.p.A. to Atos, a global company operating in the IT
service sector. Atos recently acquired the remaining 51% of e-Utile S.p.A. from Siemens IT
Solutions and Services.
e-Utile S.p.A. supplies IT services to A2A Group companies and on the free market. A2A S.p.A.
received 10.3 million euro from the operation, generating a consolidated capital gain of more
than 8 million euro. This is part of the A2A Group's ongoing process to rationalize its
shareholding portfolio and focus on the Group's core business.
15
Summary of results, assets and
liabilities and financial position of
the A2A Group
Results
The results of the A2A Group for the period ended March 31, 2012 are set out below, with
comparative figures for the corresponding period of the previous year:
Millions of euro
01 01 2012
03 31 2012
01 01 2011
03 31 2011
Changes
1,957
1,745
212
1,939
1,725
214
18
20
Revenues
16
of which:
– Revenues from sales of goods and services
– Other operating income
Operating expenses
(2)
(1,541)
(1,321)
Labour costs
(145)
(146)
1
271
278
(7)
Depreciation and amortization
(96)
(108)
12
Provisions and write-downs
8
183
Net financial expense
(220)
(23)
31
147
36
(55)
(12)
(43)
Shares of results of companies at equity
1
2
(1)
–
–
–
–
(1)
1
Income before tax
129
136
(7)
Income taxes
(55)
(40)
(15)
Income from current operations, net of tax
74
96
(22)
8
(9)
17
Minority interests
(6)
(2)
(4)
Group net profit for the period
76
85
(9)
In the three months being reported, the Group earned revenues of 1,957 million euro, 71
million euro of which came from the EPCG Group (1,745 million euro in the first quarter of
2011, of which 86 million euro relate to the EPCG Group).
Group
The key figures that contributed to generating these revenues are listed below:
03 31 2012
03 31 2011
Electricity sold to wholesale and retail customers (GWh)
5,325
5,625
Electricity sold on the Power Exchange (GWh)
3,136
3,799
Electricity sold on foreign markets (GWh)
3,312
3,145
Electricity sold (GWh) - EPCG
1,197
1,333
Gas sold (Mcm)
1,839
1,494
Heat sold (GWht)
1,526
1,439
Electricity distributed (GWh)
2,930
2,908
Electricity distributed (GWh) - EPCG
761
741
Gas distributed (Mcm)
950
965
17
15
Water distributed (Mcm)
Water purified (Mcm)
Waste disposed of (Kton)
10
10
635
670
In particular, sales mainly derived from the following quantities produced by the plants
managed by the Group:
17
03 31 2012
03 31 2011
2,265
2,431
Thermoelectric production (GWh) - EPCG
399
379
Hydroelectric production (GWh)
506
715
Thermoelectric production (GWh)
Hydroelectric production (GWh) - EPCG
310
739
1,284
1,188
Electrical produced by co-generation (GWh)
354
362
Electricity sold from waste to energy and biogas plants (GWh).
304
316
Heat production (GWht)
Gross operating income was 271 million euro, more or less the same as the figure posted for
the same period in the previous year.
Group
The following table shows how business developed in each area:
Millions of euro
03 31 2012
03 31 2011
Energy Sector
79
94
- electricity
- gas
34
45
60
34
Heat and Services Sector
53
48
Environment Sector
71
76
Networks Sector
68
65
Other Services and Corporate Sector
Total
–
271
(5)
278
The Energy sector posted a smaller margin than the first quarter of 2011: the change in the
electricity sector (down 26 million euro) was partly offset by the increase in gas margins (up 11
million euro).
Gross operating income for the electricity sector, less the contribution of the Montenegro
subsidiary EPCG, was in line with the result posted for the same quarter in 2011 (38 million
18
euro). The industrial portfolio performed well, benefiting from an improvement in the spread
between sales prices and fuel costs and also from the careful management of gas
procurement; this was offset by the dip in trading portfolio margins caused by the hugely
volatile prices on European markets at certain times of the quarter being reported.
The contribution of the EPCG energy sector during the first quarter of 2012 dropped by 26
million euro, compared to the first three months last year. This drop can be traced mainly to
the reduction in hydroelectric production in the first quarter of 2012 and resultant increase in
the amount of electricity imported at a time when market prices are on the rise.
The gas sector posted a margin that was 11 million euro higher than the same quarter last year.
Gross operating income for the Heat and Services sector was 53 million euro, compared to 48
million euro for the first quarter of 2011. The 5 million euro growth was mainly generated by
the commercial development of the District Heating Sector.
Gross operating income in the Environment Sector was 71 million euro, a decrease of 5 million
euro as a result of the loss of the CIP 6 incentive previously awarded to the Milan, Bergamo and
Filago waste-to-energy plants.
The Networks sector achieved growth in performance in the first quarter of 2012, posting
gross operating income of 68 million euro (up 3 million euro). This growth can for the most
part be attributed to the gas distribution sector.
Group
“Depreciation, amortization, provisions and write-downs” totaled 88 million euro (131
million euro at March 31, 2011). The decrease of 43 million euro can for the most part be
attributed to less amortization and depreciation, the release of previously allocated risk
provisions and bad debt provision.
As a result of the above movements, “Net operating income” rose to 183 million euro (147
million euro at March 31, 2011).
“Net expenses from financial activities” amounted to 55 million euro (12 million euro at
March 31, 2011), and were adversely affected by the fair value effect of financial derivatives at
March 31, 2012 for which a negative balance of 22 million was posted compared with the same
period in the previous year when the figure was +19 million euro. On removing the change in
the fair value of financial derivatives, net expenses from financial activities amounted to 33
million euro, compared with 31 million euro in the same quarter last year.
The balance posted for “Shares of results of companies at equity” was positive (1 million
euro) compared to a similarly positive value of 2 million euro for the same period in 2011. This
item includes primarily the effects of the valuation of the shareholdings in Premium Gas S.p.A.
and some in the Coriance Group.
“Income tax expense” for the reporting period was 55 million euro (40 million euro at March
31, 2011); this figure was affected by both the general increase in the "Robin Hood tax" rate, as
it is known, starting from the beginning of the second half-year of 2011, when it rose from 6.5%
to 10.5% for the three-year period from 2011 to 2013, and also by the widening of the range of
companies subject to this tax to include those involved in the distribution of electricity and
gas, which were previously excluded. The IRAP tax rate also increased at the same time, from
3.90% to 4.20% for companies working under government concession, in other sectors apart
from construction, motorways and tunnel management.
A positive balance of 8 million euro was posted for “Net income from non-current assets
sold or held for sale”, including primarily the contribution made by the sale of the
shareholding in e-Utile S.p.A, as compared to the same period last year when a negative
balance of 9 million euro was posted, which included the valuation of the shareholding in
Transalpina di Energia S.r.l..
“Net income for the period pertaining to the Group”, less income pertaining to noncontrolling interests, was 76 million euro (85 million euro at March 31, 2011).
19
Group
Balance sheet and financial position
Consolidated “Capital employed” amounted to 7,612 million euro at March 31, 2012, and was
covered by net equity of 3,658 million euro (834 million euro of which pertains to noncontrolling interests) and net debt of 3,954 million euro.
"Working capital" amounted to 859 million euro, which was a 9 million euro increase on the
figure reported at December 31, 2011.
“Net fixed capital”, including “Assets/Liabilities held for sale” totaled 6,753 million euro,
which was a drop of 11 million euro on the figure reported at December 31, 2011.
The “Net financial position” at March 31, 2012 was 3,954 million euro, an improvement of 67
million euro on the figure posted at December 31, 2011: this was due to cash of 141 million euro
which more than covered capital employed in the period, equal to 74 million euro.
20
Group
Millions of euro
03 31 2012
12 31 2011
Changes
Net fixed capital
5,838
5,846
(8)
Tangible assets
4,649
4,685
(36)
1,518
1,503
15
535
535
–
(138)
(133)
(5)
(4)
(10)
6
Provisions for risks, charges and liabilities for landfills
(453)
(462)
9
Employee benefits
(269)
(272)
3
of which with counter-entry to equity
(101)
(112)
Working capital
859
850
Inventories
120
267
CAPITAL EMPLOYED
Intangible assets
Shareholdings and other non-current financial assets (*)
Other non-current assets/liabilities (*)
Deferred tax assets/liabilities
9
(147)
Trade receivable and other current assets (*)
2,518
2,368
150
Trade payables and other current liabilities (*)
(1,732)
(1,790)
58
Current tax assets/tax liabilities
Assets/liabilities held for sale (*)
(47)
5
(7)
(8)
915
918
(52)
21
(3)
–
–
7,612
7,614
Equity
3,658
3,593
65
Total financial position beyond one year
3,857
3,729
128
TOTAL CAPITAL EMPLOYED
(2)
SOURCES OF FUNDS
Total financial position within one year
Total net financial position
TOTAL SOURCES
(*) Excluding balances included in net financial position.
97
292
(195)
3,954
4,021
(67)
(7)
7,612
(32)
7,614
(2)
Group
Millions of euro
NET FINANCIAL POSITION AT THE BEGINNING OF THE PERIOD
(4,021)
01 01 2011
03 31 2011
(3,893)
Net income for the period (including minorities) (**)
74
87
Depreciation and amortization
96
108
2
1
Results from companies at equity
(1)
10
Change in assets and liabilities (*)
(16)
1
Write-downs/disposals of tangible and intangible assets
155
207
Net cash from investing activities:
(63)
(45)
- investments
(74)
(49)
11
4
Free cash flow
92
162
Changes in financial assets/liabilities with counter-entry to equity
(25)
(11)
(3,954)
(3,742)
- sale of shareholdings
NET FINANCIAL POSITION AT THE END OF THE PERIOD
(*) Excluding balances with counter-entry to equity.
(**) The result for the period is stated excluding gains on the disposal of shareholdings.
22
01 01 2012
03 31 2012
Significant events after
March 31, 2012
Acerra waste-to-energy plant continues to perform excellently
throughout the first quarter of 2012
In the first three month of 2012, the Acerra waste-to-energy plant continued to perform at the
same high levels of efficiency achieved in 2011. The plant received 134 thousand tons of waste
which produced 116 million Kwh of electricity to feed into the national grid (enough energy to
meet the annual needs of 41,500 families), preventing the consumption of about 21,000 tons
of crude oil.
The results were also excellent from an environmental point of view. In fact, atmospheric
emissions are regularly well below the limits set in European regulations and also in stricter
standards laid down by the Integrated Environmental Authority governing the Acerra plant.
In the first quarter of 2012, Partenope Ambiente S.p.A. also completed several scheduled
maintenance works on two of the three lines making up the plant; as 2012 progresses, the
company expects to reach the same high standard of production attained in 2011 when the
Acerra waste-to-energy plant reached 100% of its full annual capacity - 600,000 tons of waste
- a few days ahead of schedule.
Ecodeco Group: new waste treatment plant opened in Spain
A new plant for the mechanical and biological treatment of solid urban waste using the Biocubi
process patented by Ecodeco S.r.l. was opened in Cervera del Maestre, in Spain's Castellón
della Comunidad Valenciana province, on April 11, 2012.
The plant, built by a business consortium (UTE) including Teconma, Azahar and Ecodeco S.r.l., will
receive the residual part of separated solid urban waste collected from 49 towns and cities in the
northern part of the province of Castellón, and will be able to process up to 130,000 tons per year.
As well as supplying the necessary technology, the A2A Group also built the electromechanical part
of the waste treatment system.
In the industrial process, after recyclable materials have been recovered, such as metal, plastic
and paper, the bio-dried material is pressed then sent to the landfill, built and managed by the
23
Significant events after March 31, 2012
same business consortium. The overall investment amounted to roughly 40 million euro.
Ecodeco S.r.l. has a 30% stake in the venture and as well as its quota of the work done, will also
receive royalties for 20 years.
The A2A S.p.A. Supervisory Board approved the 2011 financial
statements.
Chaired by lawyer Graziano Tarantini, the Supervisory Board met on April 26, 2012 and
approved the separate financial statements and consolidated annual report of the A2A Group
at December 31, 2011.
The Supervisory Board accepted the Management Board's proposal to ask the Shareholder's
Meeting to distribute dividends of 0.013 euro per ordinary share, to be paid from June 21, 2012
(registered on June 18, 2012).
A2A S.p.A.: contractual terms of Edison/Edipower operation amended
24
The following agreements were signed on May 5, 2012:
(i) agreement between A2A S.p.A. and Delmi S.p.A. on the one hand, and EDF S.A. on the
other, partially amending the agreement signed by the same parties on February 15, 2012
and establishing that the price of the 50% stake in Transalpina di Energia S.r.l., owned by
Delmi S.p.a., to be sold to EDF S.A., had risen from 704,372,600 euro to 783,748,900 euro,
as well as obliging Delmi S.p.a. to pay EDF S.A. 50% of the higher sum that EDF S.A. will incur
as a result of the public mandatory tender offer of Edison S.p.A. shares at 0.89 euro per
share (instead of 0.84 euro per share), and up to a maximum of 25,100,000 euro;
(ii) agreement between A2A S.p.A. and Delmi S.p.A. as one party, and Edison S.p.A and Alpiq
S.A. as the other, partially amending the agreement signed by these parties on February 15,
2012 and establishing that the price of the 50% stake in Edipower S.p.A., owned by Edison
S.p.A, to be sold to Delmi S.p.A., had risen from 604,372,600 euro to 683,748,900 euro,
thereby taking the overall price for the 70% share in Edipower S.p.A. from 804,372,600
euro to 883,748,900 euro.
The performance of the agreement to sell Transalpina di Energia S.r.l. must first be approved
by the European Commission, and the performance of the agreement to sell Edipower S.p.A.
is in turn dependent on the execution of the Transalpina di Energia S.r.l. agreement (now that
the Italian Antitrust Authority has issued its authorization).
0.2
Consolidated
financial statements
Consolidated balance sheet (1)
Assets
Millions of euro
Note
03 31 2012
12 31 2011
03 31 2011
Tangible assets
1
4,649
4,685
4,814
Intangible assets
2
1,518
1,503
1,550
Shareholdings carried at equity
3
522
521
2,410
Other non-current financial assets
3
49
48
42
Other non-current assets
4
NON-CURRENT ASSETS
26
Total non-current assets
114
132
88
6,852
6,889
8,904
CURRENT ASSETS
Inventories
5
120
267
128
Trade receivables
6
2,189
1,958
2,269
Other current assets
7
329
410
373
Current financial assets
8
234
233
38
Current tax assets
9
6
30
15
Cash and cash equivalents
10
Total current assets
NON-CURRENT ASSETS HELD FOR SALE
TOTAL ASSETS
(1)
11
245
147
246
3,123
3,045
3,069
926
921
81
10,901
10,855
12,054
Significant non-recurring events and transactions in the consolidated financial statements are indicated in Note 38, as required by Consob
Communication DEM/6064293 of July 28, 2006.
Consolidated balance sheet
Equity and liabilities
Millions of euro
Note
03 31 2012
12 31 2011
03 31 2011
Share capital
12
1,629
1,629
1,629
(Treasury shares)
13
(61)
(61)
(61)
Reserves
14
1,180
1,619
1,940
–
(420)
–
76
–
85
2,824
2,767
3,593
EQUITY
Net result for the period
Net profit for the reporting period
15
Equity pertaining to the Group
Minority interests
16
Total equity
834
826
1,350
3,658
3,593
4,943
LIABILITIES
Non-current liabilities
Non-current financial liabilities
17
3,963
3,851
3,706
Deferred tax liabilities
18
4
10
50
Employee benefits
19
269
272
274
Provisions for risks, charges and liabilities for landfills
20
453
462
466
Other non-current liabilities
21
Total non-current liabilities
182
177
162
4,871
4,772
4,658
1,315
Current liabilities
Trade payables
22
1,235
1,348
Other current liabilities
22
497
442
612
Current financial liabilities
23
587
675
406
Tax liabilities
24
53
25
103
Total current liabilities
2,372
2,490
2,436
Total liabilities
7,243
7,262
7,094
–
–
17
10,901
10,855
12,054
LIABILITIES DIRECTLY ASSOCIATED WITH
NON-CURRENT ASSETS HELD FOR SALE
TOTAL EQUITY AND LIABILITIES
27
Consolidated income
statement (1-2)
Millions of euro
Note
01 01 2012
03 31 2012
01 01 2011
03 31 2011
01 01 2011
12 31 2011
1,939
1,725
6,096
18
20
102
1,957
1,745
6,198
1,473
1,252
4,396
68
69
302
4,698
Revenues
Revenues from the sale of goods and services
Other operating income
Total revenues
26
Operating expenses
Cost of raw materials and services
28
Other operating expenses
Total operating expenses
27
1,541
1,321
Labour costs
28
145
146
558
Gross operating income - EBITDA
29
271
278
942
Depreciation, amortization, provisions and write-downs
30
88
131
641
Net operating income - EBIT
31
183
147
301
Financial income
11
26
55
Financial expense
66
38
178
1
2
(132)
(54)
(10)
(255)
–
–
6
–
(1)
(10)
Financial balance
Portion of income and charges when shareholdings are
carried at equity
Total financial balance
32
Income before tax
(1)
33
129
136
42
Significant non-recurring events and transactions in the consolidated financial statements are indicated in Note 38, as required by Consob
Communication DEM/6064293 of July 28, 2006.
(2)
Values provided for the purposes of comparison with the January - March 2011 reporting period, more specifically for income statement items such as
income and charges generated when shareholdings are carried at equity, have been reclassified to reflect the application of IFRS5.
Consolidated income statement
Millions of euro
Note
Income taxes
34
01 01 2012
03 31 2012
01 01 2011
03 31 2011
01 01 2011
12 31 2011
55
40
148
74
96
(106)
8
(9)
(810)
Net income
82
87
(916)
Income pertaining to minority interests
(6)
(2)
496
76
85
(420)
Result after tax from operating activities
Net income for the period/year pertaining to the Group
35
36
29
Earnings (loss) per share (in euro):
– basic
0.0244
0.0275
(0.1352)
– basic, from operating activities
0.0219
0.0284
(0.0076)
– basic, from activities held for sale
0.0025
(0.0009)
(0.1276)
– diluted
0.0244
0.0275
(0.1352)
– diluted, from operating activities
0.0219
0.0284
(0.0076)
– diluted, from activities held for sale
0.0025
(0.0009)
(0.1276)
Consolidated statement of
comprehensive income
Millions of euro
Net income/(loss) for the period (A)
Effective part of gains/(losses) on cash flow hedges
03 31 2011
12 31 2011
82
87
(916)
(23)
(4)
(13)
Gains/(losses) on the re-measurement of financial assets available for sale
–
–
–
Tax effect of other gains/(losses)
9
1
2
(14)
(3)
(11)
Total other gains/(losses) net of the tax effect of companies
consolidated on a line-by-line basis (B)
30
03 31 2012
Other gains/(losses) of companies valued at equity, net of the tax
effect (C)
Total gain/(loss) (A + B + C)
–
10
(11)
68
94
(938)
60
88
(453)
8
6
(485)
Total gain/(loss) attributable to:
Shareholders of the parent company
Minority interests
Consolidated cash flow
statement
Millions of euro
03 31 2012
12 31 2011
03 31 2011
147
132
132
Net income for the period/year (**)
74
(951)
87
Depreciation
75
336
87
Amortization
21
79
21
Write-downs/disposals of tangible and intangible assets
2
125
1
Results from companies carried at equity (***)
(1)
979
10
Write-downs of shareholdings
–
4
–
Income taxes paid
–
(240)
Change in assets and liabilities (*)
(16)
78
1
155
410
207
Investments in tangible assets
(39)
(183)
(29)
Investments in intangible assets and goodwill
(35)
(127)
(20)
Investments in shareholdings and securities (*)
–
(11)
–
Sales of fixed assets and shareholdings
11
79
4
CASH AND CASH EQUIVALENTS AT THE BEGINNING
OF THE REPORTING PERIOD/YEAR
Operating activities
–
Investing activities
Dividends received from shareholdings in companies carried
at equity and other shareholdings
Net cash from investing activities
FREE CASH FLOW
–
17
–
(63)
(225)
(45)
92
185
162
Financing activities
Change in financial assets (*)
(24)
(236)
30
Change in financial liabilities (*)
34
481
(67)
Net financial expenses paid
(4)
(111)
(11)
–
(298)
–
Dividends paid by parent company
Dividends paid by subsidiaries
–
(6)
Cash flows from financing activities
6
(170)
(48)
98
15
114
245
147
246
CHANGE IN CASH AND CASH EQUIVALENTS
CASH AND CASH EQUIVALENTS AT THE END OF THE
REPORTING PERIOD/YEAR
–
(*) Net of balances with contra-entry in equity and other balance sheet/cash flow items.
(**) Income for the reporting period/year is shown net of capital gains generated by the sale of shareholdings.
(***) At March 31, 2011 this item included the value of shareholding in TdE S.r.l. which has been reclassified in the Income Statement
under "Net result from non-current assets sold or held for sale".
31
Consolidated statement
of changes in equity
Description
Millions of euro
Equity at 12 31 2010
Share
capital
Treasury
shares
Cash Flow
Hedge
Note 12
Note 13
Note 14
1,629
(61)
31
Changes in the first three months of 2011
32
Allocation of 2010 net income
IAS 32 and IAS 39 reserves (*)
3
Put option on Delmi S.p.A. shares
Net income for the period pertaining to the Group and
minority interests
1,629
(61)
34
Changes from April, 1 2011 to December 31, 2011
Distribution of dividends
(14)
Put option on Delmi S.p.A. shares
Other changes
Net result for the period pertaining to the Group and
minority interests
1,629
(61)
20
Changes in the first three months of 2012
Allocation of 2011 net income
(16)
Other changes
Net income for the period pertaining to the Group and
minority interests
(*) These form part of the statement of comprehensive income.
1,629
(61)
4
Consolidated statement of changes in equity
Other
reserves, and
retained
earnings
Group
net result
for the
period/year
Note 14
Note 15
1,594
308
308
Total
Group
net equity
Total
net
equity
Note 16
3,501
1,344
4,845
33
(308)
3
4
1,906
Minority
interests
4
4
7
4
85
85
2
87
85
3,593
1,350
4,943
(298)
(298)
(6)
(304)
(14)
(15)
(29)
(2)
(2)
(7)
(7)
(5)
(12)
(505)
(498)
(1,003)
826
3,593
(505)
1,599
(420)
(420)
2,767
420
(16)
(3)
1,176
(2)
2
(3)
(14)
(3)
76
76
6
82
76
2,824
834
3,658
0.3
Notes to the
Interim report
on operations
General information
on A2A S.p.A.
A2A S.p.A. is a company incorporated under Italian law.
A2A S.p.A. and its subsidiaries (the “Group”) operate both in Italy and abroad, especially
following the acquisitions in France and Montenegro which took place in recent years.
The A2A Group mainly operates in the following sectors:
• the production, sale and distribution of electricity;
• the sale and distribution of gas;
• the production, sale and distribution of heat through district heating networks;
• waste management (from collection and sweeping to disposal) and the construction and
management of integrated waste disposal plants and systems, also making them available
for other operators;
• integrated water cycle management.
35
Interim report on operations
The Interim report on operations (the “Report”) of the A2A Group at March 31, 2012 is
presented in millions of euro; this is also the functional currency of the economies in which the
Group operates.
The report of the A2A Group at March 31, 2012 has been prepared:
• in compliance with Legislative Decree no. 58/1998 (art. 154 ter) and subsequent
amendments, and with the Issuers' Regulations published by Consob;
36
• in accordance with the International Financial Reporting Standards (IFRS) issued by the
International Accounting Standard Board (IASB) and approved by the European Union.
IFRS means all reviewed international accounting standards (IAS) and all interpretations
of the International Financial Reporting Interpretations Committee (IFRIC), formerly
known as Standing Interpretations Committee (SIC).
In preparing the Report, the same standards were adopted as those used in the preparation of
the annual report at December 31, 2011.
The principles and interpretations described in detail in the paragraph below “Changes in
international accounting standards” were adopted for the first time on January 1, 2012.
This Report at March 31, 2012, which has not been audited, was approved on May 10, 2012 by
the Management Board which also authorized its publication.
Financial statements
The Group has adopted a format for the statement of financial position which presents
current and non-current assets and current and non-current liabilities separately, as required
by paragraphs 60 and following of “IAS 1 revised”.
The income statement is presented in a vertical format with items classified by nature, as this
is considered more representative than a classification by function. The selected format is
consistent with the presentation used by the Group’s major competitors and is line with
international practice. The results of ordinary operations are shown in the income statement
separately from income or costs deriving from non-recurring transactions that do not recur in
the business's ordinary operations, such as gains or losses on the sale of shareholdings and
other non-recurring income or expense; this makes it easier to measure the effective
performance of the Group’s ordinary operating activities.
The cash flow statement has been prepared using the indirect method, as permitted by IAS 7.
The statement of changes in equity has been prepared in accordance with revised IAS 1
revised.
The formats adopted for the financial statements are the same as those used to prepare the
Consolidated annual report at December 31, 2011.
37
Basis of preparation
The Interim report on operations at March 31, 2012 has been prepared on a historical cost
basis, with the exception of those items which under IFRS must or can be measured at fair
value, as explained in more detail in the valuation criteria.
The consolidation principles, accounting principles, accounting policies, and estimates used
in the preparation of the Report are consistent with those used to prepare the consolidated
annual report at December 31, 2011.
38
Changes in international
accounting standards
The accounting standards adopted in the first three months of 2012 were the same as those
used in the previous year, with the exception of the changes discussed in the paragraphs below
"Accounting principles, amendments and interpretations approved by the European Union,
and applicable from the current period with effects for the Group”.
The subsequent paragraph “Accounting principles, amendments and interpretations not yet
approved by the European Union” provides a summary of the changes which will be adopted
in future periods, indicating where possible the estimated effects on the Interim report on
operations of the A2A Group.
Accounting principles, amendments and interpretations approved by
the European Union and applicable from the current period with
effects for the Group
Certain changes to international accounting standards and their interpretations became
effective on January 1, 2012, none of which however led to any significant effects on the
Group’s various financial statements. The main changes are described below:
• IAS 12 “Income Taxes”: the amendment was issued on December 20, 2011 and took effect
from January 1, 2012; it states that the measurement of deferred tax liabilities and deferred
tax income must reflect the tax effects deriving from the way in which the entity expects to
recover or extinguish the accounting value of the asset or liability. Hence, according to the
amendment, in certain circumstances, the measurement of deferred tax liabilities and
deferred tax income must reflect the basic presumption that the value of the underlying
asset will be recovered in full through sale, unless there is obvious proof that it can be
recovered through use. These circumstances are when the deferred tax liabilities and
deferred tax income derive from:
1. a property investment, when the entity applies the fair value model in IAS 40
"Investment Property";
39
2. property, plant and equipment or intangible assets, when the entity adopts the
provisions of IAS 16 "Property, plant and equipment" and IAS 38 "Intangible assets".
Accounting principles, amendments and interpretations not yet
approved by the European Union.
The following standards and interpretations have not been applied as at the present time the
competent bodies of the European Union have still to complete their approval process.
• IFRS 1 “First-time adoption of International Financial Reporting Standards”: on December
20, 2010 IASB issued the document “Severe Hyperinflation and Removal of Fixed Dates for
First-time Adopters (Amendments to IFRS 1)”. The reason for removing fixed dates in IFRS
1 is to allow new users of IAS/IFRS to apply the same simplified rules as bodies that
migrated to international accounting standards in 2005; for businesses publishing
accounts to IFRS for the first time after being unable to do so on account of super
hyperinflation, the amendments allow for IAS/IFRS to be backdated from the first
40
adoption, enabling these organizations to use the fair value instead of the cost for all assets
and liabilities in previous accounts.
• IFRS 9 “Financial Instruments”, published by IASB on December 16, 2011 and amending the
application date of this standard with effect from January 1, 2015 (it had previously been
set for January 1, 2013).
• IFRS 10 “Consolidated Financial Statements”, issued by IASB on May 12, 2011 and taking
effect from January 1, 2013. IFRS 10 establishes principles for the presentation and
preparation of consolidated financial statements and emphasizes the concept of control,
regardless of the nature of the shareholding held by the entity preparing the consolidated
accounts. This control becomes evident when the three circumstances below occur:
1. the power to influence and manage key operations in the shareholding;
2. exposure, or rights, to receive variable returns from its involvement with the investee;
3. the ability to use its power over the investee to affect the amount of the investor's
returns.
The power to influence operations that significantly affect the results of the subsidiary
(so-called relevant activities) can be more easily exercised through voting rights (including
potential voting rights), but also by way of contractual arrangements. Relevant activities,
when control is exercised through voting rights, are represented by operating
(development, purchasing and product sales) and financial management activities
(obtaining and negotiating loans, acquisitions and sale of financial assets).
Variable returns also include dividends, payment for services provided by the parent for
the subsidiary's activities and tax benefits.
This third condition to establish whether control exists regards the interaction between
the first two conditions. In other circumstances, an organization can have an interest in a
group of the subsidiary's assets and liabilities as part of a legal or contractual condition.
IFRS 10 establishes that, to determine if an organization is a parent, these assets and
liabilities can be considered a separate entity only if it is economically separate from the
entity as a whole, and is therefore a subsidiary company for the purposes of the
consolidated financial statements. Following the introduction of this standard, a revised
version of IAS 27 "Separate Financial Statements" was issued which remains the main
reference for separate accounts, and of IAS 28 "Shareholdings in Associates and Joint
Ventures"; the interpretation of SIC 12 "Consolidation - Special Purpose Entities" has also
been superseded. Earlier adoption of this standard is permitted.
• IFRS 11 “Joint Arrangements”, published by IASB on May 12, 2011 and taking effect from
January 1, 2013. This standard establishes that in a joint arrangement, two or more parties
have joint control and decisions regarding relevant activities require the unanimous
consent of the parties. IFRS 11 describes two different types of joint arrangement:
1. Joint operations.
2. Joint ventures.
The two types differ in the rights and obligations of each party to the joint arrangement; in
a joint operation, the parties have rights to the assets, and obligations for the liabilities,
relating to the arrangement whereas in a joint venture, the parties have rights to the net
assets of the arrangements. IFRS 11 establishes that the assets, liabilities, costs and
revenues relating to a joint operation are recognized by the parties in line with their
percentage control, whereas joint ventures are recognized by the parties using the net
equity method, as laid down in IAS 28 "Shareholdings in Associates and Joint Ventures".
Joint arrangements are recognized in the same way for both separate and consolidated
financial statements, with assets, liabilities, costs and revenues recognized on the basis of
the percentage of control; for joint ventures and shareholdings in subsidiaries and
associates on the other hand, they can be recognized in separate financial statements
either at cost or as defined in IFRS 9 "Financial Instruments" (and IAS 39 "Financial
Instruments: recognition and measurement"), as also specified in IAS 27 "Separate
Financial Statements". As regards disclosures to be provided in the explanatory notes, for
more comprehensive information you are referred to the provisions of the new IFRS 12
"Disclosures of Interests in Other Entities". Earlier adoption of this standard is permitted.
• IFRS 12 “Disclosures of Interests in Other Entities", issued by IASB on May 12, 2011 and
effective from January 1, 2013,; this standard establishes minimum disclosure
requirements, combining them with those established by other standards, that entities
must provide to help users of the financial statements to understand the nature of
subsidiary, associate and joint arrangement (the latter is defined in IFRS 11) interests held
41
by the entity, and the associated risks. In particular, the entity is required to provide
information on interests acquired in order to determine if these are controlling interests
(also joint) and if any significant influence is exerted on other entities. Earlier adoption of
this standard is permitted.
• IFRS 13 “Fair Value Measurement”, published by IASB on May 12, 2011 and effective from
January 1, 2013. IFRS 13 determines the fair value, and provides guidelines on how to
measure it, also introducing disclosure requirements. The standard does not specify when
fair value measurement is required, but does lay down how it should be done when it is
required by other standards. The new standard applies to all operations, both financial and
non-financial, for which international accounting standards require or allow fair value
measurements, with the exception of transactions recognized on the basis of IFRS 2
"Share-based Payments", leasing agreements governed by IAS 17 "Leasing", and
transactions recognized on the basis of the "net realizable value", as described in IAS 2
"Inventories" and the "Value in use", as defined in IAS 36 "Impairment of Assets". The
standard defines the “fair value” as the amount for which an asset could be exchanged, or
a liability extinguished, in a transaction between willing, informed and unrelated parties. If
42
transactions can be observed directly in the marketplace, the fair value can be measured
fairly easily; where this is not possible, valuation techniques are used. This standard
describes three of these techniques, which can be used to measure the fair value; the first
one is the market approach, which uses prices and other relevant information generated
by market transactions involving comparable assets and liabilities; the second is the
income approach, which converts future cash flows or income and expenses; the third
method is the cost approach, which requires the entity to produce a value that reflects the
amount that would be required at the current time to replace the service capacity of an
asset. As regards disclosures to be provided in financial statements, IFRS 13 extends the
hierarchy of three levels of fair value, which vary depending on the input used in the
valuation techniques, as already provided in IFRS 7 "Financial instruments: disclosures", to
all assets and liabilities within its scope of application. Several disclosure requirements
vary depending on whether the fair value measurement was done on a recurring or nonrecurring basis: recurring means the fair value measurements required by other
accounting standards at the end of each reporting period, whereas non-recurring means
fair value measurements required in special circumstances only. Earlier adoption of this
standard is permitted.
• IFRIC 19 “Extinguishing financial liabilities with equity instruments”: the current version of
this standard was issued on November 26, 2009 by the IFRIC Committee and took effect
on July 1, 2010, providing clarification and guidelines on:
1. how an entity should measure equity instruments issued against the cancellation of a
financial liability.
2. how differences between the par value of financial liabilities that have been
extinguished and the initial value of the equity instrument should be recognized and
accounted for;
3. whether the issue of equity instruments falls within the definition of “consideration”
as defined in IAS 39, paragraph 41.
As regards the first aspect, the interpretation calls for the fair value measurement of the
equity instruments issued to cancel a financial debt, unless the value cannot be reliably
measured. In this case the equity instrument must be valued at the fair value of the
financial liability that is to be cancelled.
In addition, it clarifies that any difference between the par value of the cancelled financial
liability and the initial value of the equity instruments issued must be booked to the income
statement.
• IFRIC 20 “Stripping Costs in the Production Phase of a Surface Mine”; the interpretation
considers when and how to account for the costs of removing waste materials in the
production phase of a mine. The interpretation makes a distinction between the benefits
accruing from waste removal activities. Benefits consist of the generation of usable ore
and improved access to further quantities of material that will be mined in future periods.
In the former, the materials constitute inventory and the associated costs are therefore
accounted for as such (in compliance with IAS 2 "Inventories"). In the latter case, the costs
are accounted for as non-current stripping activity assets, provided that the future
economic benefit (improved access to the ore body) associated with the stripping activity
will in all likelihood flow to the entity.
• IAS 12 “Income Taxes”, issued by IASB on December 20, 2011; IASB admits exceptions to the
general principle governing the recognition of deferred tax liabilities and deferred tax
income arising from property investments measured at fair value (as provided by IAS 40
Investment Property); the assumption is that the recognition of deferred tax liabilities
depends solely on whether an entity expects to sell the investment. This amendment
became effective on January 1, 2012 although earlier adoption is permitted.
• Revised IAS 27 "Separate Financial Statements", issued by IASB on May 12, 2011, effective
from January 1, 2013; a revised version of standard IAS 27 was published at the same time
as IFRS 10 "Consolidated Financial Statements" was introduced, retaining the general
principle regarding separate financial statements. This standard applies to the valuation of
subsidiary, associate and joint venture shareholdings in the separate financial statements
of the parent. Joint ventures, as is also the case for shareholdings in subsidiaries and
associates, are recognized in separate financial statements at cost or as described in IFRS
9 "Financial Instruments" (and in IAS 39 "Financial instruments: recognition and
measurement"). When a parent company chooses not to prepare consolidated financial
statements, as established in IFRS 10 "Consolidated Financial Statements", in its separate
43
financial statements, it must disclose shareholdings in subsidiaries, associates and joint
ventures, the main offices (and legal premises if different), their operations, the
percentage stake in each individual company and details of how the respective values are
brought to account. Earlier adoption of the principle is permitted, and in this case, IFRS 10
"Consolidated Financial Statements", IFRS 11 "Joint Arrangements", IFRS 12 "Disclosures of
Interests in Other Entities" and IAS 28 (as amended in 2011) must all be applied.
• Revised IAS 28 "Shareholdings in Associates and Joint Ventures", issued by IASB on May 12,
2011, effective from January 1, 2013; a revised version of this standard was published at the
same time as principle IFRS 10 "Consolidated Financial Statements", establishing how
shareholdings in associates and joint ventures should be recognized. An entity with joint
control or significant interest over another body must recognize this shareholding using
the net equity method. Earlier adoption of the principle is permitted, and in this case, IFRS
10 "Consolidated Financial Statements", IFRS 11 "Joint Arrangements", IFRS 12 "Disclosures
of Interests in Other Entities" and IAS 27 (as amended in 2011) must all be applied.
• IAS 32 “Accounting for rights issues": approved on December 23, 2009 and effective from
February 1, 2010: allows warrants to be classified as equity in the issuing body's financial
44
statements when issued to increase share capital at a fixed price for all shareholders in a
different exercise currency from the issuing body. The current accounting practice laid
down in IAS 32 established that these instruments must be presented as liabilities for
derivative instruments.
• IAS 1 “Presentation of Financial Statements”; the revision, which will take effect from July
1, 2012, concerns the presentation of data in the comprehensive statement of income. In
particular, this amendment retains the option of presenting the Income Statement and
Statement of Comprehensive Income in either a single report or in two separate reports,
one following immediately after the other. The various components that will be charged to
the Income Statement in future years must be grouped together in the statement of
comprehensive income: these figures can be presented either with or without the net tax
effect. Earlier adoption of this amendment is permitted.
• IAS 19 "Employee Benefits", effective from January 1, 2013; the changes made in the
amendment can be summed up in three main categories:
(i) recognition and presentation in financial statements;
(ii) disclosures;
(iii) further amendments.
The first type of amendment concerns defined benefit plans. In particular, the corridor
method to recognize actuarial gains and losses has been eliminated, and the obligation to
immediately recognize these components in the Income Statement introduced.
For the presentation of the financial statements, the amendment establishes that changes
in defined benefit costs are split into the following three components:
1. service cost;
2. finance cost;
3. remeasurement cost.
As regards disclosure, in addition to eliminating the need to provide details of deferred
recognition of gains and losses (no longer necessary after the corridor method was
eliminated), the amendment calls for disclosure of details of the plans and associated
amounts brought to account, risk arising from the plans, a sensibility analysis of changes in
demographic risk and participation in multi employer plans. multi employer plans).
45
Scope of consolidation
The Interim report on operations of the A2A Group at March 31, 2012 includes the figures of
the parent company A2A S.p.A. and those of its subsidiaries in which A2A S.p.A., directly or
indirectly, holds a majority of the voting rights that can be exercised at the ordinary
shareholders' meeting. In addition, companies in which the parent exercises joint control with
other entities (joint ventures) and those over which it has a significant influence are
consolidated using the equity method.
46
For a description of changes in the overall scope, you are referred to "Changes in the scope of
consolidation since December 31, 2011" in the explanatory notes to the balance sheet.
Consolidation policies and
procedures
Consolidation Policies
Subsidiaries
The scope of consolidation of the A2A Group comprises the parent company A2A S.p.A. and
the companies over which it exercises direct or indirect control, even when the interest is less
than 50%. Subsidiaries are consolidated from the date on which the Group effectively
acquires control and are deconsolidated from the date on which control is transferred to a
company outside of the Group.
Associates and Joint Ventures
Shareholdings in associates, namely those in which the A2A Group has a considerable interest
and is able to exercise significant influence, and those over which A2A S.p.A. has joint control
together with other entities (joint ventures), are accounted for using the equity method.
Gains and losses pertaining to the Group are recognized in the financial statements from the
date on which the significant influence or joint control commenced.
In the event that the loss pertaining to the Group exceeds the book value of the shareholding,
the carrying amount is reduced to zero and any excess loss is provided for to the extent that
the Group has legal or implicit obligations towards the associate to cover its losses or, in any
case, to make payments on its behalf.
Potential voting rights
If the A2A Group holds call options to buy shares or warrants that can be converted to
ordinary shares, or other equity instruments having the potential, if exercised or converted, to
give the Group voting rights or reduce the voting rights of third parties ("potential voting
rights"), such potential voting rights have to be taken into consideration when assessing
47
whether or not the Group has the power to govern or influence the other company's financial
and operating policies.
Consolidation Procedures
General Procedure
The financial statements of the subsidiaries, associates and joint ventures consolidated by the
A2A Group are prepared at the end of each reporting period using the same accounting
policies as the parent company. Any items recognized or measured using different accounting
principles are adjusted during the consolidation process to bring them into line with Group
accounting policies. All intragroup balances and transactions, including any unrealized profits
arising from transactions between Group companies, are fully eliminated.
In preparing the Interim Report, the assets, liabilities, income and expenses of the companies
being consolidated are included in their entirety on a line-by-line basis, stating the portion of
48
equity and net income for the period attributable to minority interests separately in the
balance sheet and income statement.
The book value of the shareholding in each subsidiary is eliminated against the corresponding
share of its net equity, including any adjustments to fair value at the acquisition date; any
differences arising are accounted for in accordance with IFRS 3.
Transactions with minority shareholders which do not lead to the loss of control in
consolidated companies are accounted for using the economic entity view approach.
Consolidation procedure for assets and liabilities held for sale (IFRS 5).
In the case of particularly large figures and exclusively in connection with non-current assets
and liabilities available for sale, and only in this case, in accordance with the requirements of
IFRS 5, the related intercompany financial receivables and payables are not eliminated in order
to provide a clear presentation of the financial impact of a possible disposal, as described in
more detail in "Accounting Standards and Valuation Criteria".
Effects on consolidation procedures of certain contracts concerning
the shares/quotas of Group companies
a) Option contracts between A2A S.p.A. and Società Elettrica Altoatesina SEL S.p.A.
relating to a part of their investment in Delmi S.p.A.
A2A S.p.A. has signed option contracts with Società Elettrica Altoatesina SEL S.p.A. (SEL) in
relation to the portion of the shares it holds in Delmi S.p.A.
Under the option contracts between A2A S.p.A. and SEL S.p.A., the latter has the right to sell to
A2A S.p.A. and A2A S.p.A. has the right to purchase from SEL S.p.A. two lots of Delmi S.p.A.
shares, representing 50% and 35% respectively of SEL S.p.A.'s shareholding in Delmi S.p.A.
(currently 10% of Delmi S.p.A.'s share capital).
The strike price of these options will be calculated for each lot based on various formulas that
take into account SEL S.p.A.'s initial investment and/or the value of Edison S.p.A's shares at the
time the options are exercised, depending among other things on the case of SEL S.p.A.'s put
options, whether SEL S.p.A.- – at the time of exercising the option - has or has not become the
owner of some of Edison S.p.A.'s hydroelectric power plants located in the Province of
Bolzano.
If exercised, the SEL S.p.A. put options and the A2A S.p.A. call options on SEL S.p.A., can be
implemented in stages. A2A S.p.A and SEL S.p.A. have renegotiated the expiry dates of these
options, postponing them beyond the initial deadline. In part, this deferral was due to the fact
that the parties could not agree on whether the conditions for the exercise of one of SEL S.p.A.'s
put options had been satisfied or not. As a result, the options are still outstanding.
In accordance with paragraph 23 of IAS 32, the Group has recognized the present value of the
estimated outlay as a liability.
Changes in the present value of this liability caused by the passing of time are considered as
financial expenses and recognized in profit and loss.
There is still some uncertainty in international accounting standards as to how to treat the
difference between the present value of the strike price of the put options and the carrying
amount of the minority interests. In the absence of an interpretation of this question by the
IFRIC, the Group has decided to show the difference as a deduction from equity attributable
to the Group (if positive) or as an increase in equity attributable to the Group (if negative) as
an alternative to adjusting goodwill.
This is consistent with previous decisions taken by the Group. Accordingly, any changes in the
liability that do not depend on time result in adjustments to Group equity.
49
If the options expire without them being exercised, the liability will be reclassified to equity,
reinstating the minority interests.
The Interim report on operations at March 31, 2012 reports a liability to third parties for the
possible exercise of the put options on the shares of Delmi S.p.A. of 91 million euro (91 million
euro at December 31, 2011), a reduction in minority interests of 157 million euro (unchanged
with respect to the previous balance sheet date).
The share of Delmi S.p.A.'s result remains 51% as the above options do not currently give A2A
S.p.A. access to the economic benefits associated with the shares under option.
b) Call option for the purchase of 1% of the share capital of ASM Novara S.p.A.
A2A S.p.A. owns 50% of the shares of ASM Novara S.p.A., a company with share capital of one
million euro, set up with other shareholders in order to build and manage a district heating
network in the town of Novara.
As a result of an agreement between the shareholders of ASM Novara S.p.A., A2A S.p.A. holds
a call option to buy 1% of the share capital of that company. Similarly, the other shareholders
50
holding the remaining 50%, have a put option to sell 1% of the share capital to A2A S.p.A.
Exercising one of these options would give A2A S.p.A. control over ASM Novara S.p.A.
Any of the parties can exercise their options within three years of fulfillment of certain
conditions relating to the construction of the district heating network in Novara: by March 31,
2012 these conditions had not yet been fulfilled.
IAS 27, paragraph 14, establishes that when assessing whether an entity has the power to
govern the financial and operating policies of another entity, it has to take account of the
“potential voting rights” that would derive from exercising the options, providing they are
currently exercisable. Such potential voting rights should then be added to the existing voting
rights in order to calculate the total interest held in the share capital, which in turn establishes
the method of consolidation to be applied to the investee.
Potential voting rights that are not currently exercisable are understood as being, for example,
those that cannot be exercised until a future date or until some future event takes place.
Since as explained above the potential voting right held by A2A S.p.A. in ASM Novara S.p.A. is
not currently exercisable, the shareholding in ASM Novara S.p.A. is consolidated using the
equity method.
When options are exercised, an assessment will be made as to whether the stake in ASM
Novara S.p.A. is controlled by A2A S.p.A, in order to decide on the consolidation method to be
used.
c) Option granted to the Municipality of Varese for the sale of 9.8% of Aspem S.p.A.
and 10% of Varese Risorse S.p.A.
A2A S.p.A. holds 90% of the shares of Aspem S.p.A., a company that provides local public
services in the city of Varese and in other towns in the province of Varese.
Under the shareholder agreement between A2A S.p.A. and the Municipality of Varese, the
latter has the right, but not the obligation, to sell (put option) to A2A S.p.A. 9.8% of the share
capital of Aspem S.p.A. and 10% of the share capital of Varese Risorse S.p.A. (90% controlled
by Aspem S.p.A).
The Municipality of Varese can exercise its option after the expiry date of the period of intratransferability of the shares in Aspem S.p.A. and Varese Risorse S.p.A., which lasts for three
years from the date of signing the shareholder agreement. These options have been valued on
the basis of purchase value for Aspem for Varese Risorse S.p.A.
In line with paragraph 23 of IAS 32, the Group has booked to liabilities with associated counter
entry under net equity, the present value of the estimated outlay which it will not be able to
avoid if it exercises this option.
The Interim Report at March 31, 2012 shows a liability of 4 million euro to the Municipality of
Varese, for the possible exercise of the put option on the shares of Aspem S.p.A. and Varese
Risorse S.p.A., with a corresponding reduction in the equity attributable to minority interests.
51
Highlight at March 31, 2012 and March 31, 2011 for joint ventures
(consolidated at equity)
Key figures at March 31, 2012
(Millions of euro)
Ecodeco
Group
Companies
50% (*)
Metamer
50%
INCOME STATEMENT
2.5
4.5
–
0.2
% of net sales
4.5%
Depreciation, amortization and write-downs
0.2
–
(0.2)
0.2
Result for the period
(0.1)
0.1
14.9
9.1
BALANCE SHEET
Total assets
Net equity
1.6
1.4
Net debt
(2.1)
2.8
(*) Bellisolina S.r.l., Bergamo Pulita S.r.l. and Sed S.r.l.
52
Key figures at March 31, 2011
(Millions of euro)
Edipower
Transalpina
di Energia
Companies
of Ecodeco
Group
50% (*)
20%
50%
52
1,554
21
92
(0.2)
40.4%
5.9%
(7.4%)
13
84
0.2
INCOME STATEMENT
% of net sales
Depreciation, amortization and write-downs
2.7
8
8
(0.4)
Result for the period
4
(12)
(0.5)
BALANCE SHEET
Total assets
797
8,535
12.0
Net equity
426
1,759
0.9
Net debt
(221)
(2,652)
(3.4)
(*) Bellisolina S.r.l., Bergamo Pulita S.r.l. and Sed S.r.l.
Seasonal nature of the business
Given the nature of the Group's ordinary activities, the interim results are liable to change as a
result of the weather experienced during the period.
In this respect, reference should be made to the comments on performance by sector
presented below.
53
A2A Group – Areas of activity
The A2A Group operates in the production, sale and distribution of gas and electricity, district
heating, environmental services and the integrated water cycle. These activities in turn form
part of the following sectors:
• Energy Sector;
• Heat and Services Sector;
• Environment Sector;
• Networks Sector;
54
• Other Services and Corporate Sector.
This breakdown into sectors reflects the organisation of financial reports regularly analyzed by
management and by the Management Board in order to manage and plan Group business.
Sectors
of the A2A Group
Thermoelectric and
hydroelectric
plants
Cogeneration
plants
Collection and
street-sweeping
Electricity
networks
Other services
Energy
Management
District heating
networks
Treatment
Gas networks
Corporate services
Sale of electricity
and gas
Sale of heat and
other services
Disposal of waste
with energy
recovery
Integrated water
cycle
Sectors of the A2A Group
Energy
Heat & Services
Environment
Networks
Other Services and Corporate
Geographical areas of activity
55
Hydroelectric plants
Thermoelectric plants
Co-generation plants
Waste disposal plants
Technological partnerships
Millions of euro
Revenues
Heat & Services
01 01 12
03 31 12
01 01 11
03 31 11
01 01 12
03 31 12
01 01 11
03 31 11
1,600
1,404
192
166
– of which inter-sector
85
69
16
15
79
94
53
48
4.9%
6.7%
27.6%
28.9%
% of revenues
Depreciation, amortization, provisions and write-downs (*)
56
Energy
% of revenues
(34)
(56)
(13)
(13)
45
38
40
35
2.8%
2.7%
20.8%
21.1%
7
4
Net financial income/expense
Non-operating income/expenses
Income before tax
Income taxes
Result after tax from operating activities
Net result from non-current assets sold
or held for sale
Minority interests
Net income for the period pertaining to the Group
Gross investments (1)
(*)
(1)
(a)
31(a)
13
"Consolidation cancellations/adjustments" listed under "Depreciation, amortization, provisions and write-downs" for the
Jan-March 2011 reporting period, were assigned to the respective individual sectors directly.
See "Capital Expenditure" in the tables in notes 1 and 2 on tangible and intangible assets in the Notes to the balance sheet.
Includes the acquisition of the Tecnovalore business, for 7 million euro.
Millions of euro
Tangible assets
Intangible assets
Energy
Heat & Services
03 31 12
12 31 11
03 31 12
12 31 11
2,148
2,171
477
471
56
57
178
163
Trade receivables and current financial assets
1,777
1,903
236
182
Trade payables and current financial liabilities
1,208
1,606
163
174
Networks
Environment
Other Services
and Corporate
Eliminations
01 01 12
03 31 12
01 01 11
03 31 11
01 01 12
03 31 12
01 01 11
03 31 11
01 01 12
03 31 12
01 01 11
03 31 11
169
165
210
210
60
57
(274)
(257)
103
110
15
10
55
53
(274)
(257)
68
65
71
76
–
(5)
40.2%
39.4%
33.8%
36.2%
–
(8.8%)
7
(27)
(28)
(21)
(27)
–
(7)
–
–
–
–
41
37
50
49
7
(12)
22.4%
23.8%
23.3%
11.7%
(21.1%)
25
Networks
8
3
Environment
4
01 01 11
03 31 11
–
24.3%
24
01 01 12
03 31 12
Total Group
4
Other Services
and Corporate
–
–
Eliminations
03 31 12
12 31 11
01 01 12
03 31 12
01 01 11
03 31 11
1,957
1,745
–
–
271
278
13.8%
15.9%
(88)
(131)
183
147
9.4%
8.4%
(54)
(10)
–
(1)
129
136
(55)
(40)
74
96
8
(9)
(6)
(2)
76
85
74
49
Total Group
03 31 12
12 31 11
03 31 12
12 31 11
03 31 12
12 31 11
03 31 12
12 31 11
1,451
1,456
466
477
216
220
(109)
1,363
1,364
37
37
79
79
(195)
(110)
4,649
4,685
(197)
1,518
1,503
345
341
350
256
316
309
(601)
(800)
2,423
2,191
279
305
172
176
597
560
(597)
(798)
1,822
2,023
57
ASSETS
Non-current assets
1) Tangible assets
Millions of euro
58
Land
Balance
at
12 31 2011
244
Buildings
Plant and machinery
Changes during the period
Investments/
Acquisitions
Other
Changes
2 (1) 818
1 2 3,130
20 5 Industrial and commercial equipment
39
1 (1) Other tangible assets
59
5 3
Landfills
11
297
Construction in progress and advances
66
9 Leasehold improvements
12
1 Total
Writedowns
Depreciation
Total
Changes
1 245
(5) (2)
816
(1) (57)
(33)
3,097
(1)
(1)
38
(1) (4)
3 62
(1)
10
(7)
(7)
290
4 70
(1) Assets held under concession (freely transferable)
Leased assets
Disposals
and sales
Balance
at
03 31 2012
(5) (1) 12
9
9
4,685
39 2 (2) Historical cost
7,658
39 2 (4) Accumulated depreciation
(2,973)
–
(75)
(36) 4,649
37
7,695
(73) (3,046)
of which:
2
(75)
“Tangible assets” amounted to 4,649 million euro (4,685 million euro at December 31,
2011), representing a net decrease of 36 million euro.
The following changes took place during the period:
• increase of 39 million euro due to capital expenditure, as described in more detail
later;
• increase of 2 million euro for other variations;
• decrease of 2 million euro due to alienation, net of accumulated depreciation;
• reduction of 75 million euro, attributable to depreciation charged for the period.
Investments may be analyzed as follows:
• there was an increase of 7 million euro in the energy sector which related mainly to the
following: 3 million euro for work on the Monfalcone and Calabria power plants; 2
million euro for work on the Cassano d’Adda, Premadio, Lovero and Grosio power
plants; 1 million euro for work on the Gissi station; 1 million euro for investments by the
EPCG Group;
• investments of 12 million euro in the heat sector concerned the development of the
district heating networks in the Milan, Brescia and Bergamo areas (6 million euro), the
acquisition of "Tecnovalore" business assets by the subsidiary A2A Calore e Servizi S.r.l.
(3 million euro), and extraordinary maintenance and development on the plants in
Milan, Brescia and Bergamo (3 million euro);
• the increase of 7 million euro in the environmental sector refers to work on the waste-
to-energy plants (1 million euro), development and maintenance work on waste
processing and disposal plants (2 million euro), as well as the acquisition of waste
collection vehicles (4 million euro);
• investments in the networks sector amounted to 12 million euro (1 million euro of which
by the EPCG Group) and focused primarily on the development and maintenance work
carried out on electricity distribution equipment, the extension and reconstruction of
the medium and low and medium voltage network, the installation of new electronic
meters, the upgrading of primary plants, and work on the gas transportation network;
• investments in the Services sector amounted to 1 million euro and mainly concerned
fiber optic cables, building maintenance in Milan, Brescia and Bergamo, and the
acquisition of office equipment.
Tangible assets include leased assets totaling 9 million euro, recognized using the
methodology prescribed in IAS 17, and for which the residual principal due to leasing
companies at March 31, 2012, amounts to 20 million euro.
59
2) Intangible assets
Millions of euro
Balance
at
12 31 2011
Investments/
Acquisitions
Industrial patents and intellectual property rights
21
1
Concessions, licences, trademarks and similar rights
864
27 25
2 Assets in progress
Other intangible assets
Goodwill
Total
13
1 580
4 1,503
35 Other Disposals/
Changes
Sales
Writedowns
1 Depreciation
(3) (1) 20
(17) 10
874
2 27
(1) 1
–
–
Total
Changes
Balance
at
03 31 2012
(21) –
13
4 584
15 1,518
"Intangible assets” amounted to 1,518 million euro at 31 March, 2012 (1,503 million euro at
31 December, 2011) which was an increase of 15 million euro from the end of the previous
period.
Note that under IFRIC 12, from the start of 2010 intangible assets also include the value of
60
third party assets held in concession for the distribution of gas, the integrated water cycle
and district heating networks.
The following changes took place during the period:
• increase of 35 million euro due to capital expenditure during the period;
• increase of 1 million euro for other changes during the period;
• reduction of 21 million euro, attributable to amortization charged for the period.
Investments relate mainly to the following:
• “Industrial patents and intellectual property rights” totaling 1 million euro refer
primarily to CRM software, the new credit management system, the integration of
A2A Group company IT systems, and reconstruction of the A2A S.p.A website.
• "Concessions, licenses, trademarks and similar rights" amounting to 27 million euro
refer to:
- development and maintenance work on gas distribution plants on connecting new
users, and to replace medium and high pressure underground pipes for a total of 9
million euro;
- work on the water transportation and distribution network, on the sewage networks
and on the treatment plants, totaling 2 million euro;
- investments made by the Coriance Group for 15 million euro;
- other investments totaling 1 million euro.
• “Assets in progress”, amounting to 2 million euro, concerning primarily the
development of new IT projects, plant development and maintenance in the gas
distribution, water distribution, sewerage network and purification plant areas.
• “Other intangible assets" amounting to 1 million euro, primarily for investments made
by Ecodeco.
• “Goodwill” amounting to 4 million euro and arising from the acquisition of
"Tecnovalore" business assets by the subsidiary A2A Calore & Servizi S.r.l..
"Other intangible assets" includes the value of Customer Lists, relating to the acquisition
of customer portfolios by Group companies. These balances are being amortized on the
basis of the estimated benefits expected to be obtained in future years. More specifically,
the outstanding balance of 11 million euro reported in the balance sheet relates mainly to
the amount paid in previous years by subsidiaries for the acquisition of customers of the
business acquired from ENEL in 2003 relating to a portion of the networks and the
customers of the city and province of Bergamo, the value of the customers belonging to
the gas sector and the valuation of the customer portfolio of the subsidiary Aspem
Energia S.r.l., a company belonging to the Aspem Group.
Goodwill
Millions of euro
61
Balance at
12 31 2011
Invest
Goodwill
580
4 Total
580
4
Balance at
03 31 2012
Other
Changes
Writedowns
Total
Changes
4
584
-
-
4
584
The figure reported for “Goodwill” shows an increase of 4 million euro compared to the
previous year, which can be traced to the acquisition of "Tecnovalore" business assets by
the subsidiary A2A Calore & Servizi S.r.l..
Goodwill at March 31, 2012 may be analyzed as follows:
Cash Generating Unit - Millions of euro
Electricity networks
271
Ecodeco
227
Aprica
Gas networks
Gas
Heat - Italy
Heat - France
Total goodwill at March 31, 2012
5
38
7
25
11
584
There were no impairment indicators during the reporting period which led to writedowns. Impairment testing is carried out on goodwill at least once a year.
3) Shareholdings and other non-current financial assets
Millions of euro
Balance at
Changes
12 31 2011 in the period
Balance at
03 31 2012
of which included in NFP
12 31 2011
03 31 2012
Shareholdings in companies
carried at equity
521
1
522
-
-
Other non-current financial assets
48
1
49
34
36
Total shareholdings and other
non-current financial assets
569
2
571
34
36
The value of shareholdings carried according to equity method increased by 1 million
euro since December 31, 2011.
The following table sets out details of the changes:
62
Shareholdings carried according to equity method - Millions of euro
Balance at December 31, 2011
Total
521
- Acquisitions and capital increases
- Valuation at equity
1
- Dividends received from shareholdings in companies carried at equity
- Sales
- Other changes
- Reclassifications
Total changes during the period
Balance at March 31, 2012
1
522
The changes taking place, amounting to an overall increase of 1 million euro, relate to the
valuation at equity of the subsidiary PremiumGas S.p.A. and some shareholdings of the
Coriance Group.
A balance of 49 million euro was posted for “Other non-current financial assets" at March
31, 2012, which was an increase of 1 million euro compared with the previous year.
4) Other non-current assets
Millions of euro
Balance at
Changes
Non-current derivatives
Total other non-current assets
113
Balance at
03 31 2012
(17)
12 31 2011
03 31 2012
113
96
96
19
(1)
18
-
-
132
(18)
114
113
96
"Other non-current assets" amounted to 114 million euro (132 million euro at December
31, 2011) and include the following:
• 96 million euro for non-current hedging derivatives, principally Interest Rate Swap
(IRS) contracts hedging the risk of unfavorable fluctuations in the interest rates for
long-term bond loans. This item decreased by 17 million euro compared with the
figure reported at December 31, 2011 mainly due to the measurement of financial
instruments at fair value.
• 18 million euro for "Other non-current assets", principally relating to guarantee
deposits and to expenditure costs incurred but relating to future years.
63
Current assets
5) Inventories
Millions of euro
Inventories
Balance at
12 31 2011
Changes
in the period
267
Balance at
03 31 2012
(147)
120
“Inventories” amounted to 120 million euro (267 million euro at December 31, 2011) which
was a decrease of 147 million euro which may be analyzed as follows:
• 162 million euro relating to the decrease in fuel stocks which, at the balance sheet date,
totaled 15 million euro compared to 177 million euro at December 31, 2011.
• 20 million euro relating to the increase in other inventories which, at the balance sheet
date, totaled 48 million euro compared to 28 million euro at December 31, 2011.
• 8 million euro relates to the decrease in advance payments, which at March 31, 2012
amounted to 2 million while the corresponding figure at the end of the previous year
was 10 million euro.
• 3 million euro relating to the increase in materials, which showed an overall balance of
55 million euro while the corresponding figure for the previous year was 52 million
euro.
6) Trade receivables
Millions of euro
Trade receivables
(Bad debt provision)
Total trade receivables
Balance at
12 31 2011
Changes
in the period
Balance at
03 31 2012
2,285
230
2,515
(327)
1
1,958
(326)
231
2,189
Trade receivables amounted to 2,189 million euro at March 31, 2012 (1,958 million euro at
December 31, 2011), which was in increase of 231 million euro due to the following:
• 136 million euro increase in trade receivables from customers; this account showed a
balance of 1,986 million euro at the balance sheet date which compares to 1,850 million
euro reported in the financial statements dated December 31, 2011;
• an increase of 94 million euro in amounts receivable from Milan and Brescia City
Councils, for which an overall balance of 188 million euro was posted (94 million euro
in the previous year);
• 1 million euro decrease in receivables from associates; a balance of 7 million euro was
64
reported for this item at balance sheet date, which compares to the 8 million euro
reported in the financial statements dated December 31, 2011;
• 2 million euro relates to the increase in contract work in progress, which shows an
overall balance of 8 million euro (6 million euro at December 31, 2011).
The bad debt provision provision decreased by 1 million euro as a result of provisions of 1
million euro less utilizations of 2 million euro made during the period.
7) Other current assets
Millions of euro
Balance at
12 31 2011
Changes
in the period
Balance at
03 31 2012
Current derivatives
36
11
47
Other current assets
374
(92)
282
Total other current assets
410
(81)
329
A balance of 329 million euro was posted for other current assets, as compared to 410
million euro reported for the previous year; this resulted in a decrease of 81 million euro,
which can be analyzed as follows:
• increase of 11 million euro in current derivative instruments which at March 31, 2012
totaled 47 million euro (36 million at December 31, 2011);
• decrease of 40 million euro relating to advances paid to suppliers, which at the end of
the reporting period amounted to 4 million euro (44 million euro at December 31,
2011);
• decrease of 79 million euro in VAT receivables which at March 31, 2012 totaled 52
million euro (131 million euro in the previous year);
• increase of 3 million euro in receivables from the Electricity Sector Equalization Fund
which at March 31, 2012 amounted to 56 million euro, while the corresponding figure
for the previous year was 53 million euro;
• increase of 4 million euro in other receivables which totaled 131 million euro (127
million euro at December 31, 2011);
• increase of 20 million euro in assets attributable to future years, which amount to 38
million euro (18 million euro at December 31, 2011).
8) Current financial assets
Millions of euro
Other financial assets
Balance at
Changes
2
Balance at
03 31 2012
–
12 31 2011
03 31 2012
2
2
2
Financial assets due from related
parties
231
1
232
231
232
Total current financial assets
233
1
234
233
234
This item had a balance of 234 million euro at the balance sheet date (233 million at
December 31, 2011) and refers to financial receivables of 232 million euro due from
associates and 2 million euro from third parties.
9) Current tax assets
Millions of euro
Current tax assets
Balance at
12 31 2011
Changes
during
the year
30
(24)
Balance at
03 31 2012
6
“Current tax assets” amounted to 6 million euro (30 million euro at December 31, 2011)
with a decrease of 24 million euro compared with the previous year.
65
10) Cash and cash equivalents
Millions of euro
Balance at
Changes
147
98
Balance at
03 31 2012
245
12 31 2011
03 31 2012
147
245
"Cash and cash equivalents" showed a balance of 245 million euro at March 31, 2012, which
compares to 147 million euro at the start of the period, therefore equaling an increase of
98 million euro.
Bank deposits include accrued interest even if this had not yet been credited at the end of
the reporting period.
11) Non-current assets held for sale
Millions of euro
66
Balance at
Changes
Non-current assets held for
sale
921
5
Balance at
03 31 2012
926
12 31 2011
03 31 2012
3
11
“Non-current assets held for sale” showed a balance of 926 million euro at the balance
sheet date, which includes the following:
• 915 million euro which is the value of the shareholding in Transalpina di Energia S.r.l.,
reclassified under "Non-current assets held for sale" following agreements signed
with Delmi S.p.a., A2A S.p.A and EDF S.A.;
• 11 million euro reflects the credit arising from the loan granted by Delmi S.p.A. to
Transalpina di Energia S.r.l..
The changes during the period, which equaled an overall increase of 5 million euro, can be
traced to the following:
• 8 million euro credit arising from an additional loan granted by Delmi S.p.A. to
Transalpina di Energia S.r.l.;
• decrease of 3 million euro deriving from the sale of shareholdings in e-Utile S.p.A. and
Brescia Mobilità S.p.A..
EQUITY AND LIABILITIES
Equity
Equity, which at March 31, 2012 amounted to 3,658 million euro (3,593 million euro at
December 31, 2011), is set out in the table below:
Millions of euro
Balance at
12 31 2011
Changes
in the period
Balance at
03 31 2012
1,629
–
1,629
Equity pertaining to the Group:
Share capital
(Treasury shares)
Reserves
Group profit (loss) for the period
Total equity pertaining to the Group
Minority interests
Total equity
(61)
–
(61)
1,619
(439)
(420)
496
76
57
2,824
2,767
1,180
826
8
834
3,593
65
3,658
The overall change in group equity, which equaled an increase of 65 million euro, resulted
from the recognition of 76 million euro profit for the period, cash flow hedges measured
as prescribed in IAS 32 and 39, and the change in interest attributable to minority
interests.
12) Share capital
Share capital amounts to 1,629 million euro which consists of 3,132,905,277 shares with a
unit value of 0.52 euro each.
13) Treasury shares
"Treasury shares" amount to 61 million euro (no change from December 31, 2011) and
comprise the 26,917,609 treasury shares held by the parent company A2A S.p.A.
14) Reserves
Millions of euro
Other reserves
Balance at
12 31 2011
1,619
Changes
in the period
(439)
Balance at
03 31 2012
1,180
67
“Reserves”, which amount to 1,180 million euro (1,619 million euro at December 31, 2011),
comprise the legal reserve, extraordinary reserves arising on consolidation, and the
retained earnings of subsidiaries. The item also includes the cash flow hedge reserve,
which relates to the measurement at the end of the period of derivatives meeting hedge
accounting requirements.
Other reserves also include the effects of applying IAS 32 paragraph 23 to the put options
stipulated on the shares of Delmi S.p.A., agreed between A2A S.p.A. and Società Elettrica
Altoatesina S.p.A. As discussed in detail in the section “Consolidation policies and
procedures”, the difference between the present value of the strike price of these put
options and the carrying amount of the minority interests is deducted from Group equity
(if positive) or added to it (if negative).
15) Net profit for the reporting period
This amounted to 76 million euro and represents the net profit for the reporting period.
68
16) Minority interests
Millions of euro
Minority interests
Balance at
12 31 2011
Changes
in the period
Balance at
03 31 2012
826
8
834
"Minority interests" amounted to 834 million euro (826 million euro at December 31, 2011)
and represent the portion of capital, reserves and net income attributable to noncontrolling shareholders.
The increase of 8 million euro reported for the period reflected the allocation of the
portions of profit/loss for the period attributable to minority interests.
LIABILITIES
17) Non-current financial liabilities
Millions of euro
Balance at
Changes
Balance at
03 31 2012
12 31 2011
03 31 2012
Non-convertible bonds
2,186
50
2,236
2,186
2,236
Due to banks
1,429
64
1,493
1,429
1,493
223
–
223
223
223
13
(2)
11
13
11
3,963
3,851
3,963
Due to other providers of finance
Finance lease payables
Total non-current financial
liabilities
3,851
112
"Non-current financial liabilities", which amounted to 3,963 million euro (3,851 million
euro at December 31, 2011), showed an increase of 112 million euro.
More specifically, “Non-convertible bonds” are four bonds issued by the Group as
follows:
• A ten-year bond with a nominal value of 500 million euro issued on May 28, 2004, at a
nominal fixed rate of 4.875%. Its carrying amount of 498 million euro is calculated at
amortized cost.
• A thirty-year bond issued in yen on August 10, 2006 at a fixed rate of 5.405%. Its
carrying amount of 98 million euro is calculated at amortized cost.
• A ten-year bond with a nominal value of 500 million euro issued on October 30, 2003 at
a nominal fixed rate of 4.875%. As a result of electing for the fair value option on
transition to IAS/IFRS, the fair value of this bond at March 31, 2012 was 520 million euro.
• A seven year bond with a nominal value of 1,000 million euro issued on October 27,
2009 at a nominal fixed rate of 4.50% which qualifies for fair value hedge accounting.
As a result, this financial instrument (bond) is measured at amortized cost, adjusted to
reflect the change in the fair value of the underlying risk. Its value at March 31, 2012 was
1,070 million euro.
The end-of-period measurement of the fair value and amortized cost of the nonconvertible bonds led to an increase of 19 million euro in “Non-current financial
liabilities”.
Interest of 50 million euro had accrued on the bonds at March 31, 2012.
The different accounting treatment used for the four bonds is the result of the different
options selected during the stage of transition to IAS/IFRS by the companies merged on
January 1, 2008.
69
Non-current amounts "due to banks” increased by 64 million euro over the period. This
was mainly due to the use of new medium and long-term loan facilities.
The total of 223 million euro “Due to other providers of finance” was unchanged from the
end-of-period figure for the previous year.
"Finance lease payables" amounted to 11 million euro while the figure reported at
December 31, 2011 was 13 million euro.
18) Deferred tax liabilities
Millions of euro
Balance at
12 31 2011
Changes
in the period
10
(6)
Balance at
03 31 2012
4
This item, totaling 4 million euro (10 million euro at December 31, 2011), comprises the net
effect of deferred tax expense and deferred tax income (IRES and IRAP) resulting from
70
variations and provisions made exclusively for tax purposes.
The balances shown for deferred tax income and deferred tax expense at March 31, 2012
are shown at their net values (offsetting), in accordance with IAS 12.
Millions of euro
12 31 2011
Provi- Utilizasions tions
(A)
Analysis of deferred tax assets and liabilities
Value differences in tangible assets
Adoption of the finance lease standard (IAS 17)
Adoption of the financial instruments standard (IAS 39)
Value differences in intangible assets
Capital gains instalments
Employee leaving entitlement (TFR)
Goodwill
Other deferred tax liabilities
Deferred tax liabilities (A)
Deferred tax assets
Taxed risk provisions
Value differences in tangible assets
Adoption of the financial instruments standard (IAS 39)
Provision for bad debt
Business combinations costs
Grants
Goodwill
Other deferred tax assets
Total deferred tax assets (B)
NET EFFECT DEFERRED TAX ASSETS/LIABILITIES (A-B)
Total
IAS 39a
net
(A+B) equity
(B)
Other 03 31 2012
changes
/reclass/
mergers
294
8
17
14
4
3
80
72
492
–
4
–
4
(8)
–
–
–
–
–
–
(8)
(8)
–
–
–
–
–
4
–
(4)
–
–
(12)
–
–
–
–
–
(12)
–
–
–
–
–
–
–
–
–
286
8
5
14
4
3
84
72
476
85
127
12
31
–
16
153
58
482
(10)
–
2
–
–
–
–
1
8
11
(5)
(1)
–
–
–
–
(3)
(8)
(17)
(5)
1
–
–
–
–
(2)
–
(6)
–
–
(4)
–
–
–
–
–
(4)
–
–
–
–
–
–
–
–
–
80
128
8
31
–
16
151
58
472
(4)
19) Employee benefits
At the end of the reporting period, the balance for this item was 269 million euro (272
million euro at December 31, 2011) with the following changes seen:
Millions of euro
Employee leaving entitlement
Balance at
12 31 2011
Provisions
138
5 Utilizations
(4)
Other
Changes
(4) Balance at
03 31 2012
135
Employee benefits
134
–
(1)
1 134
Total employee benefits
272
5
(5)
(3)
269
71
20) Provisions for risks, charges and liabilities for landfills
Millions of euro
Balance at
12 31 2011
Provisions for risks, charges
and liabilities for landfills
462
Provisions
Utilizations
(9) Other
Changes
Balance at
03 31 2012
1 453
(1) The overall balance for these provisions at March 31, 2012 was 453 million euro (462
million euro in the previous year), which is a net increase of 9 million euro due to
allocations of 5 million euro made during the period, offset by the 14 million euro of risk
provisions made in previous years, released in the current year since the original disputes
have ceased to exist. Utilizations of 1 million euro mainly regard the amount withdrawn
from the provision to make payments during the period.
21) Other non-current liabilities
Millions of euro
72
Balance at
Changes
Non-current derivatives
Total other non-current
liabilities
Balance at
03 31 2012
12 31 2011
03 31 2012
152
4
156
–
–
25
1
26
25
26
177
5
182
25
26
The balance for this item at March 31, 2012 showed an increase of 5 million euro compared
with the previous year.
Current liabilities
22) Trade payables and other current liabilities
Millions of euro
Advances
Trade payables
Total trade payables
Payables to social security institutions
Other current liabilities
Current derivatives
Total other current liabilities
Total trade payables and other current liabilities
Balance at
12 31 2011
Changes
in the period
Balance at
03 31 2012
20
(4)
16
1,328
(109)
1,219
1,348
(113)
1,235
36
(15)
21
375
60
435
31
10
41
442
1,790
55
497
(58)
1,732
"Trade payables and other current liabilities" amounted to 1,732 million euro (1,790 million
euro at December 31, 2011), representing an overall decrease of 58 million euro which
arose mainly from the decrease in trade payables which were partially offset by the
increase in "Other current liabilities" and "Current derivatives".
"Other current liabilities" include 8 million euro generated by application of the tax
transparency agreement entered into by the head company A2A S.p.A. with an associate.
23) Current financial liabilities
Millions of euro
Balance at
Changes
Due to banks
620
Balance at
03 31 2012
12 31 2011
03 31 2012
(88)
532
620
532
Due to other providers of finance
43
2
45
43
45
Finance lease payables
10
(1)
9
10
9
2
(1)
1
2
1
675
(88)
587
675
587
Financial payables to related
parties
Total non-current financial
liabilities
"Current financial liabilities" amounted to 587 million euro, which compares to the 675
million euro reported at the end of the previous year. The decrease of 88 million euro was
mainly to the drop in amounts Due to Banks.
24) Tax liabilities
Millions of euro
Tax liabilities
Balance at
12 31 2011
Changes
in the period
Balance at
03 31 2012
25
28
53
Tax liabilities amounted to 53 million euro (25 million euro at December 31, 2011), which
was an increase of 28 million euro.
73
Net debt
25) Net debt
(pursuant to Consob resolution no. DEM/6064293 of 28 July, 2006)
The following table provides details of net debt.
Millions of euro
74
Note
03 31 2012
Bonds - non-current portion
17
2,236
2,186
Bank loans - non-current portion
17
1,493
1,429
Amounts due to other providers of finance - non-current portion
17
223
223
Finance leases - non-current portion
17
11
13
21
Total medium/long-term debt
12 31 2011
26
25
3,989
3,876
Non-current financial assets with related parties
3
(5)
(6)
Financial assets - non-current portion
3
(31)
(28)
4
Total medium/long-term financial assets
Total non-current net debt
(96)
(113)
(132)
(147)
3,857
3,729
23
532
620
Amounts due to other providers of finance - current portion
23
45
43
Finance leases - current portion
23
9
10
Current financial liabilities with related parties
23
Bank loans - current portion
Total short-term debt
1
2
587
675
Other current financial assets
8
(2)
(2)
Current financial assets with related parties
8
(232)
(231)
Financial assets to companies held for sale
11
Total short-term financial receivables
Total current net debt
Net debt
10
(11)
(3)
(245)
(236)
(245)
(147)
97
292
3,954
4,021
Changes in the scope of consolidation since March 31, 2011
The scope of consolidation at March 31, 2012 changed as compared to the first three months
of the previous year due to the sale of the shareholding in BAS-SII S.p.A. in December 2011.
26) Revenues
Revenues for the period amounted to 1,957 million euro (1,745 million euro at March 31, 2011),
which was an increase of 212 million euro.
The key items of this balance were as follows:
Revenues - Millions of euro
Revenues from sale of goods
Revenues from services
Revenues from long-term contracts
Total revenues from sale of goods and services
Total revenues
03 31 2012
03 31 2011
1,721
1,521
212
204
6
–
1,939
1,725
18
20
1,957
1,745
"Revenues from sale of goods and services" amounted in total to 1,939 million euro (1,725
million euro in the same period of the previous year), which was an increase of 214 million
euro. This change reflects the 200 million euro rise in sales revenues, the 8 million euro
increase in revenues from services and the 6 million euro increase in revenues from long-term
contracts.
"Other operating income" amounted to 18 million euro, which was a decrease of 2 million euro
compared to the first three months of the previous year.
75
The principal items are analyzed in detail below:
Millions of euro
03 31 2012
03 31 2011
Sale and distribution of electricity
843
867
Sale and distribution of gas
737
544
Sale of heat
106
88
11
10
Water and utilities sold to civil customers
Hedging charges on operating derivatives
(1)
–
Sales of emission certificates and allowances
18
4
Connection contributions
Total revenues from sale of goods
7
8
1,721
1,521
Services to customers
212
204
Total revenues from services
212
204
Revenues from long-term contracts
Total revenues from sale of goods and services
6
-
1,939
1,725
Total revenues
18
20
1,957
1,745
76
Trading margin
The table below shows the income/expense generated by trading portfolios, or more specifically
the electrical energy, gas and environmental certificates trading portfolios.
Millions of euro
Note
03 31 2012
03 31 2011
Revenues
26
329
160
Operating expenses
27
(338)
(154)
(9)
6
Trading margin
Total trading margin
27) Operating expenses
"Operating expenses" amounted to 1,541 million euro (1,321 million euro for the same three
month period last year), which was therefore an increase of 220 million euro.
The main components of this balance are outlined below:
Operating expenses - Millions of euro
Raw materials and consumables used
Service costs
Total expenses for raw materials and services
03 31 2012
03 31 2011
1,286
1,040
187
212
1,473
1,252
68
69
1,541
1,321
“Expenses for raw materials and services” amounted to 1.473 million euro (1,252 million euro
at March 31, 2011), which was an increase of 221 million euro.
This increase was caused by:
• a 214 million euro rise in purchases of raw materials and consumables, attributable to the
206 million euro rise in purchases of power and fuel, the decrease in material purchase
costs of 1 million euro, the increase of 10 million euro in purchases of emission certificates
and allowances, and the net effect of hedging income/expenses on operating derivatives
which generated a decrease of 1 million euro;
77
• the drop in costs for delivery, subcontracted work and services of 25 million euro;
• the increase in the value of fuel and material inventories, amounting to 32 million euro.
The main items are analyzed in more detail below:
Millions of euro
Purchases of power and fuel
Purchases of materials
03 31 2012
03 31 2011
1,097
891
17
18
Purchases of water
1
1
Hedging charges on operating derivatives
1
2
Hedging income on operating derivatives
(2)
(2)
Purchases of emission certificates and allowances
12
2
Total raw materials and consumables used
1,126
912
Electricity delivery, subcontracted work and services
187
212
Total services
187
212
Change in inventories of fuel and materials
160
128
1,473
1,252
68
69
1,541
1,321
Total expenses for raw materials and services
28) Labour costs
The balance of labor costs at March 31, 2012, net of capitalized costs, totaled 145 million euro
(146 million euro at March 31, 2011).
Labor costs consist of the following components:
Labour costs -Millions of euro
03 31 2012
03 31 2011
Wages and salaries
97
97
Social security charges
36
36
Employee leaving entitlement (TFR)
5
6
Other costs
7
7
145
146
Total labour costs
The A2A Group had an average workforce at March 31, 2012 of 11,863. Labor costs were
consistent with those reported for the first quarter of 2011.
78
29) Gross operating income
As a result of the above changes, consolidated gross operating income at March 31, 2012
amounted to 271 million euro (278 million euro at March 31, 2011).
For more details, you are referred to the contents of the section entitled "Results sector-bysector".
30) Depreciation, amortization, provisions and write-downs
The balance of "Depreciation, amortization, provisions and write-downs" at March 31, 2012
amounted to 88 million euro (131 million euro for the first quarter of 2011), which was a
decrease of 43 million euro.
These charges are analyzed in the following table:
Depreciation, amortization, provisions and write-downs - Millions of euro
03 31 2012
03 31 2011
Amortization of intangible assets
21
21
Depreciation of tangible assets, of which:
75
87
– 1. Ordinary depreciation
68
74
7
13
Total depreciation and amortisation
96
108
Provisions for risks and charges
(9)
– 2. Depreciation of assets held under concession (freely transferable)
Bad debt provision (receivables booked as current assets)
Total depreciation, amortization, provisions and write-downs
9
1
14
88
131
More specifically, “Depreciation and amortization” amounted to 96 million euro (108 million
euro for the first three months of the previous year), which was a decrease of 12 million euro.
The balance of "Provisions for risks and charges" shows a net increase of 9 million euro (net
decrease of 9 million euro at March 31, 2011) due to allocations of 5 million euro made during
the period, offset by the 14 million euro of risk provisions made in previous years, released in
the current year since the original disputes have ceased to exist.
The "Bad debt provision" shows a balance of 1 million euro (14 million euro at March 31, 2011) as
a result of allocations made during the period. This was a decrease on the figure for the same
three month period in the previous year due to the fact that the risk posed by some doubtful
customer accounts in previous years, and for which provisions were made, no longer exists.
31) Net operating income
"Net operating income" amounted to 183 million euro (147 million euro at March 31, 2011).
79
32) Financial balance
The "Financial Balance" shows a negative balance of 54 million euro (-10 million euro at March
31, 2011).
Details of the more significant items are provided below:
Financial balance - Millions of euro
03 31 2012
03 31 2011
Financial income
11
26
Financial expense
(66)
(38)
Portion of income and expenses deriving from the valuation at equity of
shareholdings
Total financial balance
1
(54)
2
(10)
"Financial income" amounted to 11 million euro; this was lower than the figure reported for the
first quarter of 2011 because of the downward trend in the fair values of financial derivative
contracts.
"Financial expense" amounted to 66 million euro, which was an increase of 28 million euro
compared with March 31, 2011; it is made up of the following elements:
• costs of 23 million euro (no value at March 31, 2011) from financial derivatives;
• charges of 43 million euro levied on financial liabilities (38 million at March 31, 2011),
described in detail below:
Charges on financial liabilities - Millions of euro
03 31 2012
03 31 2011
Interest on bond loans
25
25
Interest charged by banks
11
9
Interest on loans from Cassa Depositi e Prestiti
2
–
Interest on finance leases
1
1
Other financial expense
Total charges on financial liabilities
4
3
43
38
The "Portion of income and charges when shareholdings are carried at equity" shows a
positive balance of 1 million euro (+2 million euro at March 31, 2011).
This item mainly comprises the effects of the measurement of shareholdings in PremiumGas
S.p.A. and the Coriance Group.
80
33) Other non-operating income/expense
No balance was posted for "Other non-operating income/expense" at March 31, 2012, while a
net negative value of 1 million euro was reported for the first three months of 2011, as a result
of costs incurred by the subsidiary EPCG.
34) Income taxes
Income taxes - Millions of euro
Current taxes
Deferred tax asset
03 31 2012
03 31 2011
53
50
6
(2)
(4)
(8)
Total income taxes
55
40
Taxes for the period are calculated on the basis of current accounting standards and
acceptable consolidation policies.
Taxes for the first quarter of 2012 were adversely affected both by the general increase in the
so-called Robin Hood Tax, applied for the second half of 2011 and which saw it rise from 6.5%
to 10.5% for the three-year period from 2011 to 2013, and also by the extension of number of
entities subject to this tax to include electricity and gas distribution companies which were
previously excluded. The IRAP tax rate was also increased, rising from 3.90% to 4.20% starting
from the second half of 2011 and applicable to companies working under government
concession, in sectors other than construction, motorways and tunnel management.
35) Net result from non-current assets sold or held for sale
This item showed a positive balance of 8 million euro at March 31, 2012 (compared to the
negative balance of 9 million euro reported for the first quarter of 2011), created primarily by
the positive effect of the sale of the shareholding in e-Utile S.p.A..
36) Net income for the period pertaining to the Group
The Group reported consolidated income of 76 million euro (85 million euro March 31, 2011),
less the loss of 6 million euro allocated to minority interests (loss of 2 million euro at March 31,
2011).
81
Earnings per share
37) Earnings per share
01 01 2012
03 31 2012
01 01 2011
03 31 2011
0.0244
0.0275
Earnings (loss) per share (euro)
–
82
basic
–
basic, from operating activities
0.0219
0.0284
–
basic, from assets held for sale
0.0025
(0.0009)
–
diluted
0.0244
0.0275
–
diluted, from operating activities
0.0219
0.0284
–
diluted, from assets held for sale
0.0025
(0.0009)
Weighted average number of shares in circulation for the calculation of
earnings (loss) per share
–
basic
3,105,987,497
3,105,987,497
–
diluted
3,105,987,497
3,105,987,497
Significant non-recurring,
atypical or unusual transactions
38) Consob Communication no. DEM/6064293 of July 29, 2006
There were no non-recurring transactions during the period under review.
83
Guarantees and commitments
with third parties
Millions of euro
03 31 2012
Guarantee deposits received
Guarantees given
12 31 2011
446
462
1,288
1,268
Guarantee deposits received
84
The guarantees deposited by subcontractors and guarantees issued by credit institutions to
ensure proper execution of work amount to 446 million euro (462 million euro at December
31, 2011).
Guarantees and commitments with third parties
These amount to 1,288 million euro (1,268 million euro at December 31, 2011) and refer to
guarantee deposits lodged as security for commitments to third parties.
Secured guarantees
The shareholding in Metroweb S.p.A. has been pledged to the banks that finance Metroweb
S.p.A..
Group companies hold third party assets worth 66 million euro under concession.
Other information
1) Significant events after March 31, 2012
You are referred to the specific section in this Interim report on operations.
2) Information on treasury shares
At March 31, 2012, A2A S.p.A. held 26,917,609 treasury shares, equal to 0.859% of the share
capital which consists of 3,132,905,277 shares, the same as at the end of the previous reporting
period. At March 31, 2012 no treasury shares were held through subsidiaries, finance
companies or nominees.
3) Information relating to non-current assets held for sale and
discontinued operations (IFRS 5)
The balance of “Non-current assets held for sale” includes the values of the shareholdings in
Transalpina di Energia S.r.l. and the loan granted by Delmi S.p.A. to TdE S.r.l., as well as the
shareholding in Utilia S.p.A. which is valued at less than one million euro. For more
information, you are referred to note 3 "Shareholdings and other non-current financial assets"
and note 12 "Non-current assets held for sale" in the Balance Sheet".
For the purposes of clarity, it should be specified that sale of TdE S.r.l. which was a significant
transaction with related parties, is part of a complex reorganization project of the Edison
control structure whereby TdE S.r.l. was sold to give EDF S.A. control.
85
Other information
Key balance sheet and income statement figures for the aforementioned shareholdings are
presented below.
Figures at March 31, 2012
Assets and liabilities of companies
held for sale
Millions of euro
Non-current assets
TdE
S.r.l.
915
Current assets
Total assets
Delmi
S.p.A.
Total
915
11
11
915
11
926
–
–
–
Current liabilities
Total liabilities
86
4) Update of the main legal and tax disputes still pending
EC infringement procedure
On June 5, 2002, the European Commission published decision 2003/193/EC declaring that the
three-year exemption from income tax (under art. 3.70 of Law 549/95 and art. 66.14 of Decree
331/1993, converted into Law 427/93) and the advantages deriving from loans (pursuant to art.
9-bis of Decree 318/1986, converted into Law 488/96) granted to publicly-owned companies
formed under Law 142/90 were incompatible with EC law, since they were deemed to represent
State aid which is banned by art. 87.1 of the EC Treaty. The Commission did not consider the tax
exemption on business contributions under art. 3.69 of Law 549/95 to be State aid.
This decision was notified on June 7, 2002 to the Italian State, which appealed against it to the
Court of Justice. Subsequently, by order of the Court of Justice dated June 8, 2004, the case
was transferred to the Court of First Instance with reference number T-222/04, following the
expansion of that court's functions by the Treaty of Nice.
In July 2002, the Commission communicated the decision to the companies concerned, which
appealed against it to the Court of First Instance of the European Community on September 30,
2002, pursuant to art. 230.4 of the EC Treaty; further appeals against this decision have also
been filed by other public-sector commercial companies and by Confservizi.
The Italian State did not ask the Court of Justice to suspend execution of the Commission's June
2002 Decision so as not to prejudice the resolution of merit in the event of a refusal. In fact, it is
rare for the Court to concede a stay of execution, above all in matters regarding State aid.
Other information
The decision is therefore fully effective and binding on the Italian State, which is obliged to
recover the aid granted.
On the invitation of the Commission and while continuing to pursue action to overturn the
decision, the Italian State has therefore activated a recovery procedure. This process has
involved preparation of a survey questionnaire to identify the public-sector commercial
companies that have Benefited from the above income tax exemption, and from loans granted
by Cassa Depositi e Prestiti in the years under consideration.
The Italian State's recovery initiatives continued with the predisposition of an amendment to
the EC law, which was approved by the Senate on April 13, 2005 (art. 27, Law 62 of April 18, 2005).
The measure envisages detailed recovery procedures based on ordinary tax rules to adjust any
recovery to the effective existence of recoverable aid (considering the specific circumstances
of each position and bearing in mind any outstanding disputes with the tax authorities). In
particular, this measure envisages certain declarations on the part of the taxpayer and
presumes certain official acts specifying the application methods and guidelines for a correct
evaluation of cases of non-application. The guidelines were then amended to make them more
precise by Art. 1, sub-section 133 of Law 266 of March 23, 2006 (Budget Law 2006).
Subsequently, following Italy's condemnation by the Court of Justice for the delay in recovering
the "aid" (Sentence June 1, 2006, case C – 207/05), Decree 10 of February 15, 2007 (converted
into Law 46 of April 6, 2007) made further amendments to the existing recovery procedures.
As a result, new instructions were issued for the implementation of European Commission
Decision 2003/193/EC, with a view to the recovery of aid equivalent to the unpaid taxes and
related interest resulting from application of the tax exemption regime envisaged in art. 3.70 of
Law 549 dated December 28, 1995, and art. 66.14 of Decree no. 331 of August 30, 1993, a
converted with amendments into Law no. 427 of October 29, 1993.
In the first half of 2007, the Tax Authorities sent notices to AEM S.p.A. and ASM S.p.A. - pursuant
to Decree no. 10/2007 - in the form of a "communication-injunction"- concerning the alleged
State aid enjoyed during the moratorium period.
On April 30, 2009, as explained in greater detail below, the Tax Office notified five further
assessments in connection with the position of the former AEM S.p.A. and the former ASM
S.p.A. pursuant to Art. 27, Decree No. 185 of November 29, 2008, as converted with
amendments into Law No. 2 of January 28, 2009, for around 64 million euro, including interest.
Decree no. 135 of September 25, 2009 (art. 19) introduced new instructions regarding recovery
of the aid mentioned, essentially involving (i) the possible notification of further repayment
assessments, (ii) the non-recoverability of any realized capital gains. As a result, on October 2,
87
Other information
2009, the company received six further assessments from the competent offices for the
recovery of amounts additional to those already claimed totaling about 220 million euro.
On this basis, the Italian Tax Authorities activated the recovery procedure by means of a fiscaltype assessment without offering any chance to defer or suspend payment.
The guidelines for recovery can be found in the Agenda of the Chamber of Deputies no.
9/01972/071, which was approved at the session held on January 14, 2009. In the guideline, it is
explained that the recovery "cannot take the form of a simple tax assessment, without any
specific criteria; instead, it has to determine if and how much aid has to be recovered, clarifying
in particular that it is recoverable only if actually enjoyed and verifying case by case whether the
company has effectively made use of illegitimate state aid that has altered the principles of free
competition and companies' freedom of establishment". In line with this concept, "those
resources that have already been involved in forms of reimbursement" have to be considered
"excluded from the recovery measure".
In exercising the powers granted, the Tax Authorities should have identified, in the specific
88
circumstances, the actual enjoyment of illegitimate state aid that has not already been
reimbursed.
Given that the lawsuits involving the merging company AEM S.p.A. (now A2A S.p.A.) and the
merged company ASM S.p.A. are the subject of separate proceedings at the Court of First
Instance of the European Community and have different positioning in relation to the
"communication-injunction" and other assessments, the two situations are explained
separately for the sake of clarity.
Former AEM S.p.A. (now A2A S.p.A.)
In the action promoted by AEM S.p.A., on January 6, 2003, the Commission filed an objection
claiming that it could not accept the appeal. AEM promptly replied before the legal deadline.
The Court set the meeting concerning the objection claiming that it could not accept the
appeal by order dated August 5, 2005. On March 15, 2006, AEM filed a brief in relation to the
judgment pending before the Court of First Instance. On February 28, 2008, the Court of First
Instance communicated to AEM S.p.A. its intention to combine (only for the oral phase) the
various lawsuits being brought by AEM S.p.A., Confservizi, other public-sector commercial
companies and the Italian Government, asking for the opinions of the parties concerned.
On March 6, 2008, AEM S.p.A. advised the Court that it would welcome a move to combine the
various lawsuits and, apparently, the other appellants also responded in the same way. The
final hearing was held on April 16, 2008 and, by a ruling dated June 11, 2009, the Court of First
Instance declared that the appeal presented by AEM S.p.A. was admissible, but rejected it on
Other information
merit - as for those presented by the other appellants - taking the view that the measure in
question constituted State aid that was banned under art. 87.1 of the EC Treaty, and therefore
confirming the decision made by the Commission. AEM S.p.A. impugned this sentence on a
timely basis before the European Court of Justice. With sentence C 320/09 P, published on 21
December 2011, the European Court of Justice rejected the appeal made by A2A S.p.A. (similar
appeals proposed by other former municipal utilities were also rejected).
With reference to Art. 27 of Law 62 of April 18, 2005, AEM S.p.A. has complied each of the
obligations placed on the former municipal utilities that are contained in the recovery
regulations and related enabling instructions.
On October 27, 2005 the Tax Authorities visited the head office of AEM S.p.A. to acquire
documentation to check the correctness of the figures declared in the tax returns presented
in accordance with art. 27 of Law 62. The visit was merely to ascertain and finalize the amount
of any taxes that were to be reimbursed. AEM S.p.A. provides the inspectors with a full
statement on how the tax returns were compiled. Even if all possible forms of legal protection
failed, it was deemed reasonable to assume that the Italian government's recovery actions
would have involved revoking the benefits granted in different ways, depending on the public
service sectors concerned. In particular, it was assumed that such action would have taken
account of the actual degree of competition during the period of the measures being
contested and, therefore, of the extent to which it may have been distorted.
In this regard, AEM S.p.A.'s appeal explained that, during the 1996-1999 period examined by
the Commission, the Company operated in sectors such as electricity and gas that were not
opened up to competition, and in which AEM S.p.A. did not take part in any tenders for
provision of the related services (an observation that has subsequently been repeated to the
Court of Justice).
In light of the uncertainty regarding the outcome of the recourses and the ways in which the
Commission's Decisions would be applied, the Company thinks it possible, but not probable,
that it risks having to hand back all of the aid received if the result of the entire appeal
procedure turns out to be negative: consequently, no provisions were made for this matter in
any of the financial statements approved up to December 31, 2006. This decision took account
of objective uncertainties that make it impossible to obtain a sufficiently reasonable estimate
of the charges that would be borne by AEM S.p.A. as a consequence of the above Decision.
Lastly, the majority of the profits distributed by AEM S.p.A. during the tax moratorium period
were paid to the Municipality of Milan, which is part of the Public Administration. AEM S.p.A.
did not receive any assisted loans from Cassa Depositi e Prestiti (Italian Deposits and Loan
Fund) under the laws mentioned during the period considered by the Commission.
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Other information
On March 30, 2007, the Milan I Tax Office notified four assessments, or "communicationinjunctions" under Decree no. 10/2007, relating to the aid alleged to have been used during the
periods 1996, 1997, 1998 and 1999.
The amounts requested in these assessments, totaling 4.8 million euro inclusive of interest,
were based on the Company's declaration made July 2005, except for the disallowance of the
effect of applying the so-called "tombstone" tax amnesty under Law no. 289/2002.
Pursuant to Decree 10/2007, the amounts established but not paid over are subject to forcible
collection via inclusion on the tax roll; the rules do not permit any extended payment terms or
suspensions, not even in the event of appeal.
Having taken note of these communications, and considered Decree Law 10/2007 and related
conversion law and checked that the amounts requested agree with those originally declared,
the Company decided on April 27, 2007 to pay. .
As a result of the above, the amounts paid were included in the 2007 accounts under
“Financial expenses” and “Other non-operating expenses”.
90
To protect its interests, the Company decided to appeal against these communicationinjunctions to the competent tax jurisdiction. The Provincial Tax Commission of Milan Section 21 rejected these appeals in ruling no. 8 of January 25, 2008 and the sentence that
establishes the amount of the recoverable aid is now definitive.
On April 30, 2009, the Tax Authorities notified three assessments, issued under art. 24 of
Decree 185/2008, for the recovery of alleged State aid that conflicts with EC regulations and
the earlier decision of the European Commission. Appeals against these assessments have
been filed with the Milan Provincial Tax Commissioners. The case was discussed on
September 19, 2011 and the appeals presented were all rejected, after a meeting, in sentence
No. 222/09/11. The company lodged an immediate appeal against this sentence.
Based on current law, the amount requested, namely a total of 23 million euro, had to be paid
within thirty days of notification of the provision, so A2A S.p.A. made the payment on May 8,
2009.
As mentioned, on October 2, 2009, the Tax Authorities notified four assessments, issued
under art. 19 of Decree 135/2009, for the further recovery of alleged State aid to the former
AEM S.p.A. that conflicts with EC regulations.
Having paid a total of 184 million euro on October 22, 2009 - to avoid the charges involved in
being entered on the tax rolls and the accrual of further interest - the Company appealed
against these notices before the Milan Provincial Tax Commission, which first met with ASM
Other information
S.p.A. - discussed the merit of the case on January 19, 2010 and declared itself in favor with
sentence 137/01/10.
Following the sentence, A2A S.p.A asked the Tax Office to refund the amounts paid to return
alleged "government aid" received, but received no reply.
By way of this sentence, on April 9, 2010 an appeal was submitted by the Regional Headquarters of
the Revenues Agency and Milan 1 Tax Office.
Former ASM S.p.A. (from January 1, 2008 absorbed by A2A S.p.A.)
As regards ASM S.p.A.'s position, the company has also impugned the decision before the
Court of First Instance in Luxembourg with an appeal filed on its own account on January 2,
2003 and "ad adiuvandum" in support of AEM S.p.A. and AMGA S.p.A.
ASM felt that the European Commission's decision 2003/293/CE of July 5, 2002 could not be
applied to it because of the particular nature of its situation: during the period under
consideration, the services provided by ASM S.p.A. in its areas of operations were not open to
the market and to free competition.
On January 6, 2003 the Commission filed an objection claiming that it could not accept the appeal.
ASM S.p.A. promptly replied before the legal deadline. The Court set the meeting concerning the
objection claiming that it could not accept the appeal by order dated August 5, 2005.
On February 28, 2008, the Court of First Instance communicated to ASM S.p.A. its intention to
combine (only for the oral phase) the various lawsuits being brought by ASM S.p.A.,
Confservizi, other public-sector commercial companies and the Italian Government, asking
for the opinions of the parties concerned. ASM S.p.A. communicated to the Court that it
would welcome such a move to combine the various lawsuits.
The final hearing was held on April 16, 2008 and, by a ruling dated June 11, 2009, the Court of
First Instance declared that the appeal presented by ASM S.p.A. was admissible, but rejected it
on merit - as for those presented by the other appellants - taking the view that the measure in
question constituted State aid that was banned under art. 87.1 of the EC Treaty, and therefore
confirming the decision made by the Commission. With sentence C 320/09 P, published on 21
December 2011, the European Court of Justice rejected the appeal made by A2A S.p.A. (similar
appeals proposed by other former municipal utilities were also rejected).
The companies of the ASM Group involved in the recovery procedure (ASM S.p.A., also on
behalf of BAS S.p.A. and Azienda Servizi Valtrompia S.p.A.), in accordance with the request
contained in art. 27 of Law 62 of April 18, 2005, sent the declaration required by art. 27 of the
said law for each of the periods affected by the tax moratorium.
91
Other information
BAS S.p.A. Bergamo, which was absorbed with effect from May 18, 2005, and Azienda Servizi
Valtrompia S.p.A had negative taxable income during the years in which the moratorium
applied, so it is probable that no tax will be due.
In April 2007, ASM received a communication-injunction under art. 1 of Decree 10/2007 from
the Brescia Tax Office for the periods 1998 and 1999.
Based on the opinion of its own tax consultants and experts in EC law, ASM S.p.A. pointed out
to the Brescia Tax Office that the communication-injunction that it had received was contrary
to the provisions of this decree both in content and in amount.
At the same time, ASM S.p.A. appealed to the Brescia Court for this injunction to be declared
null and void; it also asked for a court order suspending payment.
On May 23, the Tax Office acknowledged that ASM's arguments were correct and cancelled
the communication-injunction to pay. In light of the uncertainty regarding the outcome of the
recourses and the ways in which the Commission's Decisions would be applied, the Company
thinks it possible, but not probable, that it risks having to hand back all of the aid received if the
92
result of the entire appeal procedure turns out to be negative: consequently, no provision has
been made for this matter in any of the financial statements.
While waiting for the question to be decided, the Shareholders' Meeting of ASM S.p.A. has
resolved not to consider distributable an amount of 13 million euro representing a portion of
the free reserves formed during the period of the "tax moratorium".
On April 30, 2009, the Tax Authorities notified two assessments, issued under art. 24 of
Decree 185/2008, for the recovery of alleged State aid to the former ASM S.p.A. that conflicts
with EC regulations. Appeals against these assessments have been filed with the Milan
Provincial Tax Commissioners. The case was discussed on September 19, 2011 and the appeals
presented were all rejected, after a meeting, in sentence No. 222/09/11. The company lodged
an immediate appeal against this sentence.
Under current regulations, the amount requested, 41.6 million euro, had to be paid within
thirty days of the provision being notified, so A2A S.p.A. paid on May 8, 2009.
As mentioned, on October 2, 2009, the Tax Authorities notified two assessments, issued
under art. 19 of Decree 135/2009, for the further recovery of alleged State aid to the former
ASM S.p.A. that conflicts with EC regulations.
Having paid a total of 35.8 million euro on October 22, 2009 - to avoid the charges involved in
being entered on the tax rolls and the accrual of further interest - the Company appealed
against these notices before the Milan Provincial Tax Commission, which first met with AEM
Other information
S.p.A. - discussed the merit of the case on January 19, 2010 and declared itself in favor with
sentence 137/01/10. Following the sentence, A2A S.p.A asked the Tax Office to refund the
amounts paid to return alleged "government aid" received, but received no reply.
By way of this sentence, on April 9, 2010 an appeal was submitted by the Regional
Headquarters of the Revenues Agency and Milan 1 Tax Office.
***
Judgment on the appeal presented by the Revenues Agency regarding sentence
no.137/01/10, and the positions of the former AEM S.p.A. and former ASM S.p.A.
Following the appeal presented, A2A S.p.A lodged an appeal, submitting counterclaims and
subsequent brief.
On July 5, 2010, the Revenue Agency's appeal was discussed before the Regional Tax
Commission, who accepted it.
The company lodged an immediate appeal to the Court of Cassation, describing the flaws in
the appeal sentence; a date for the hearing to discuss the case has not been set yet.
Consul Latina / BAS S.p.A. (now A2A S.p.A.)
The purchase of the investment in HISA by BAS S.p.A. was made through a local consultant
called Consul Latina.
Given that the wording of the contract was not totally clear and the fact that BAS S.p.A. on its
own did not buy 100% of HISA, BAS S.p.A. did not pay the fee due to Consul Latina, which sued
for payment in 1998.
The lawsuit is still in underway with various procedural objections, some recent, such as the
fact that all court proceedings after May 18, 2005 were declared null and void for lack of right
of attorney; a problem that has been resolved subsequently.
In the appeal ref. EXP 82218, Sentence 3697/3000 dated May 9, 2008, Consul Latina requested
that the proceedings be declared void given that the lawyers had no powers and claiming
damages due to a delay in the filing of documents by BAS S.p.A. in 2008; the Court rejected all
claims in full, announcing that ownership of ASM S.p.A. had taken over from BAS S.p.A.
According to Consul Latina (as advised by lawyer Mr De Florio) the amount payable on May 10,
2007 was US$ 1,872,000, calculated on a principal of US$ 720,000 plus interest of 1% from
April 1999.
93
Other information
As of that date, a possible settlement agreement by ASM S.p.A. to settle the dispute for US$
400,000 was not considered acceptable.
In a letter dated November 18, 2008, the lawyer reiterated that the coefficient to be applied to
the value of the principal to understand the sum due by BAS S.p.A. in the event of losing the
lawsuit was 27.22%. He also confirmed that, over the last two years, the interest rate applicable
to commercial settlements had remained the same at 1.55%.
The international rogatory notification was sent on July 30, 2010 with the request that A2A
S.p.A. be formally questioned about the interrogatories formulated by the Buenos Aires
Court; the hearing was held on September 17, 2010. The evidence will be sent the Buenos Aires
appeal court for its judgment.
The legal team assisting A2A S.p.A believes A2A S.p.A.'s testimony went well, but has no
prediction to make as regards a date or outcome of the possible sentence.
The opinion regarding the potential outcome of the case that our lawyers outlined in a report
at the end of March 2012 suggested that there is a 25% possibility that the sentence accepts
94
each of Consul Latina's requests (capital of US$ 720,000 + interest at 1% monthly + expenses
equal to 30% of capital plus interest), 55% possibility that the sentence lowers Consul Latina's
claims (US$ 131,521 + interest at 1% monthly + expenses equal to 30% of capital plus interest),
10% possibility that the sentence lowers Consul Latina's claims (US$ 82,855 + interest at 1%
monthly + expenses equal to 30% of capital plus interest) and 10% that A2A S.p.A is judged to
be right on all scores and not required to pay anything.
In appeal number 82220 Consul Latina asked to establish a lien on the shares in Redengas S.A.
on June 21, 2001, and the Court called for this lien.
On October 6, 2009, the judge also refused appeal no. EXP 90779, Sentence 5317534 dated
May 20, 2005 (in which Consul Latina claimed that Avv. De Florio had no powers of
representation at the hearing held in August 2005 since BAS S.p.A. had been taken over by
ASM S.p.A.) on the grounds of the main party's inoperative status.
On November 10, 2008, attempted to file a new claim against BAS S.p.A., EXP 095148,
requesting information about Enerfin S.r.l. in liquidation, designed to find out if ASM S.p.A. was
still a shareholder and, if not, the selling price obtained. On November 16, 2009, the judge
condemned A2A to pay a fine of 300 pesos per day from May 6, 2009 for not having provided
the information required about the sale on that date; our legal team immediately appealed
against this sentence, and for this reason, no fine has yet been paid. On June 30, 2011, the Court
of Appeal repealed the interim statement that declared A2A S.p.A to be the defaulting party,
hence A2A S.p.A., who had never paid the daily penalty, was released from this obligation.
Other information
In February 2010, A2A S.p.A. renewed the mandate of the Garrido Law Office to find a way of
settling the original lawsuit brought by Consul Latina S.r.l. and take the necessary steps to
revoke the pledge filed by Consul Latina S.r.l. on HISA's subsidiaries. At the end of September
2011, the legal team advised, without documenting the actual terms, of a proposed settlement
submitted by Consul Latina S.r.l for 9 million dollars. A2A S.p.A. communicated that this would
not be acceptable, confirming our willingness to settle for up to US$ 750 million. We have no
information on Consul Latina's formal response.
The international rogatory notification was sent on July 30, 2010 with the request that A2A
S.p.A. be formally questioned about the interrogatories formulated by the Buenos Aires
Court; the hearing was held on September 17, 2010. The evidence will be sent the Buenos Aires
appeal court for its judgment.
The legal team assisting A2A S.p.A believes A2A S.p.A.'s testimony went well, but has no
prediction to make as regards a date or outcome of the possible sentence.
The company is assisted by Studio Garrido in Buenos Aires.
95
ENEL / AEM Elettricità S.p.A. (now A2A Reti Elettriche S.p.A., controlled by A2A
S.p.A.)
ENEL served a writ in 2001 requesting the annulment of the decision made by the Board of
Arbitrators appointed in accordance with Leg. Decree 79 of March 16, 1999 (the so-called
"Bersani Decree"), which set at Lire 820 billion the price to be paid to ENEL for the sale to AEM
Elettricità S.p.A. (now A2A Reti Elettriche S.p.A.) of the power distribution business in the
municipalities of Milan and Rozzano. AEM Elettricità S.p.A. asked for ENEL's request to be
rejected, as the arbitrators' decision could not be considered manifestly unfair or erroneous
in accordance with art. 1349 of the Italian Civil Code. AEM Elettricità S.p.A. in turn filed a claim
asking for ENEL to be sentenced to pay compensation for the damages caused by the delay
with which ENEL implemented the sale of the business, as imposed by the law.
In AEM Elettricità S.p.A.'s opinion, the judge would only be able to change the arbitrators'
decision if it appeared to be "manifestly unfair or erroneous", as confirmed by an expert
witness's report which the judge has ordered.
The Court-appointed expert witness carried out a laborious review of the situation, making
numerous adjustments, and in the end established a figure of about 66 million euro as the
higher value of the business, net of the damages that the witness recommended should be
awarded to AEM Elettricità S.p.A..
By way of a sentence announced on June 9, 2008, the Milan Court set a new price for the
business based on the indications of the expert witness (990.8 billion lira) and rejected the
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claim for damages made by AEM Elettricità S.p.A. According to the Court, the difference
between the expert witness's valuation and that carried out by the Board of Experts was such
as to make the latter blatantly unfair. In other words, the Judge felt that he could fully trust the
conclusions reached by the expert witness appointed by the Court, even though some of the
choices made appeared to be the result of exercising in a different way the technical
discretion that is inherent in measurements, leading to a very different result from that
reached by the Board of Experts. The Judge also based his decision on certain affirmations
made by the expert witness regarding the "inappropriate nature" of certain parameters used
by the Board of Experts.
Considering the price established by the Board of Experts to be unfair, the Judge also rejected
the claim made by AEM Elettricità S.p.A. for damages caused by the delay in transferring the
business. In fact, according to the Judge, ENEL was justified in not transferring the business as
the price was unfair.
There are various objections that can be made to this sentence.
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To start with, we do not accept that the price established by the Board of Experts was affected
by errors, or that it was unfair. The Board consisted of illustrious professors with years of
experience in company valuations, so the fact that the Judge simply replaced their calculation
with the one performed by the expert witness is totally unsatisfactory. From another point of
view, there appears to be no grounds to reject the claim for damages because of the delayed
transfer of the business, given that ENEL could quite easily have handed it over - as in fact it did
- while at the same time asking for a fairness review of the price set by the Board of Experts.
A2A S.p.A. has appealed against the Court sentence with a writ served on October 23, 2008;
the hearing for the statement of the conclusions is expected on April 5, 2011. Subsequently,
with a writ served on May 28, 2009, ENEL has sued A2A S.p.A., based on this sentence by the
Milan Court (which was not a sentence of condemnation), asking that A2A should be
condemned to pay Euro 88,244,342.00, as well as interest at the legal rate and monetary
revaluation from October 31, 2002. At the first hearing of this case on November 24, 2009, the
plaintiff waived the injunction and the parties are now waiting for the above appeal to go
ahead.
An agreement was negotiated in 2009 with the counterpart allowing any costs to be paid in
installments and eliminate the risk of the company having to pay out a sizeable amount at the
one time.
When preparing the 2009 annual report, it was decided, for prudence sake, to maintain the
balance sheet book value of goodwill relating to the business transferred at 88 million euro,
booking the contra-entry to a provision for risks and charges under balance sheet liabilities of
the same amount and ancillary charges of 24 million euro.
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During the reorganization of roles, the case was postponed and the hearing to decide on the
conclusions, originally set for April 5, 2011, has been postponed until September 18, 2012.
Investigation on gas measuring devices
There is a nationwide investigation pending at the Public Prosecutor's Office in Brescia
concerning the way that gas consumption is accounted for. The investigation involves, among
others, a number of A2A Group companies and some of their directors and managers The
alleged crime is that of fraud, as well as other matters.
The investigation was initiated by the Milan Judicial Authority but then transferred to Brescia
for a question of territorial jurisdiction. After the notification of the "Conclusion of
Preliminary Questioning - Art. 415 bis of the Italian Penal Code" dated February 7, 2011,
notification of the "Preliminary Hearing Date" was received on June 9, 2011 regarding the
committal for trial presented by the Public Prosecutor. The preliminary hearing was held
before the Brescia Public Prosecutor on November 8, 2011. The defense for the accused raised
a preliminary exception annulling the notification of the decree containing the notification
advising of the "Preliminary Hearing Date" given that it did not include the CD with the list of
"indicted" meters indicated in the decree as "attachment forming a material part of the
charge". The Examining Judge accepted the exception and declared the notification annulled.
As a result, the Public Prosecutor had to reissue the "Notification of Conclusion of Preliminary
Investigations -Art. 415 bis Italian Penal Code" and return to the previous stage in the
proceedings. On January 4-9, 2012, the "Notification of Conclusion of Preliminary
Investigations -Art. 415 bis Italian Penal Code" was reissued, along with the CD. We are awaiting
the date of the preliminary hearing before the Brescia Public Prosecutor.
Buzzi Arturo/A2A S.p.A.
Mr. Buzzi sued AEM S.p.A. (now A2A S.p.A.) before the Milan Court in a writ served on May 24,
2001.
Mr. Buzzi challenged before the Milan Court the resolutions by which the Shareholders'
Meeting approved the financial statements and authorized the sale by AEM S.p.A. to e.Biscom
S.p.A. Of the 30.8% stake then held by AEM S.p.A. in Fastweb S.p.A.; at the same time, AEM
S.p.A. bought e.Biscom's 33% interest in Metroweb S.p.A. and subscribed a bond loan.
AEM S.p.A. appeared at the hearing on November 19, 2003, filing a defense statement.
The hearing at which the parties made an appearance was held on April 20, 2004, whereas the
hearing at which the case was debated was held on November 9, 2004. The parties' legal
counsel exchanged statements in accordance with arts. 183.5 and 184 of the Code of Civil
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Procedure. Mr. Buzzi's counsel asked the Judge to admit evidence from witnesses, to request
an expert witness's report and to order the acquisition "of the assessment carried out at the
time by Morgan Stanley on the valuation of Fastweb S.p.A. and Metroweb S.p.A. for the
purposes of the share exchange between e.Biscom S.p.A. and AEM S.p.A. and collateral
transactions and Metroweb S.p.A.'s financial statements at December 31, 2002 and December
2003”. AEM S.p.A.'s legal counsel opposed this and at the hearing of February 28, 2005, the
Investigating Judge dismissed Mr. Buzzi's requests. Then, considering that the case was ready
for a final decision, he set April 4, 2006 as the date for the hearing at which the conclusions
would be heard.
With a sentence filed on June 7, 2007, the Judge of the Milan Court rejected the plaintiff's
requests, sentencing him to pay all of the legal expenses.
While it is impossible to predict the outcome of the appeal, the risk of the sentence of first
instance being reviewed appears to be relatively minor. The Court's decision will likely be
issued in the forthcoming months.
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Arbitration initiated by Ecovolt for breach of the Quotaholders' Agreement for
investment in Ostros Energia S.r.l. (now in liquidation) (Arbitration case no. 6309
initiated by Ecovolt)
On May 25, 2009, the minority quota holders of Ostros Energia S.r.l. (now in liquidation)
initiated arbitration proceedings under a settlement clause contained in the Investment
Agreement signed with ASM S.p.A. on January 30, 2007, with a view to establishing a breach of
the Agreement by A2A S.p.A., given that it had failed to finance the development of Ostros
Energia S.r.l. (now in liquidation) and had not complied with the provisions of art. 2.5 of the
Agreement.
These matters were first examined by the parties towards the end of 2008, and legal opinions
were obtained.
The Board of Arbitration is made up of Prof. N. Irti, Prof. G. Sbisà and Prof. M. Cera. During
the first meeting on March 4, 2010, convened to make the obligatory attempt at
reconciliation, the board took note of the absence of the parties as the conditions did not
exist for a settlement and scheduled for April 26, 2010 the hearing to cross-examine the
parties, to this end inviting their legal representatives or informed persons with right of
attorney. The board also established November 20, 2010 as the deadline to conclude the
arbitration proceedings..
Following the aforementioned free examination, the board issued order no. 6309/20 on June
3, 2010, asking the Chamber of Arbitration to appoint an expert technical witness to qualify the
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difference between the projects mentioned in the investment agreement dated January 31,
2007, in particular the San Biagio project and projects described in the Baltic agreement.
By way of a provision issued by the Council of Arbitration on July 1, 2010, the German research
institute Deutsches Windenergie GmBH Institute Branch DeEI Italia was appointed as the
independent court expert; the Board then scheduled the hearing for September 23 to confirm
arbitration proceedings and set a date to commence the expert examination (October 15,
2010), submission of the report (January 10, 2010) and to allow the parties to appoint their
own technical expert witnesses.
At that hearing, A2A S.p.A. appointed the firm D'Apollonia as its expert witness, and Ecovolt
appointed Professor Zaninelli.
On September 28, the Chamber of Arbitration advised the parties that their appointed expert
technical witness had withdrawn, with relative written notice.
On October 13, 2010, the Chamber of Arbitration announced its new order no. 1611/21 dated
October 12, 2010, naming Professor Villacci from Sannio University as the new expert technical
witness. On December 23, 2010, the expert technical witness applied to the Arbitrators for the
term set for submitting the expert report to be extended until February 25, 2011; the term was
further extended to April 6, 2011.
On receipt of the report of the expert technical witness, the Board set the term for the parties
to submit their respective statements, and the last statement was filed on June 24, 2011. The
Board then invited the Parties to come to a settlement; the epistolary exchange in this regard
did not alter the positions of either of the parties.
The Board of Arbitration requested an extension of the term to submit the award until May 20,
2012 selected then set a date for the hearing, before both lawyers and the technical experts, on
October 6, 2012
The Board of Arbitration set December 14, 2011 as the date for the obligatory attempt at
reconciliation, and a few days prior to this date, Ecovolta filed a new opinion by an external
third party, with no relation to the arbitration procedure, in an attempt to quantify the
damage caused by A2A S.p.A's conduct.
During the hearing, the arbitrators listened to the parties and communicated that no new
measures or orders would be passed until January 15, 2012. On December 19, 2011, Ecovolt's
lawyers wrote to A2A S.p.A's legal team to remind them of the limited time available to assess
any settlement solutions.
A2A S.p.A's legal team replied in writing that the company was willing to reach an agreement,
with no recognition of responsibility whatsoever, to pay the comprehensive and non-
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modifiable sum of 500,000 euro, in exchange for Ecovolta's agreement to withdraw all claims
of any kind.
We are awaiting their reply in order to notify the arbitrators accordingly, or alternatively, to
receive new arbitration papers.
The Arbitration Board appointed Mario Massari as the new expert technical witness on
February 2, 2012, establishing multiple requisites to determine the value of the shareholding in
Ostros Energia S.r.l (now in liquidation) held by Ecovolt at December 31, 2008; after lengthy
discussion at the subsequent hearing on February 14, 2012, Ecovolt appointed Prof. Brugger as
the expert technical witness, and A2A S.p.A appointed Prof. Dallocchio; the deadline to submit
the expert reports taking these expert opinions into account was set for June 15, 2012.
The company is defended by the Chiomenti legal firm.
Arbitration initiated by S.F.C. S.A. and Eurosviluppo Industriale S.p.A. against A2A
S.p.A. And E.ON Europa S.L. for an alleged breach of a private agreement to purchase
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shares in Eurosviluppo Industriale S.p.A. (now called Ergosud S.p.A.)
On May 2 and 3, 2011, the Milan Chamber of Arbitration sent A2A S.p.A. (owner of 50% of the
share capital of Ergosud S.p.A.) and E.ON Europa S.L. (former shareholder of Ergosud S.p.A. currently the share is owned by E.ON Italia S.p.A) respectively an arbitration request, whereby
Société Financiere Cremonese S.A. together with Eurosviluppo Industriale S.p.A. had raised
arbitration proceedings against the aforementioned companies, requesting the following: 1)
to verify E.ON Europa S.L.'s and A2A S.p.A.'s breach of contract and failure to fulfill the
obligations assumed in the agreements dated December 16, 2004, October 15, 2004 and July
25, 2007 inter parties, and 2) to sentence them to the payment of the remaining portion of the
cost of the asset sale, consisting of the entire share capital of Ergosud S.p.A, equal to
10,000,000 euro, as well as compensation for damages incurred by Société Financiarie
Cremonese S.A. and Eurosviluppo Industriale S.p.A., to cover both the consequential loss and
loss of profits, amounting to 126,496,496, save any further enumeration, as well as damages
incurred to site stoppage, interest and revaluation.
E.ON Europa S.L. and A2A S.p.A. duly appeared before the court to ask for the opposing
request to be rejected in full, forwarding a counter-claim requesting that the counter parties
be forced to pay compensation for the damages incurred by the defendants as a result of the
numerous breaches of contract; these were initially quantified in the sum of 30,500,000, i.e.
the larger or smaller sum considered to be equitable by the court, quantified in accordance
with Article 1226 of the Italian Civil Code, including interest (as under Article 1283 of said code)
and monetary revaluation (as under Article 1224, sub-section 2).
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On September 7, 2011, the Chamber of Arbitration officially suspended arbitration due to the
non-payment of the legal expenses by the plaintiff.
Lawyers for A2A S.p.A and E.ON Europa S.L. are checking if arbitration can be continued only
for the counter-claim, without having to take responsibility for the payment of the plaintiff's
expenses.
If this is not possible, arbitration may be terminated.
With regards to payment of the legal fees by defendants A2A S.p.A and E.ON Europa S.L., and
the non-payment by plaintiffs SFC S.A. and Eurosviluppo Industriale S.p.A., on December 2,
2011 the secretary of the Chamber of Arbitration communicated that the plaintiffs'
applications had been extinguished and proceedings would continue only for the applications
presented by A2A S.p.A. and E.ON Europa S.L.; in simultaneous letters, the secretary also
advised that all documentation had been sent to the arbitrators to allow the proceedings to
commence.
The board consists of Giuseppe Portal (Chairman), Vincenzo Mariconda (arbitrator
appointed by A2A S.p.A and E.ON Europa S.L.) and Giovanni Frau (arbitrator appointed by SFC
S.A. and Eurosviluppo Industriale S.p.A.)
The Arbitration Board appointed Mario Massario as the new expert technical witness on
February 2, 2012, establishing multiple requisites to determine the value of the shareholding in
Ostros Energia S.r.l. (now in liquidation) held by Ecovolt at December 31, 2008; after lengthy
discussion at the subsequent hearing, Ecovolt appointed Prof. Brugger as its expert witness
and A2A S.p.A appointed Prof. Dallocchio; the deadline to submit the expert reports taking
these expert opinions into account was set for June 15, 2012.
The company is defended by Studio Chiomenti and Simmons & Simmons.
Consorzio Eurosviluppo Scarl / Ergosud S.p.A. + A2A S.p.A. – Rome Civil Court
On May 27, 2011, Consorzio Eurosviluppo Industriale Scarl sent Ergosud S.p.A. and A2A S.p.A. a
writ of summons, appealing for the following: (i) contractual and non-contractual damages
claim, jointly or severally, amounting to 35,411,997 euro (1,065,529 euro of which for the
remaining expenses payable); (ii) damages claim for site stoppage and failure to return areas
pertaining to the Consortium.
When they appear before the court, Ergosud S.p.A. and A2A S.p.A. will ask for the claim to be
rejected in full being unfounded and basically highlighting: (i) The Consortium does not have
the legal status to institute legal proceedings, being in bankruptcy, (ii) the Consortium does
not have the legal status to claim the damages allegedly incurred by Fin Podella for "advance
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contract schedule" and amounting to 6,153,437 , and for damages allegedly incurred by
Conservificio Laratta S.r.l. totaling 359,000 euro.
The first hearing was scheduled for October 30, 2011. Jurisdiction for the case was assigned to
the Second Civil Division of the Court, Single Judge Lorenzo Pontecorvo. The first hearing at
which the parties are required to attend was set for November 30, 2011, and the judge did not
comment on the legal status of the bankrupt consortium to institute proceedings.
At that time, Ergosud S.p.A. and A2A S.p.A. will not be able to place counter-claims as this falls
under the authority of the Bankruptcy Judge.
SFC S.A. filed an act of joinder on November 8, 2011, in accordance with Art. 105 of the Italian
Code of Civil Procedure; this will allow a third party to add a new and different claim to the
original proceedings, and asked for Ergosud S.p.A. alone to be forced to pay damages, more
specifically the same amount as those claimed by the Consortium, quantified at 27,467,031
euro.
The authority of SFC S.A. to institute legal proceedings is independent of that of the
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Consortium, the original plaintiff, and if the latter's claim is declared non-processable due to
an insufficient premise, i.e. the onset of bankruptcy, the case would continue between SFC
and Ergosud S.p.A. In this context, A2A S.p.A may ask to be excluded insomuch as no claims
have been raised against the company, although the judge will most likely to adjourn the case
until the final sentence.
Within the term of the first hearing, the lawyers formulated conclusions for Ergosud S.p.A
regarding the claim raised by SFC S.A., to be rebutted more conclusively in subsequent pretrial statements, following Art. 183, sub-section 6, Italian Code of Civil Procedure.
The company is defended by Simmons&Simmons.
CIP 6 auxiliary services
We have learned that some plants in Tuscany party to CIP6/92 conventions have been inspected
by GSE (Electricity Services Operator), i.e. appointed by AEEG (Italian Authority for Electricity
and Gas) to determine the amount of electricity (produced by plants powered by renewable
sources) consumed by auxiliary plant services, as defined by AEEG. It seems that the
inspections were followed by an AEEG provision contesting that the amount of electricity used
by auxiliary services was greater than the level indicated in the relevant conventions; it also
appointed the Electricity Sector Equalization Fund (Cassa Conguaglio del Settore Elettrico CCSE) to recover amounts unduly paid to the two companies. These amounts equal - according
to AEEG's calculations - the difference between the energy that the plants received CIP 6
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incentives for, and the energy that (again according to AEEG) was actually delivered into the
grid. One company has contested the provision with the Regional Administrative Tribunal (TAR)
of Lombardy, and has had it suspended. The appeal will be discussed at the hearing on June 21,
2012.
Amsa S.p.A.
The CIP 6 convention agreed by Amsa S.p.A. set electricity consumption for auxiliary plant services
at 5% of gross output (of the actual energy generated). It may also be useful to know that the
convention also provides that this value "can be replaced by a new value to be calculated on the
basis of jointly defined technical inspections".
Amsa S.p.A. has already received an inspection from the Electricity Sector Equalisation Fund
(CCSE) on December 19, 2006. The visit led to a note (September 19, 2007) according to which the
amount of electricity produced by the plant and consumed by auxiliary plant services, is greater
than the flat rate indicated in the convention, having been found to reach 16% to 23%. To date,
AEEG has not taken any particular stance regarding Amsa S.p.A, having also received the CCSE
note.
Although we have been aware of the CCSE inspection for some time, the possibility that this could
create potential liabilities only emerged when we learned of the measures that AEEG applied to the
aforementioned Tuscan companies.
Should Amsa S.p.A. be the subject of AEEG measures, similar to those levied on the
aforementioned companies, the potential liability that may derive for Amsa S.p.A is difficult to
estimate. Assuming the worst, the estimated liability could amount to more than 40 million euro
for the period the plant was in operation (February 2011 - December 2011). As things stand, we
believe however that this liability is only a remote possibility, given the lack of measures against the
company and defensive objections that could be raised.
Ecodeco Group
The CIP 6 convention agreed by Ecodeco S.r.l. and Ecolombardia 4 S.p.A. set electricity
consumption for auxiliary plant services at 3% and 5.5% of gross output respectively (of the
actual energy generated).
It may also be useful to know that the conventions also provide that this value "can be replaced
by a new value to be calculated on the basis of jointly defined technical inspections". For
Ecolombardia 4 S.p.A. this value has already been reviewed, communicated and accepted by
AEEG, after the plants became fully operational (with effect from January 1, 2004).
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Ecolombardia 4 S.p.A. received an inspection from GSE (Electricity Service Operator) in
September 2011. The inspection led to a note by the Operator (January 4, 2012 2007)
according to which the amount of electricity produced by the plant and consumed by auxiliary
plant services, is greater than the flat rate indicated in the convention, having been found to
reach 19.4% to 25.5%.
Based on the inspections and analysis carried out by the company, the differences found
result from a different interpretation of what auxiliary services actually are in relation to the
Ecolombardia 4 S.p.A. waste-to-energy plant. To date, AEEG has taken no action.
Should Ecolombardia 4 S.p.A. and Ecodeco S.r.l. be the subject of AEEG measures, similar to
those levied on the aforementioned companies, the potential liability that may derive for the
Ecodeco Group is difficult to estimate. Assuming the worst, the estimated liability could
amount to around 31 million euro for the period the plant was in operation, i.e. also taking into
account the previous years, from 2004 to 2011.
Based on the technical evidence supporting the Ecodeco Group's conduct in identifying
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auxiliary services and other valid defensive objections of a legal and contractual nature that
could be raised in the event of a legal dispute, the liability may occur.
Giussago bioreactor
Case raised by Casarile and other councils against Lombardy Region and the Province of Pavia
to obtain the cancellation of the integrated environmental authorization (AIA) and
environmental impact assessment (positive) measures expressed by entities regarding the
building of a bioreactor (by Ecodeco S.r.l) for non-hazardous waste in Cascina Maggiore Giussago (PV). The appeal proposed additional reasons to extend the appeal to other acts
related to the proceedings and broaden the list of bans. The Province of Milan intervened
voluntarily in the case to support the claims of Casarile Town Council.
Following the hearing on December 5, 2011, where the provisional motion submitted by the
local councils was discussed, public order no. 1818 of December 6, 2011 was initially
pronounced then sentence no. 67 of January 11, 2012 published.
The Court issued Ordinance n° 1818, stating – even though it was a precautionary ruling – that
the encumbrance was inadmissible due to lateness, inasmuch as it went against the
assessment measure (positive) regarding the environmental impact of the plant. The Court
ruled that the appeal against the integrated environmental authorization was timely. The
same Ordinance, however, stated that certain assessments "in accordance with sundry
outlines to be issued in the final ruling" needed to be made. At the same time, the Court said
that "any delay would be dangerous, since the plant in question has already been completed
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and is ready to be started," and thus suspended all the other contested measures (including
the integrated environmental authorization for the plant).
Ruling n° 67 therefore confirmed that the Court accepted the plea of delay in making the
appeal against the positive measure with regard to the plant. Having superseded the
objections made by the local councils, the Regional Administrative Tribunal decided that, to
understand how much of the encumbrance against the integrated environmental
authorization was to be awarded, "in reaching a final agreement and to settle the question of
the undeclared and inadmissible reprimands, the documents deposited at the last minute, and
the persistent differences between the parties, an assessment will be made, with the parties
present, in order to ascertain: 1) if the documentation deposited by Ecodeco S.r.l. during the
hearings to examine the guarantees required for start-up, day-to-day running, and the
procedures for closing the bioreactor down pursuant to Legislative Decree n° 36/2003 and
Legislative Decree n° 152/2006; 2) the actual nature of the refuse to be treated in the
bioreactor in question, and in particular whether or not the waste is putrescible; 3) if, in the
light of the planning documents presented by Ecodeco S.r.l. during the authorization hearings,
the multi-layer coating is compliant with the requirements of Legislative Decree n° 36/2003, as
specified in V.I.A. Decree n° 1503, dated 17 February 2009."
The Court ordered the assessment operations to be carried out by the "Director of the
Environmental Assessments Office at the Environment Ministry" (or by an "authorized deputy
thereof"), saying that a report was to be made by no later than "ninety (90) days after
administrative notification or receipt" of the Ruling. A decision on how the case will be handled
(after the aforementioned verification) was therefore postponed until the public hearing on 5
June 2012. Ecodeco S.r.l. appointed Prof. Adami at the Politecnico and Mr. Minetti as their
representatives.
Following the sentence, the petitioning towns also formulated a further document listing
additional reasons to appeal against ruling no. 155384 of November 18, 2011 whereby ARPA,
having verified the plant's compliance with the prescriptions laid down in the relative
authorization documents, gave its permission, pursuant to Art. 9 of Leg. Decree No. 26/03,
to the start of disposal operations at the bioreactor, further extending the thema
decidendum.
A similar initiative was raised by the town of Lacchiarella.
In sentence no. 68, Section IV of TAR Lombardy rejected the appeal lodged by the town of
Lacchiarella, on lateness grounds.
The Council therefore lodged its own appeal to reinforce ruling no. 155384 of November 18,
2011 whereby ARPA, having verified the plant's compliance with the prescriptions laid down in
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the relative authorization documents, gave its permission, pursuant to Art. 9 of Leg. Decree
No. 26/03, to the start of disposal operations at the bioreactor.
The Council has also appealed against sentence no. 68 dated January 11, 2012 of Section IV of
TAR Lombardy.
Legal counsel for the case is Giuseppe Franco Ferrari.
Monfalcone Plant Inquiry
In November 2011, the Trieste Judicial Authority took restrictive action against several
individuals in several regions, including an employee of the Monfalcone Thermoelectric Plant.
This inquiry was initiated when the A2A Group reported A2A employees and third party
business people for aggravated fraud against A2A S.p.A; these individuals are suspected of
illegally waste trafficking and damage to private assets (A2A Group) and public assets, with
reference to events that took place in the aforementioned power plant concerning both the
quantitative supply of biomass and the certification of their heat-generating potential.
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A2A S.p.A., owner of the production plant, took the precautionary action of suspending the
employee involved.
This case concerning the qualitative and quantitative deformity of biomasses, if confirmed by
the relevant authorities on conclusion of the investigation phase, would be solely to the
damage of the A2A Group and A2A Trading S.r.l. insomuch as the latter, as toller and
responsible for energy distribution in the plant, is potentially at risk of huge financial penalties
for greater costs incurred. Moreover, again if the case is confirmed, A2A S.p.A may have to
return to GSE any extra green certificates booked to accounts; indeed, in 2009 and 2010, the
company may have reported more requests to issue the aforementioned environmental
securities than it should have had, given that the calculation could have been corrupted by a
greater "energy from biomass to energy from conventional sources" ratio that was actually
the case. In this case, the company will have to made adjustments to the aforementioned
previous statements and return any extra income or securities recognized to GSE.
The investigation initiated by the Trieste Judicial Authority has not been completed yet hence,
the information needed to determine the effect of any criminal conduct found on the
company's balance sheet is not yet available.
It goes without saying that the A2A Group, as the injured party, to protect its image and
interests, especially as regards full compensation for damages incurred, is taking and will take
all necessary action as and when appropriate.
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***
As regards the main tax disputes, your attention is drawn to the following:
A2A S.p.A. – Notification of IRES, IRAP and IVA assessment for 2005 tax year
Lombardy Regional Headquarters of the Revenues Agency notified A2A S.p.A. (formerly Asm
Brescia S.p.A) on December 23, 2010 of an IRES, IRAP and IVA tax assessment for the 2005 tax
year, as a result of a general tax audit carried out in 2008 by the Brescia 2 Tax Office for the
same tax year.
These assessments are based on the Regional Management's claim that the company had not
fulfilled its direct tax and VAT obligations' on this basis, greater IRES, IRAP and VAT payments
are required as well as penalties and interest amounting to 3.3 million euro.
Appeals against each of these assessments have been filed with the relevant Tax
Commissioners.
On the same day, the regional management also served notice of IRES assessments (level 2
notice) for the 2005 tax year on A2A S.p.A, being the consolidating company of Aprica S.p.A.
and A2A Reti Gas S.p.A.
As regards the notice served as consolidating company of A2A Reti Gas S.p.A., the sum
demanded was paid thereby definitively closing the case.
The notice served as consolidating company of Aprica S.p.A. was contested as part of the
dispute currently ongoing for the level I notice, received in 2010 for the same reasons
regarding Aprica S.p.A.
A2A Trading S.r.l. - IVA assessment for Green Certificates in 2004- 2005 - 2006
The Milan Tax Office served notice on A2A Trading S.r.l. on December 23, 2009 of a VAT tax
assessment concerning the 2004 tax year. This notice cited the company's failure to invoice
taxable transactions and required the company to pay a greater amount of VAT as well as
penalties and interest amounting to a total of 3.3 million euro.
In particular, under this assessment, the Italian Tax Authority served a penalty on A2A Trading
S.r.l. for not having invoiced the tollee (Edipower S.p.A.) Green Certificates allegedly
transferred between the two.
After appropriate examination which also included the other tollers, it was felt that the Tax
Authority's conclusions could not be accepted. In fact, under tolling contracts, tollers are the
owners of the raw materials, including fuel oil, that they supply to the tollees to produce
107
Other information
electricity, and are also the "ab-origin" owners of the electricity produced. The delivery of Green
Certificates from tollees to tollers cannot in any way be considered as the transfer of title to
them.
A2A Trading S.r.l. has therefore not committed any breach of regulations and as a result, did
not allocate any funds to the risk provision.
For the same reasons, on December 16, 2010, the Milan Tax Office served notice of a VAT tax
assessment concerning the 2005 tax year, and on October 31, 2011 for the 2006 tax year,
requiring the company to pay a greater amount of VAT as well as penalties and interest
amounting to a total of 4.8 million euro and 8.9 million euro respectively. As in both 2004 and
2005, also in 2006 A2A Trading S.r.l. did not breach regulations and as a result, no funds were
allocated to the risk provision.
A2A Trading S.r.l. appealed to the relevant bodies for all of the above notices received,
requesting that the claim for additional taxes be fully annulled.
The Milan Provincial Tax Commission accepted the appeals presented by the company for
108
both the 2004 and 2005 figures disputed.
Note that following the request for documentation regarding Green Certifications for the
same tolling contract in tax years from 2007 to 2010, and having accessed the company, on
October 28, 2011 the Italian Guardia di Finanza - Milan Office served notice of the Report on
Findings, highlighting the same failure to bill taxable transactions for the years 2007, 2008 and
2010.
A2A Reti Elettriche S.p.A. Registration tax assessment to review the value of goodwill
regarding the sale of "protected categories (regulated market)" business assets to
A2A Energia S.p.A.
On February 16, 2010, the Milan 3 office of the Italian Tax Authority served notice of the correction
and liquidation of registration tax due on the sale of "protected categories (regulated market)"
assets from Aem Elettricità S.p.A. (now A2A Reti Elettriche S.p.A.) and Aem Energia S.p.A. (now
A2A Energia S.p.A.) on February 1, 2008. In this notice, the tax office contested the figure disclosed
for “goodwill” and as a result, the associated registration tax payable. The company attempted to
reach a tax settlement but since no agreement was reached with the office in question, the
assessor challenged the notice served by lodging an appeal. The Milan Provincial Tax Commission
accepted the appeal.
Other information
A2A Reti Gas S.p.A. - General IRES/IRAP/IVA for 2007 tax year.
On February 24, 2010, the Brescia 2 office of the Italian Tax Authority commenced a tax audit
of A2A Reti Gas S.p.A. (previously Asm Reti S.p.A.) in order to check IRES, IRAP and IVA for tax
year 2007. This tax audit was completed on April 29, 2010.
Significant breaches were found regarding direct taxation.
To date, we have received notifications for 2005, 2006, 2007 and 2008.
On February 21, 2011 the company paid the amount due for 2005, on May 2011 the amount due
for 2006 and June 6, 2011 for 2008.
As regards the notification regarding the 2007 tax year, the Company presented a tax
settlement proposal on June 30, 2011, and the amount liquidated by the Tax Office was paid in
December.
Aprica S.p.A. – General IRES, IRAP and IVA assessment for 2007 tax year
On January 10, 2011, the Brescia 2 office of the Italian Tax Authority commenced a tax audit of
Aprica S.p.A. to verify IRES, IRAP and IVA payments for the 2007 tax year. This tax audit was
completed on February 8, 2011.
Significant breaches were found regarding direct taxation.
On September 14, 2011, notification of a tax assessment was received, reporting the same
findings found during the audit, and which the company agreed to comply with, paying the
extra taxes indicated. As regards write-backs resulting from errors in the application of the
accruals principle, a claim for the higher taxes paid in the year in which the costs should have
been deducted, has been presented.
A2A S.p.A. (merging company of AMSA Holding S.p.A.) – Notification of IVA
assessment for 2001 and 2005 tax years.
In early 2006, the Italian Guardia di Finanza - Lombardy Tax Squad, Milan - audited AMSA
Holding S.p.A. (now A2A S.p.A.) to check VAT paid in tax years from 2001 to 2005.
The audit ended with the issue of a final report contesting the legitimacy of the ordinary VAT
rate applied by suppliers instead of the special rate for waste disposal and plant maintenance,
as well as the subsequent deduction made after the associated invoices were paid.
The report was followed by formal notices of assessment from the Tax Authority - Milan 3
Office - for each year audited; appeals were then lodged with the provincial tax commission, as
allowed by law.
109
Other information
The appeal for 2001 was discussed on January 25, 2010 and those of 2004 and 2005 on
February 17, 2010, with a favorable outcome for each for the company.
The outcome of the 2002 and 2003 disputes were also favorable for the company,
although the Tax Authority lodged an appeal against both sentences. The 2002 appeal was
discussed on November 30, 2010; the Milan Regional Tax Commission issued its sentence
on February 23, 2011, reformulating the initial sentence and accepting the Tax Authority's
appeal on almost all accounts with the exception of the hazardous waste category. The
Company filed an appeal with the Court of Cassation for 2002. The appeal for 2003 was
discussed before the Regional Tax Commission on November 7, 2011. The decision in favor
of the company was contested by the Tax Office, but the second ruling was also in favor of
the company.
The Tax Office then presented an appeal against the sentences for 2004 and 2005. The
company submitted its counterclaims on April 20, 2012.
The Company paid the bill requesting 1.9 million euro for 2002 on April 12, 2012; further to the
110
sentences in favor of the Company, the Tax Office applied rebates for the years 2003, 2004
and 2005 for a total of 1.6 million euro.
Plurigas S.p.A. – Excise audit for 2009, 2010 and 2011 tax years.
On May 25, 2011, the Italian Guardia di Finanza - the Milan Tax Squad - commenced a tax audit
in Plurigas S.p.A. to verify excise payments for tax years 2009, 2010 and 2011, on the entry date
only.
The audit was completed on October 20, 2011 with the preparation of the relative Report on
Findings detailing inaccuracies in the compilation of annual natural gas statements were
described for the years 2009 and 2010, as well as the incorrect compilation of Intrastat lists for
2010.
ECODECO S.r.l. – Notification of IVA assessment for 2006 and 2007 tax years.
On July 5 and 6, 2010, the Milan 3 Tax Office served VAT tax assessment notices for the years
2006 and 2007, contesting the reduced VAT rates applied to the disposal of refuse derived fuel
(RDF). This claim was accompanied by a demand for 472 thousand euro extra in VAT payments
(as well as penalties and interest) for the year 2006, and 496 thousand euro (as well as
penalties and interest) for the year 2007.
Ecodeco S.r.l. lodged an appeal with the appropriate authorities for both tax assessment
notices received; a hearing has been set for March 2012.
Other information
On receipt of the Equitalia tax statement for the non-billing of VAT, for 50% of the tax plus
interest and penalties (94 thousand euro for 2006 and 96 thousand euro or 2007), payment
was made in October 2011, as collection by installment while awaiting a sentence.
ASRAB S.r.l. – Notice of IRES and IRAP tax assessment for the 2004 tax year
On December 21, 2009, notice of IRES and IRAP tax assessments were served for the 2004 tax
year, contesting several items of amortization and depreciation deducted from taxable
income along with costs related to "assignment rights" that the company pays every year to
Co.s.r.a.b. The claim was accompanied by a demand for 355 thousand euro extra for IRES and
IRAP, as well as penalties and interest.
The company lodged an appeal with C.T.P in Milan on May 20, 2010. The Commission accepted our
request to suspend proceedings and in May 2011, it accepted our appeal and cancelled the
notification regarding costs for "assignment rights". The Tax Office appealed and the Company
responded by presenting its own cross appeal.
On March 10 and 15, 2011, notices of IRES and IRAP tax assessments were served, contesting
several items of amortization and depreciation deducted from taxable income along with
costs related to “assignment rights” that the company pays every year to Co.s.r.a.b. The claim
was accompanied by a demand for 515 thousand euro extra for IRES and IRAP, as well as
penalties and interest.
The company lodged an appeal with C.T.P in Milan on May 20, 2011. On September 5, 2011, the
Biella Commission suspended the execution of the proceedings until a guarantee had been
presented, i.e. a policy covering 50% of the contested credit. This policy was presented to the
Biella Tax Office on September 28, 2011.
Several notices of IRES and IRAP tax assessments were served between June 10 and June 17,
2011, contesting several items of amortization and depreciation deducted from taxable
income along with costs related to “assignment rights” that the company pays every year to
Co.s.r.a.b. The claim was accompanied by a demand for 729 thousand euro extra for IRES and
IRAP, as well as penalties and interest.
The company lodged an appeal with C.T.P in Milan on October 18, 2011. On November 16, 2011 we
received notification that the entire assessment had been annulled insomuch as the wrong
amount had been indicated for assignable rights; on December 9, 2011, a new assessment
111
Other information
notification was received replacing the previous one. The company will submit an appeal to this
to the Provincial Tax Commission, as permitted by law.
Several notices of IRES and IRAP tax assessments were served on Ecodeco S.r.l. and ASRAB S.r.l.
between October 21 and October 24, 2011, contesting several items of amortization and
depreciation deducted from taxable income along with costs related to “assignment rights”
that the company pays every year to Co.s.r.a.b. The claim was accompanied by a demand for
920 thousand euro extra for IRES and IRAP, as well as penalties and interest. An appeal was
lodged with the technical expert in Biella on January 12, 2012, who granted suspension of the
document on presentation of a guarantee that the Company is currently arranging.
ECODECO S.r.l. – Notification of IRES, IRAP and IVA assessment for 2007 tax year
On August 17, 2011, notice of IRES and IRAP tax assessments were served, contesting the undue
deduction of a risks and charges provision, demanding an extra 233 thousand euro for IRES
112
and IRAP, as well as penalties and interest.
Notice of an IVA tax assessment was also received, contesting the undue deduction of direct
taxation due to the non-application of pro-rata deductibility, accompanied by a demand for
284 thousand euro extra for taxes, penalties and interest.
A motion to suspend and handle through public hearing was submitted to the Provincial
Management II of the Revenues Agency on November 15, 2011 by recorded delivery letter, and
to the technical expert in Milan, on December 6, 2011. The appeal was discussed on April 23,
2012. We are waiting to hear the outcome of the sentence, which will also include a ruling on
the decision to suspend collection.
8) Environmental certificates as contingent assets
At March 31, 2012 the Group had an excess of environmental certificates (Green Certificates,
Emission Allowances and White Certificates).
0.4
Attachments to the
notes to the Interim
report on operations
1 - List of companies included in the
consolidated financial statements
Name
Registered office
Currency
Share
capital
(thousands)
Brescia
Brescia
Milan
Brescia
Brescia
Brescia
Milan
Milan
Brescia
Brescia
Brescia
Milan
Varese
Podgorica (Montenegro)
Brescia
Brescia
Noisy Le Grand (Francia)
Brescia
Gissi (Ch)
Brescia
Euro
Euro
Euro
Euro
Euro
Euro
Euro
Euro
Euro
Euro
Euro
Euro
Euro
Euro
Euro
Euro
Euro
Euro
Euro
Euro
442,000
520,000
52,179
150,000
3,000
300
520
1,000
120
250
70,000
7,469
2,000
300
10
204,698
32,562
126
130,000
34,495
Varese
Varese
Brescia
Brescia
Cedegolo (Bs)
Milan
Milan
Brescia
Milan
Milan
S. Gervasio Bresciano (Bs)
Niksic (Montenegro)
Belgrade (Serbia)
Danilovgrad (Montenegro)
Euro
Euro
Euro
Euro
Euro
Euro
Euro
Euro
Euro
Euro
Euro
Euro
Dinar RSD
Euro
174
3,624
1,500
350
900
100
800
700
1,875
1,466,868
1,808
958,666
35
12,240
Consolidation area
114
A2A Reti Gas S.p.A.
A2A Reti Elettriche S.p.A.
AMSA S.p.A.
A2A Calore & Servizi S.r.l.
Selene S.p.A.
A2A Servizi alla Distribuzione S.p.A.
A2A Energia S.p.A.
A2A Trading S.r.l.
Partenope Ambiente S.p.A.
A2A Logistica S.p.A.
A2A Ciclo Idrico S.p.A.
Ecodeco S.r.l.
Aspem Energia S.r.l.
A2A Montenegro d.o.o.
Mincio Trasmissione S.r.l.
Aprica S.p.A.
A2A Coriance S.a.s.
Assoenergia S.p.A. in liquidation
Abruzzoenergia S.p.A.
Retragas S.r.l.
Aspem S.p.A.
Varese Risorse S.p.A.
Montichiariambiente S.p.A.
Ostros Energia S.r.l. in liquidation
Camuna Energia S.r.l.
A2A Alfa S.r.l.
Plurigas S.p.A.
Seasm S.r.l.
Proaris S.r.l.
Delmi S.p.A.
Ecofert S.r.l.
Elektroprivreda Cnre Gore AD Niksic (EPCG)
EPCG d.o.o. Beograd
Zeta Energy d.o.o.
For shareholdings in the subsidiaries of the Ecodeco Group, refer to attachment 3
For shareholdings in the subsidiaries of the Coriance Group, refer to attachment 4
1 - List of companies included in the consolidated financial statements
%
consolidated
group
shareholding
at
03 31 2012
Stake
held
%
Shareholder
Valuation method
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
99.99%
98.08%
97.76%
100.00%
91.60%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
99.99%
98.08%
97.76%
100.00%
91.60%
Line-by-line consolidation
90.00%
90.00%
80.00%
80.00%
74.50%
70.00%
70.00%
67.00%
60.00%
51.00%
47.00%
43.70%
100.00%
57.86%
90.00%
90.00%
80.00%
80.00%
74.50%
70.00%
70.00%
67.00%
60.00%
51.00%
47.00%
43.70%
100.00%
51.00%
A2A S.p.A.
A2A S.p.A.
A2A S.p.A.
A2A S.p.A.
A2A S.p.A.
A2A S.p.A.
A2A S.p.A.
A2A S.p.A.
A2A S.p.A.
A2A S.p.A.
A2A S.p.A.
A2A S.p.A.
Aspem S.p.A.
A2A S.p.A.
A2A S.p.A.
A2A S.p.A.
A2A S.p.A.
A2A S.p.A.
A2A S.p.A.
A2A S.p.A. (87.27%)
A2A Reti Gas S.p.A. (4.33%)
A2A S.p.A.
Aspem S.p.A.
Aprica S.p.A.
A2A S.p.A.
A2A S.p.A.
A2A Trading S.r.l.
A2A S.p.A.
A2A S.p.A.
A2A S.p.A.
A2A S.p.A.
A2A S.p.A.
A2A S.p.A.
EPCG
EPCG
115
2 - List of shareholdings in
companies carried at equity
Name
Registered office
Currency
Share
capital
(thousands)
Bergamo
Euro
120
Roma
Euro
81,448
Shareholdings carried accordingn to equity method
PremiumGas S.p.A.
Ergosud S.p.A.
Ergon Energia S.r.l. in liquidation
Metamer S.r.l.
Milan
Euro
600
San Salvo (Ch)
Euro
650
1,000
Asm Novara S.p.A.
Brescia
Euro
Sarnico (Bg)
Euro
10
SET S.p.A.
Toscolano Maderno (Bs)
Euro
104
Azienda Servizi Valtrompia S.p.A.
Gardone Valtrompia (Bs)
Euro
6,000
1,000
Bergamo Servizi S.r.l.
116
Ge.S.I. S.r.l.
Centrale Termoelettrica del Mincio S.r.l.
Serio Energia S.r.l.
Brescia
Euro
Ponti s/Mincio (Mn)
Euro
11
Concordia s/Secchia (Mo)
Euro
1,000
Visano Soc. Trattamento Reflui Scarl
LumEnergia S.p.A.
Brescia
Euro
25
Lumezzane (Bs)
Euro
300
Sviluppo Turistico Lago d'Iseo S.p.A.
ACSM-AGAM S.p.A.
Edipower S.p.A.
Iseo (Bs)
Euro
1,616
Monza
Euro
76,619
1,441,300
Milan
Euro
Brescia
Euro
2,500
Milan
Euro
27,555
Prealpi Servizi S.r.l.
Varese
Euro
5,451
COSMO Società Consortile a Responsabilità Limitata
Brescia
Euro
100
Dolomiti Energia S.p.A.
Rovereto (Tn)
Euro
219,000
Rudnik Uglja Ad Plejvlja
Plejvlja (Montenegro)
Euro
21,493
Futura S.r.l.
Metroweb S.p.A.
Ecodeco Group Consolidation (1)
Coriance Group Consolidation (2)
Total shareholdings
Shareholdings held for sale
Transalpina di Energia S.r.l.
Milan
Euro
3,146,000
Utilia S.p.A.
Rimini
Euro
900
(1) For shareholdings in the subsidiaries of the Ecodeco Group, refer to attachment 3.
(2) For shareholdings in the subsidiaries of the Coriance Group, refer to attachment 4.
2 - List of shareholdings in companies carried at equity
Stake
held
%
Shareholder
Book
value at
03 31 2012
(thousands)
Valuation method
50.00%
A2A Alfa S.r.l.
4,495
Equity method
50.00%
A2A S.p.A.
75,837
Equity method
50.00%
A2A S.p.A.
103
Equity method
50.00%
A2A S.p.A.
1,314
Equity method
Equity method
50.00%
A2A S.p.A.
-
50.00%
Aprica S.p.A.
246
Equity method
49.00%
A2A S.p.A.
509
Equity method
48.86%
A2A S.p.A. (48.48%)
A2A Reti Gas S.p.A. (0.38%)
3,908
Equity method
44.50%
A2A S.p.A.
1,304
Equity method
45.00%
A2A S.p.A.
8
Equity method
40.00%
A2A S.p.A.
472
Equity method
40.00%
A2A S.p.A.
10
Equity method
33.33%
A2A Energia S.p.A.
225
Equity method
24.29%
A2A S.p.A.
830
Equity method
21.94%
A2A S.p.A.
31,600
Equity method
20.00%
A2A S.p.A.
290,000
Equity method
20.00%
500
Equity method
19.44%
A2A S.p.A.
24,000
Equity method
Equity method
12.47%
Aspem S.p.A.
801
52.00%
52
Equity method
7.90%
A2A S.p.A.
62,435
Equity method
39.49%
A2A S.p.A.
19,066
Equity method
2,311
See attachment 3
2,185
See attachment 4
522,211
50.00%
Delmi S.p.A.
915,000
Equity method
20.00%
A2A Energia S.p.A.
202
Equity method
117
3 - List of companies included in
the consolidated financial
statements of the Ecodeco Group
Name
Registered office
Currency
Share
capital
(thousands)
Consolidation area
118
Ecodeco S.r.l.
Milan
Euro
7,469
Ecodeco Hellas S.A.
Atene
Euro
60
Ecolombardia 18 S.r.l.
Milan
Euro
658
Ecolombardia 4 S.p.A.
Milan
Euro
17,727
Milan
Euro
1,040
Canvey Island Essex (UK)
GBP
250
Sicura S.r.l.
Sistema Ecodeco UK Ltd
Vespia S.r.l.
Milan
Euro
10
A.S.R.A.B. S.p.A.
Biella
Euro
2,582
Nicosiambiente S.r.l.
Milan
Euro
50
Ecoair S.r.l.
Milan
Euro
10
Robassomero (TO)
Euro
1,250
Bergamo
Euro
10
Omegna (VB)
Euro
206
Montanaso (LO)
Euro
52
Shareholdings carried according to equity method
SED S.r.l.
Bergamo Pulita S.r.l.
Tecnoacque Cusio S.p.A.
Bellisolina S.r.l.
Total shareholdings
3 - List of companies included in the consolidated financial statements of the
Ecodeco Group
%
consolidated
group
shareholding
at
03 31 2012
Stake
held
%
Shareholder
100.00%
100.00%
Ecodeco
Book
value at
03 31 2012
(thousands)
Valuation method
91.66%
91.66%
Ecodeco
68.56%
68.56%
Ecodeco
96.80%
96.80%
Ecodeco
100.00%
100.00%
Ecodeco
98.90%
98.90%
Ecodeco
70.00%
70.00%
Ecodeco
99.90%
99.90%
Ecodeco
100.00%
100.00%
Ecodeco
50.00%
Ecodeco
1,169
Equity method
50.00%
Ecodeco
892
Equity method
25.00%
Ecodeco
250
Equity method
50.00%
Ecodeco
-
Equity method
2,311
119
4 - List of companies included in
the consolidated financial
statements of the Coriance
Group
Name
Registered office
Currency
Share
capital
(thousands)
Consolidation area
Coriance Sas
Aulnay Energie Services Sas
120
Calo Rem Sas
Castres Energie Services Sas
Mebois-Montrond Bois Energie Sas
Andrezieux Boutheon Energie Services Sas
Energie Meaux Sas
Les Mureaux Energie Services Sas
Societé Thermique De Villiers Le Bel Gonesse Sas
Blanc Mesnil Energie Services Sas
Chelles Chaleur Sas
Noisy Le Grand - France
Euro
5,407
Aulnay-sous-Bois - France
Euro
610
Manosque - France
Euro
40
Castres - France
Euro
38
Montrond-Les-Bains - France
Euro
40
Andrezieuz-Boutheon - France
Euro
40
Meaux - France
Euro
3,050
Le Mureaux - France
Euro
40
Villiers-Le-Bel - France
Euro
150
Le Blanc Mesnil - France
Euro
40
Chelles - France
Euro
369
Drome Energie Services Sas
Pierelatte - France
Euro
200
Eneriance Sas
Toulouse - France
Euro
150
Ris Energie Services Sas
Ris Orangis - France
Euro
38
Societé Thermique De La Doua Sas
Villeurbanne - France
Euro
40
VLBG Energie Sa
Viliers-le-Bel - France
Euro
781
Fresnes - France
Euro
1,000
Le Mureaux - France
Euro
150
300
SOFREGE Société fresnoise de Géothermie Sas
Les Mureaux Bois Energie Sas
Societé Thermique De Bondy Sas
Inter Industrie Thermique Sas
SOFREDITH Société Fresnoise de la Distribution Thermique Sa
Societé Thermique De Salon De Provence Sa
Bondy - France
Euro
Saint-Pierre-Lès-Nemours - France
Euro
60
Fresnes - France
Euro
229
Salon De Provence - France
Euro
39
Puteaux - France
Euro
85
Noisy-le-Grand - France
Euro
153
Montereau-Fault-Yonne - France
Euro
100
Laval - France
Euro
472
Saint-Etienne - France
Euro
1,100
Sant-André-es-Lille - France
Euro
n.a.
Shareholdings carried according to equity method
Gennedith Sas
Stade Energie Sas
Eriva Sas
Societé Thermique de Laval Saint Nicolas Sa
Via Confort Sas
Coge Sante Lille Gie
Total shareholdings
4 - List of companies included in the consolidated financial statements of the
Coriance Group
%
consolidated
group
shareholding
at
03 31 2012
Stake
held
%
Shareholder
Book
value at
03 31 2012
(thousands)
Valuation method
100.00%
100.00%
A2A Coriance Sas
100.00%
100.00%
Coriance Sas
100.00%
100.00%
Coriance Sas
100.00%
100.00%
Coriance Sas
100.00%
100.00%
Coriance Sas
100.00%
100.00%
Coriance Sas
100.00%
100.00%
Coriance Sas
100.00%
100.00%
Coriance Sas
100.00%
100.00%
Coriance Sas
100.00%
100.00%
Coriance Sas
100.00%
100.00%
Coriance Sas
100.00%
100.00%
Coriance Sas
100.00%
100.00%
Coriance Sas
100.00%
100.00%
Coriance Sas
100.00%
100.00%
Coriance Sas
100.00%
100.00%
Coriance Sas
100.00%
100.00%
Coriance Sas
100.00%
100.00%
Coriance Sas
100.00%
100.00%
Coriance Sas
96.00%
96.00%
Coriance Sas
50.98%
50.98%
Coriance Sas
51.00%
51.00%
Coriance Sas
26.00%
Coriance Sas
254
Equity method
50.00%
Coriance Sas
1,623
Equity method
50.00%
Coriance Sas
105
Equity method
25.00%
Coriance Sas
320
Equity method
49.00%
Coriance Sas
(117)
Equity method
34.00%
Coriance Sas
–
Equity method
2,185
121
5 - List of financial assets available
for sale
Name
Stake
held
%
Shareholder
1.57%
A2A S.p.A.
Book
value
03 31 2012
(thousands)
Financial assets available for sale (AFS)
Infracom S.p.A.
Immobiliare-Fiera di Brescia S.p.A.
122
2,011
5.52%
A2A S.p.A.
1,101
10.00%
A2A S.p.A.
1,247
9.39%
A2A S.p.A.
1,846
5.00%
A2A S.p.A.
Alesa S.r.l.
5.26%
A2A Reti Gas S.p.A.
ANCCP S.r.l.
5.24% A2A Calore & Servizi S.r.l.
E.M.I.T. S.p.A.
Azienda Energetica Valtellina e Valchiavenna S.p.A. (AEVV)
Other:
A.C.B. Servizi S.r.l.
AQM S.r.l.
8.18%
A2A S.p.A.
AvioValtellina S.p.A.
0.18%
A2A S.p.A.
Banca di Credito Cooperativo di Calcio e Covo Società Cooperativa
n.s.
A2A S.p.A.
9.44%
A2A S.p.A.
Cavaglià Sud S.r.l. in liquidation
1.00%
Ecodeco S.r.l.
Consorzio DIX.IT in liquidation
14.28%
A2A S.p.A.
Brixia Expo-Fiera di Brescia S.p.A.
Consorzio Intellimech
n.s.
A2A S.p.A.
Consorzio Italiano Compostatori
n.s.
Ecodeco S.r.l.
Consorzio L.E.A.P.
10.53%
A2A S.p.A.
Consorzio Milano Sistema in liquidation
10.00%
A2A S.p.A.
Consorzio Polieco
n.s.
Ecodeco S.r.l.
CSEAB (formerly Cramer S.c.ar.l.)
6.67%
A2A S.p.A.
Curdem
4.00%
Coriance Sas
1.85%
A2A S.p.A.
Emittenti Titoli S.p.A.
Guglionesi Ambiente S.c.a.r.l.
1.01%
Ecodeco S.r.l.
INN.TEC. S.r.l.
10.89%
A2A S.p.A.
Isfor 2000 S.c.p.a.
4.94%
A2A S.p.A.
S.I.T. S.p.A.
0.26%
Aprica S.p.A.
5 - List of financial assets available for sale
Name
Stradivaria S.p.A.
Stake
held
%
Shareholder
n.s.
A2A S.p.A.
Tirreno Ambiente S.p.A.
3.00%
Ecodeco S.r.l.
Prva banka Crne Gore A.D. Podgorica (*)
19.76%
EPCG
Total other financial assets
Total financial assets available for sale
Book
value
03 31 2012
(thousands)
7,165
13,370
(*) The shareholding in Prva banka Crne Gore A.D. Podgorica equals 24.10% of the company's share capital, which also includes the
preferred shares held with no voting rights.
Nota: A2A S.p.A. took part in the formation of Società Cooperativa Polo dell'innovazione della Valtellina subscribing 5 shares of a par
value of 50 euro each.
123
0.5
Interim report on
operations
The areas in which the A2A Group operates can be defined as the following sectors:
Energy Sector
Activities in this sector involve the wholesale and retail sale of electrical energy and gas.
Support for the commercial areas is ensured by the supply of fuel, planning and dispatch of
plants for generating electrical energy, portfolio optimization, and trading on domestic and
foreign markets.
Heat and Services Sector
Activities in this sector chiefly involve the sale of heat and electricity produced by cogeneration plants (owned mainly by the Group). The sale of co-generated heat is handled
through district heating networks. The sector also provides management services for heating
systems owned by third parties (heat management services).
Environment Sector
This sector handles the entire waste management cycle from collection and street-sweeping
to processing, disposal, and material and energy recovery. The activities in this sector include
the recovery of the energy content of waste through waste-to-energy or biogas plants.
Networks Sector
The activities of this sector include technical-operating management of electricity
transmission and distribution networks, the transport and distribution of natural gas, and
management of the entire integrated water cycle (water collection, management of
waterworks, water distribution, management of sewage networks, purification). This sector
also works in the field of public lighting, traffic lights, the management of votive lamps, and
plant engineering.
125
Other Services and Corporate
Corporate services include guidance, strategic orientation, coordination, and industrial
reporting, as well as services supporting the business and operations (e.g. administrative,
accounting, legal, procurement, personnel management, IT, and communication services).
The area of Other Services includes video surveillance systems, data transmission, telephone
services, and Internet access.
126
The weakening of the world economy in the fourth quarter of last year, caused by a
contraction of the economies of the euro area and Japan and a slowing of the emerging
markets, appears to have stopped in the first quarter of 2012. Indeed, in a context of general
loosening of tensions on the world’s financial markets, we are seeing signs of economic
stabilization globally.
Based on preliminary economic indicators, the euro area is currently experiencing a slight
recession. Nonetheless, the contraction of economic activity has lessened slightly in the first
quarter of the year in conjunction with the lessening of tensions in lending conditions in
various countries. According to the early indications of the Bank of Italy and the European
Central Bank (ECB), GDP growth improved in the first quarter of 2012 from the low posted in
December to a rate of virtually zero in March.
The U.S. economy proved to be more favorable than expected by the leading economic
research institutes, with the job market improving slightly in recent months, which made a
significant contribution to improving the climate of confidence. Production indicators and
business surveys in the emerging markets point to a further slowing. In China, in particular,
GDP settled at 8.1% for the first quarter of 2012, reflecting the weakening of the
manufacturing segment due to the ongoing weakness of foreign demand.
According to recent projections of the International Monetary Fund (IMF), global growth in
2012 is expected to fall to 3.5% (from 3.9% in 2011), held back by the decline in business in the
euro area and the slowdown in emerging nations, but with growth in the U.S. economy making
a positive contribution of close to 2.1% (compared with 1.7% in 2011) along with growth in
Japan thanks to post-earthquake reconstruction following the decline of 0.7% in 2011. A
number of elements of uncertainty, related mainly to the renewed turbulence concerning
sovereign debt in the euro area and to the risk that ongoing tensions in the global supply of oil
could trigger a sharp increase in oil prices, as well as the slow reduction in public and privatesector debt in the more advanced nations, continue to weigh on the outlook for growth for
world’s economy.
In the euro area, the drop in GDP should remain limited to the last quarter of 2011 and the first
quarter of 2012 and so should remain moderate on average for the whole of 2012. A return to
127
growth is then expected for 2013. The latest estimates by Eurosystem experts place the
change in GDP for 2012 at between -0.5% and 0.3% (and -0.3% according to the IMF and
Eurostat) and between 0% and 2.2% for 2013. Therefore, in 2012 the recession should be less
severe than was witnessed in 2008-2009. Indeed, there is a very specific cause of the current
contraction to be found in the peripheral nations, so the major economies, including Germany
and others of the Eurozone, will be able to continue expanding, buoyed by the stimulus
provided by monetary policy.
With the worsening of the sovereign debt crisis in the euro area and the consequent serious
effects, including in real terms, the dollar-euro exchange rate grew increasingly weaker from
the end of 2010 to reach an average of $1.31 in the first quarter of 2012, down 4.1% compared
to the average for the first quarter of 2011. Based on the current consensus and the data
coming from the forward markets, the continuing weakness of the European macroeconomic
landscape should cause the euro to remain weak throughout 2012, with the average exchange
rate expected to reach $1.32, down approximately 6% compared to the average for 2011.
The widespread decline in the spreads of ten-year government notes in the euro area
compared to the German bund seen through most of the first quarter of 2012 partially
128
stabilized by the end of March. In addition, we are likely to see a lengthy pause in European
monetary policy actions as the ECB assesses the effects of recent measures. Nonetheless, the
ECB has announced that they will continue to satisfy all of the liquidity needs of the ordinary
sovereign debt auctions through July and will likely extend such support at least until the end
of 2012
Inflation for the euro area came to an average of 2.7% for the quarter under review. The
increases in oil prices and the excise duties on fuel in certain countries, as well as the effects of
the weakening of the euro, have resulted in acceleration in the prices of energy products.
Eurostat’s preliminary estimates point to inflation for 2012 in excess of 2%, but below 2% for
2013. The status of the economy means that endogenous price tensions are unlikely. Upward
pressure could, however, come from increases due to price administration, indirect taxes and
any signs of the transmission of increases in energy to salaries and profits.
In Italy in the first part of the year, given the slowdown in global trade, economic activity
appears to have declined again, showing the effect of the ongoing difficulties in consumer and
business spending. According to early indications by the Bank of Italy, industrial production
appears to have posted further declines from the previous period, which would result in a
greater decrease in GDP than posted for the fourth quarter of 2011 (i.e. -0.4% compared to
the fourth quarter of 2010). In particular, the Organisation for Economic Cooperation and
Development (OECD) has estimated that Italian GDP fell 1.6% in the first quarter of 2012 and
by 0.1% in the second. Confindustria forecasts would appear to confirm these figures, with the
association’s research center estimating that industrial production fell by 2.2% in the first
quarter of 2012 compared to the fourth quarter of 2011.
As for inflation, recently published ISTAT figures showing inflation of 3.3% compared to the
first quarter of 2011, reflecting the 15.5% increase in energy prices through the first three
months of 2012 as well as the rise in indirect taxes.
Estimates of economic growth in Italy are still subject to a great deal of uncertainty. The
likelihood of a recovery starting by the end of 2012 to then pick up speed in 2013 depends,
above all, on the performance of the financial markets and the yields of government
securities, where volatility remains high, as well as on the risk of a more marked slowdown in
world trade. Recently approved measures of administrative streamlining and liberalization
could stimulate growth in potential output and lead to an improvement in expectations.
The IMF is expecting negative growth of 1.9% for Italy in 2012, which is worse than the -1.5%
estimated by the Bank of Italy, whereas the average of all projections by the leading banking
and economic institutes available in April points to negative growth of 1.2%. However, the
forecasts for 2013 all converge on an estimate of zero growth for Italy. The only exception is
the IMF, which is forecasting continued recession and a 0.3% decline in GDP. These pessimistic
expectations for Italy are mainly in reaction to the effects of fiscal tightening, which will, in all
likelihood, continue holding back the economy next year, regardless of how the financial crisis
plays itself out. In addition to the “direct” effects of the crisis (i.e. the fiscal tightening), there
are also the “indirect” effects, such as the higher cost and reduced availability of capital for
both businesses and the consumer and the effects of uncertainty about the economy and the
markets, which is influencing both consumption and investment decisions.
Finally, according to the currently available market consensus, expectations for Italian
inflation for 2012 have been revised upward to about 3% in reaction to the effects of the
indirect taxation measures approved at the end of 2011 and the recent increases in raw
materials prices.
129
Performance of the energy
market
The first quarter of 2012 was characterized both by high levels of market pressure on fuel, and
on oil in particular, and by increasing weakness in energy needs as a result of the worsening of
the economy.
At the end of 2011, oil prices continued rising and remain high to this day. From the 107.6 $/bbl
of December 2011, oil reached 124.5 $/bbl by March 2012. Looking at the averages for the first
quarter of 2012, we see that the price of Brent was 118.3 $/bbl, up 12% from the average for the
130
first quarter of 2011 (i.e. 105.2 $/bbl).
The change in Brent in euro terms was even greater due to the strengthening of the dollar in
the first quarter of this year. During the period under review, the price of oil in euro per barrel
rose 17% to an average of approximately 90 $/bbl with the dollar strengthening against the
euro by over 4%. This increase may be attributed to the growing tensions between Iran and
the western world and to the consequences of this on other oil-producing nations,
particularly on Saudi Arabia. This strong upward pressure on prices is due to the potential
shortages in supply and fears in the market that the limited levels of spare capacity currently
available will not be able to compensate for this decline. More specifically, the International
Energy Agency (IEA) estimates that spare capacity available in January from OPEC nations
was 2.4 million barrels per day, which compares to an estimated global consumption of over
89 million barrels per day for 2012. Two additional factors are further complicating the
situation. On the one hand, domestic demand for oil in Saudi Arabia is continuing to increase
as a result of the gradual improvement in living conditions for the people who live there, while
on the other, stocks of oil in OECD nations remain at the lowest average levels seen in the last
5 years (at 2.6 billion barrels, equal to 57.8 days of oil consumption).
Electricity
Regarding the Italian electricity marketplace, net electricity needs for the first quarter of 2012
totaled 83,045 GWh, a decrease of 1.9% compared to the same period of the previous year. In
addition to the ongoing economic crisis, temperatures recorded during the quarter had a
significant impact on the monthly trend in energy needs (with February being colder than
average and March warmer). The drop in national demand led to a 1.7% reduction in net power
generation, which settled at 72,054 GWh. Net of pumping, national production for the quarter
covered 86% of total demand, which was in line with the first quarter of 2011, while net imports
met the remaining 14% of demand.
The decrease in net national production reflects the sharp drop in hydroelectric power
generation (-3,681 GWh for a decline of 35% compared to the first quarter of 2011) due to low
levels of rain and the decline in thermal power generation, which totaled 56,770 GWh (-2.6%
compared to the same period of 2011). These factors were partially offset by the significant
growth in other renewable sources, which now account for roughly 12% of all power
generated in Italy. Renewable energy posted significant growth due to both the marked
increase in photovoltaic power generation, which more than tripled compared to the first
quarter of 2011 to reach roughly 3,574 GWh in the first quarter of 2012, and in wind power (up
1,159 GWh). The installed capacity for photovoltaic power in particular rose from 3,450 MW at
the end of 2010 to 12,750 MW by the end of 2011. Geothermal power generation remained
essentially unchanged.
During the quarter under review, the net energy trade balance fell by 2.6% due to the change
in net imports in February, which fell by nearly 30% due to the increase in exports from Italy
into France (which nearly tripled in February 2012 compared to February 2011). This can be
explained by the exceptionally cold temperatures recorded in Europe in the first half of
February, which drove French spot prices to 11-year highs, reaching a peak of 1,938 €/MWh
With regard to prices, the average PUN (Single National Baseload Price) for January-March
2012 was 81.4 €/MWh, up 22% compared to the figure posted for the same period last year
(66.49 €/MWh). Wholesale electricity prices in particular began rising again, especially during
peak load hours (with PUN up 25% during the “F1” time period and up 28% during peak load
hours). This confirms the upward trend in prices that began after the market collapse in 2009
and also reflects the increase in the price of fuel used in power generation (and of gas in
particular) in reaction to the price of Brent. Despite the increase in prices on the wholesale
market, the spark spread for the period under review decreased due to the partial transfer of
the aforementioned increase in the cost of fuel onto electricity prices.
Natural Gas
During the first quarter of 2012, demand for natural gas in Italy equaled 27,434 Mcm, down
2.2% on the figure reported for the same period in 2011. Imports accounted for roughly 89% of
131
gas needs, net of the change in stocks, with domestic production covering the remainder.
These figures were the result of a decline in thermal power consumption, which fell by roughly
700 Mcm (-9.1%) compared to the first quarter of 2011, given the decrease in production by
gas-fuelled thermal power plants. Consumption by the manufacturing industry remained
stable (at 3,732 Mcm), thereby outperforming expected Italian GDP for the quarter, but
remaining at levels that are still far from those seen before the crisis. Finally, consumption for
service and residential use increased slightly compared to the same period of the previous
year, as these segments were greatly affected by the anomalous temperatures posted in
February and March.
Certain market tensions were seen in the first half of February in conjunction with the ongoing
unfavorable weather conditions and cold temperatures throughout Europe. In such a context,
gas flows from Russia posted reductions of up to 30%. During that period, the Rovigo terminal,
which covers 10% of Italian demand, was not operating at full capacity because the poor
weather conditions and rough seas made it impossible for vessels transporting methane to
dock. Gas companies dealt with these reductions in gas availability by maximizing the use of
132
stocks and of imports via other gas pipelines. At the same time, in order to reduce the demand
for gas, the Italian Ministry for Economic Development and the AEEG intervened by shutting
off the “interruptible” customers and limiting the operations of thermal power plants.
The effect of the sharp increase in the price of Brent in euro per barrel was also reflected in the
change in gas prices (see Gas Release 2007). Indeed, the Gas Release 2007 formula showed an
increase of over 35% compared to the first quarter of 2011, and the price at the virtual trading
point increased by 26% compared to the same period of the previous year.
Energy sector
The Energy Sector includes the following activities.
• Electricity generation: management of power plants through an energy-generation
system composed of hydroelectric and thermoelectric plants with an installed power of
6.6 GW(1);
• Energy Management: the purchase and sale of electricity, gas and non-gas fuels on
national and international wholesale markets; the supply of fuel needed to cover the needs
of thermoelectric plants and customers; planning, programming and dispatch of plants
133
that generate electricity.
• Sale of electricity and gas: sale of electricity and gas on the market of eligible customers.
This area includes the sale of electricity to customers in “protected categories”.
In addition to the activities conducted directly by A2A S.p.A., the following companies also
come under the Energy Sector:
Energy
Consolidated A2A group companies
Thermoelectric and
hydroelectric plants
• Abruzzoenergia
• Plurigas
• A2A Energia
• Aspem Energia
Energy Management
• A2A Trading
• EPCG
Sale of Electricity
and Gas
(1) Includes 20% of the Edipower plants and the EPCG plants.
Energy sector
Recent regulatory developments in the electricity sector
Large-scale hydroelectric derivation
On March 15, 2011, the European Union issued a letter of formal notice to Italy regarding the
extension procedures established under Italian Law no. 122 of 2010, which are seen as being in
conflict with European legislation regarding the freedom of establishment. Specifically, the
law in question allows for a general 5-year extension of all contracts granted and a further 7year extension if certain conditions are met.
The infringement proceedings should be terminated in response to ruling no. 205/2011
(published on July 13, 2011) with which the Italian Supreme Court upheld an appeal filed by the
Region of Liguria on the matter, citing the illegality of the following:
• the provisions of Italian Law no. 122/10 aimed at extending the contracts for large-scale
hydroelectric derivation (for periods of 5 and 7 years) in that they are in conflict with the
constitution with regard to the separation of national and regional powers (the matter
134
falls under regional jurisdiction);
• legislation allowing for the applicability of the aforementioned previsions until the
adoption of other legislation by the regions within the scope of their powers (i.e. the
“malleability” clause) given that there is no need to fill a legislative gap in application of the
fundamental national principles for the time needed to issue regional legislation.
At the local level, and given the upcoming expiration of a number of contracts in the region,
the Region of Lombardy, by way of Article 14 of Law no. 19 of December 23, 2010, amended
regional law no. 26 of December 12, 2003, by adding Article 53-bis, which includes provisions
concerning the temporary continuation of operations, the ownership profiles following said
expirations, and the operation of related plant and infrastructures. Following this, the
Regional Executive Council commenced implementation of the aforementioned provisions,
then passed Resolution 1205 of December 29, 2010 establishing a “temporary continuation”
for A2A S.p.A. to run the derivations and hydroelectric plants in Stazzona, Lovero and
Grossotto, considered as expiring on December 31, 2010, despite the aforesaid national
regulations. This resolution also confirmed the obligation of paying the various fees and of
carrying out the routine and extraordinary maintenance specified under the aforementioned
Article 53-bis. Furthermore, it transferred responsibility to a subsequent resolution to
determine the additional fee to be paid beginning on January 1, 2011.
A2A S.p.A. and other operators lodged an appeal with the High Court of Public Waters (TSAP
in Italian) against this provision.
Energy sector
In addition, on February 24, 2011, Italy’s Council of Ministers called for the impugnment,
before the supreme court, of a number of provisions adopted by way of the aforementioned
law no. 19 of December 23, 2010, of the Region of Lombardy and of Articles 3(2) and 14,
paragraphs 3, 7, 8, 9 and 10, claiming that they are prejudicial to state powers.
By way of its ruling no. 339/2011, the Italian Supreme Court declared the impugned provisions
to be unconstitutional. As a result, paragraphs 4 and 5 of Article 53-bis, which were introduced
with the aforementioned law and which allow for the temporary continuation of the
performance of contracts that expired at the end of 2010 and make it possible for the regional
council to establish less favorable financial and other conditions during such period, remain in
effect. Indeed, these paragraphs were not impugned by the government in the appeal for
which the court issued the aforementioned ruling, but rather by A2A S.p.A. by way of
interlocutory appeal related to the case before the High Court of Public Waters against the
resolution of the regional council of the end of 2010. To date, the High Court has yet to issue a
ruling on the matter.
Regarding the calendar of upcoming tenders, legislation following the aforementioned rulings
is rather incomplete and shows a certain de facto return to the rules established by Italian
Legislative Decree no. 79/99. As a result, Article 24-bis of Law no. 27 of March 24, 2012 (the
“Liberalization Bill”), has established a deadline of April 30, 2012, by which the competent
ministries must define the minimum organization and financial requirements and the other
terms and parameters regarding the tender process to grant the hydroelectric derivation
contract.
Finally, by way of a decree on November 30, 2011, the Italian Environmental Ministry
established the additional BIM (Bacini Imbriferi Montani) fees for hydroelectric derivation
contracts for motive-power generation for the period January 1, 2012, to December 31, 2013.
In particular, the amount of the additional fee to be paid by hydroelectric derivation contract
winners for motive-power generation with an average nominal output of between 220 kW and
3,000 kW has been set to 22.13 euro per kW of average nominal output, and for outputs of
greater than 3,000 kW the fee has been set at 29.40 euro. At the same time, by way of decree
on November 30, 2011, the Italian state property office set the amount of the additional fees
for hydroelectric plants for the same period and for the same output ranges at 5.53 euro and
7.35 euro, respectively.
Fees for hydroelectric derivation contracts
By way of Regional Law no. 22/2011, beginning in 2012, the fee to be paid to the region for
hydroelectric deviations with a capacity of greater than thirty modules (i.e. 3,000 l/s) for
135
Energy sector
industrial use, which includes the cooling of thermal power plants, was set at 34,000 euro per
module.
This regional law has had an impact on derivations for the cooling of the thermal power plants
in Cassano d’Adda and Ponti sul Mincio.
Compensation of production capacity
The transitory mechanism defined by Resolution 48/04 of the Italian Regulatory Authority for
Electricity and Gas (AEEG in Italian) envisions the payment of a guaranteed sum to parties that
make production capacity available to maintain system stability, for which they must fulfill the
commitment to make production capacity available on days of high and medium criticality,
and an additional sum to be paid if the effective revenues earned by the individual producer on
the electrical market are lower, year on year, than a set amount equivalent to the revenues that
the producer would have earned under the previous system.
Resolution ARG/elt 166/10 revised the method used to calculate the additional payment,
136
pursuant to Art. 48 of Annex A to Resolution 111/06. Since this calculation method is
discriminating and distorts the operating mechanisms of the reference markets, A2A Trading
S.r.l. has lodged an appeal with the Regional Administrative Court against AEEG’s request to
repeal this provision.
In the meantime, by way of Resolution ARG/elt 98/11 and having concluded the many
discussions opened on the matter, AEEG established the terms and conditions governing the
system of remuneration of available power generation capacity under full operations. In
accordance with Articles 1 and 2 of Legislative Decree no. 379/03, based on the
aforementioned criteria, Terna will have to prepare a proposal for system governance, and
this proposal is to be submitted for approval by the Italian Ministry for Economic
Development based on the opinion of the AEEG.
The system so adopted will replace the regulation currently in effect for the transition period
beginning with the first year of delivery of the standard capacity provisioning contracts called
for by the new regulation.
Essential resources for the security of the electrical system
With Resolutions ARG/elt no. 8/11 and ARG/elt no. 110/11, the AEEG amended Resolution 111/06
regarding payments to plants that are essential to guarantee the safety of the electricity
system (the owners of which have requested application of the ordinary compensation
Energy sector
method), with particular reference to the conditions that apply to the offer of energy
produced by units and eligible under the reimbursement regime, and methods to quantify the
variable employed in the compensation mechanism.
Incentives for the production of energy from renewable sources
Italian Legislative Decree No. 28/2011 implementing European Directive 2009/28/EC
promoting the use of energy from renewable sources took effect on March 29, 2011.
The main measures envisioned can only be implemented after further ministerial decrees
have been issued (most of which by the Ministry for Economic Development and the Ministry
of the Environment); these have not been published yet.
Offer price for Green Certificates entitled to Gse – 2012
In Resolution 11/2012/R/efr applying the criteria laid down in Resolution ARG/elt 24/08, the
AEEG set the offer price for the Green Certificates owned by Gse for the year 2012 at
€74.72/MWh (as provided for by Resolution ARG/elt 5/11, for 2011 this value was set at
€66.90/MWh).
Payment of charges related to production by plants fed by “quasirenewable” energy sources
By way of Resolution no. 113/06 and in accordance with Title II, point 7-bis, of CIP measure no.
6/92, the AEEG has acknowledged the charges related to Article 11 of Legislative Decree no.
79/99, limited to electricity generated by plants fed by “quasi-renewable” energy sources that
do not meet the definition of cogeneration established by Resolution no. 42/02 and that is not
sold to the GSE under Title II of said measure, within the scope of related sales agreements. By
way of Resolution no. 81/2012/R/eel and for the purpose of application of Resolution no. 113/06,
the AEEG has set the amount of the Vm fee to be paid for each Green Certificate related to
2012 at €52.14/MWh.
Emissions Trading
Pursuant to European Directive 2003/87/EC, as of January 1, 2005 the operators of plants
releasing CO2 into the atmosphere must have a permit issued by their national governing
137
Energy sector
body, and their emissions must be covered by equivalent rights, part of which are granted free
of charge on the basis of the National Allocation Plan adopted in each country.
Italian Law Decree 72 of May 20, 2010 adopted urgent measures to set CO2 emission quotas
for plants that commenced operation after the introduction date of the National Allocation
Plan (PNA in Italian) and for the second period of application (2008–2012) of the European
Emissions Trading System (referred to as new entrants).
With Resolution ARG/elt 117/10 the AEEG established that the credits due to each entitled party
must be defined annually based on the number of quotas submitted to the AEEG by the National
Committee for the Management and Implementation of Directive 2003/87/EC, recognizing a
value for each emission quota based on the arithmetic averages of the daily closing prices of the
EUA certificates and the volumes exchanged on Europe’s main organized markets. The
assignment of emission quotas to the operators of plants as approved by the national governing
body is done for each period specified under Legislative Decree 216/2006. At present, the
assignment decision for the period 2008-2012 is in effect.
138
Finally, DPR no. 157 of July 11, 2011, was published in the Gazzetta Ufficiale (the Italian Official
Journal), issue no. 224 of September 26, 2011. This Presidential Decree adopts the rules for
execution of EC Regulation no. 166/2006 regarding the creation of a pollutant release and
transfer register (PRTR) and which is an amendment to Directives 91/68/EEC and 96/61/EC.
Price for the sale of electricity for owners of plants under CIP 6/92
Italian Law 99/09 stipulates that, as of 2009, the value of the Avoided Cost of Fuel (ACF) as a
component of the sale price of energy under CIP 6 Conventions to which owners of plants
party to these agreements are entitled, to be recognized as a down payment until the annual
adjustment value has been set, must be determined with a decree issue by the Ministry for
Economic Development following a proposal submitted by the AEEG. Furthermore, the
regulations clarify that these updates must be made on the basis of quarterly reports of the
prices of the commodities in the reference basket for the conventional value of natural gas, as
Resolution 154/08 provides.
Green Pricing
By way of Resolution ARG/elt 104/11, the AEEG has specified the information required on all
contracts for the sale of renewable energy signed on or after October 1, 2011, concerning
electricity provided to end users on or after January 1, 2012, such that the same quantity of
power generated from renewable sources is not included on multiple green energy contracts.
Energy sector
To this end, the AEEG has established that only the Guarantees of Origin (GOs) envisaged
under Directive 2009/28/EC are to be used and that the CO-FER certificates envisaged by
Ministerial Decree of July 31, 2009, may be used until Legislative Decree no. 28/11 goes into
effect. Nonetheless, the seller may use other means of certification on a voluntary basis, but
each contract for the sale of renewable energy must also be supported by the proper GOs.
Therefore, a number of changes have been made to the commercial code of conduct
regarding the preparation of promotional and informational material for the sale of energy,
and a number of provisions have been introduced regarding the prospectuses that the seller
is required to distribute with the energy bill every four months.
By way of Resolution ARG/elt 179/11, the AEEG has authorized the application of measures
approving the technical procedure and procedures for competitions prepared by the Gse and
intended for the application of the measures contained in the aforementioned Resolution
ARG/elt 104/1 and for the assignment of Guarantees of Origin available to the Gse.
Regulation of the electricity sector in Montenegro
At the end of 2011, in accordance with government instructions and based on the provisions of
the Energy Law, the Regulatory Authority for Energy (RAE), an independent authority for the
energy industry, evaluated and then approved the new method for determining electricity
transmission and distribution rates, as well as the method for setting the price for energy sales
to the end user. Subsequently, in February 2012, the RAE made a number of changes to existing
regulations, including postponing the start of the regulatory period to August 1, 2012, and
altering the method for calculating the cost of energy generated using domestic sources and
sold to end users.
This new method brings new regulatory features to Montenegro that are similar to those in
effect in the major European nations, such as the establishment of multi-year regulatory
periods, methods for measuring capital and setting the remuneration rate, and increasing
industry efficiency by introducing the price-cap method. More specifically, the first regulatory
period is to begin on August 1, 2012, and will have a duration of three years. For the first year, a
weighted-average cost of capital (WACC) of 6.8% is to be applied to net invested capital, i.e. to
the value of operating assets at the end of year t-1, which is to be measured net of any grants
received and taking account of inflation. The annual updates of capital are to take place in
accordance with the investment plans approved by the RAE, while depreciation is to be
calculated based on the useful life shown on the documents to be sent to the RAE when
requesting approval of rates.
139
Energy sector
Operating costs are to be calculated using a profit-sharing approach starting from the figures
that the company sends to the RAE.
At the same time, in December 2011, the RAE published the rates calculated using the previous
method, which are to be valid from January 1, 2012, to the end of the transition period.
Recent regulatory developments in the gas sector
Upstream gas market
Market reorganization and the “economic merit” balancing of natural gas
Regulations regarding the economic-merit balancing as established by Resolution ARG/gas no.
45/11 took effect on December 1, 2011.
The initial analyses conducted of the results of the gas balancing market platform (PB-Gas)
show that the market has some 60 active players and a good level of liquidity, and the price set
as a result of the balancing market sessions was indeed in line with the prices at the virtual
140
trading point.
However, during the first half of February, given the ongoing adverse weather conditions and
state of emergency declared by the Italian Ministry for Economic Development on February 6,
2012, these prices did not reflect the low levels of gas within the Italian system. This was
because the market in question essentially prices the value of gas stored, which was not at
critical levels during the period, and not the value of all of the gas available in the system. In
order to correct this defect, the AEEG issued Resolution 32/12 to introduce a misalignment in
prices determined by the balancing market in the event of a gas crisis and to establish price
administration to be implemented when gas levels are particularly low.
Finally, uncertainty remains regarding the regulation of the guarantees required of gas
companies in order to operate on the balancing market. Indeed, it is worthy of note that the
regulations designed by Snam Rete Gas have been impugned by a number of companies as
being excessively costly. Therefore, the balancing market currently lacks such a system of
guarantees.
Gas supply
Protected economic conditions
There is still an ongoing dispute regarding ARG/gas resolution no. 89/10, approved in June
2010 and which AEEG used to amend the way gas supply prices are updated for the protected
category service by applying a reduction coefficient k to the index-linked component of the
Energy sector
QE (variable amount covering supply costs). This revision was also confirmed by ARG/gas
Resolution no. 77/11, which ordered the extension of the mechanism described in ARG/gas
Resolution no. 89/10 until September 30, 2012, even though the value of the coefficient k was
slightly increased (from 0.925 to 0.935). The hearing related to this dispute has not yet been
set by the Lombardy TAR.
With Resolution no. 116/2012/R/gas, “AEEG intervened once again in the revision process as
pertains to the methodology used to determine the protected economic conditions for the
supply of natural gas (CCIt component), in order to implement article 13 of Legislative Decree
no. 1/12 "Urgent provisions for competition, infrastructure development and competitiveness"
(so-called ”Liberalizations” Legislative Decree) which introduce to the aforementioned
article the reference to European market values in the parameters for updating starting from
the second quarter of 2012.
The provision, even though it maintains its current articulated CCIt structure in the sum of the
two QCI elements (fixed sum covering the costs of commercialization of wholesale gas) and
QEt (variable sum covering the gas provisioning costs in quarter t), redefines the criteria for
determination of the latter, introducing a reference to the short term market prices (virtual
hub TTF - Title Transfer Facility). The indexed quota in reference to the market is fixed at 3% for
the second 2012 quarter, and at 4% for the third quarter of 2012.
Finally, it is reiterated that with ARG/gas Resolution no. 200/11 the Authority also intervened in
the retail commercialization of natural gas, reviewing the current methodologies
implemented for determination of the relative QVD component applied to end users in the
scope of protected gas service, differentiating the values according to the domestic and non
domestic typology of the end user to which the value applies, and defining the remuneration
of the protected service merchants.
Measures common to both sectors (electricity and gas)
End user protection
A commercial conduct policy has been in force since January 1, 2011, introduced by
Resolution ARG/com 104/10 and applicable in the event any merchant offers to supply an
end user on the free market to customers receiving LV and/or natural gas that is less than
200,000 scm/year.
With Resolution ARG/gas no. 71/11 the Authority, based on Legislative Decree no. 93/11,
amended Resolution ARG/gas no. 64/09 and redefined the parameter for end users with the
right to protected service, also extending it to non domestic clients with annual consumption
141
Energy sector
less than 50,000 Smc and, independent of their level of consumption, to public service
activities.
Legislative Decree no. 1/2012 containing “Urgent provisions for competition, infrastructure
development and competitiveness” (so-called “Liberalizations” Legislative Decree), in article
7, requires that the protection from deceptive and aggressive commercial practices set forth
in the Consumer Code for consumers-physical persons also extend to micro-enterprises.
Article 6 of the “Liberalizations” Legislative Decree then amends and integrates discipline of
class action lawsuits, as set forth in article 140 bis of the Consumer Code. For this purpose, the
aforementioned article also includes class action protection, in addition to individual rights,
for homogeneous groups of consumers and users, also of “collective interests”, legitimizing
these to act as consumer associations. Furthermore, article 8 of the same decree states that
the Standards of Service of public service providers, also at a local level, or of an infrastructure
deemed "necessary for the implementation of business activities or for exercising a
constitutionally guaranteed right of a person” must specifically indicate the right, also of a
compensatory nature, that the users can enforce towards the service provider. The task of
142
defining the specific rights to be included in the Standards of Service is assigned to the
independent regulatory Authority and to any other public body, also regional, assigned to
regulate public services.
Integrity and transparency in the wholesale market: the European REMIT regulations
Upon conclusion of an articulated legislative process, last October 25th the European
Parliament and Council adopted the new EU Regulation no. 1227/2011 concerning integrity and
transparency in the wholesale energy market (REMIT), with the purpose of instituting a
uniform judicial framework at a European level for the prevention of market abuses and
manipulations in the gas and electric energy sector.
Among its main previsions, REMIT includes the prohibition to implement market abuse in the
form of “speculation based on privileged information (insider trading)” and “market
manipulation” for wholesale energy products, and also requires operators to report so-called
“privileged information”. The body charged with monitoring of market operations is the
Agency for the Cooperation among National Energy Regulators (ACER).
With the exclusion of some specific articles, on December 28th of last year most of the
dispositions contained with the REMIT regulation became effective, in particular the
obligation to publish privileged information which falls upon all subjects who execute
transactions in one or more wholesale energy markets, and which requires that “privileged
information” which an operator possesses in relation to its own plant or business is made
public.
Energy sector
In this regard, the Italian Antitrust Authority issued a negative response, stating that in a
context like that in Italy, characterized by an oligopoly in the electric energy market, excessive
transparency of information would facilitate fraudulent results and opportunistic activities
for the purpose of taking advantage of the timely publishing of information by companies
diverse from those which published the privileged information.
Quantitative data-electricity sector
The table below provides summary figures for the energy sector.
GWh
03 31 2012
03 31 2011
Changes
%
2012/2011
Net production
2,771
3,146
– thermoelectric production
2,265
2,431
(166)
(6.8%)
– hydroelectric production
506
715
(209)
(29.2%)
9,002
9,423
(421)
(4.5%)
747
811
(64)
(7.9%)
– exchange
2,657
2,903
(246)
(8.5%)
– foreign markets
3,464
3,829
(365)
(9.5%)
SOURCES
Purchases
– single buyer
(375)
(11.9%)
– other purchases
2,134
1,880
254
13.5%
TOTAL SOURCES
11,773
12,569
(796)
(6.3%)
747
811
(64)
(7.9%)
USES
Protected market sales
Sales to eligible customers and wholesalers
4,578
4,814
(236)
(4.9%)
Sales on exchange
3,136
3,799
(663)
(17.5%)
Sales on foreign market
TOTAL USES
3,312
3,145
11,773
12,569
167
5.3%
(796)
(6.3%)
Note: sales figures include losses. Quantitative data for the EPCG Group are not included.
In the first quarter of 2012, 2,771 GWh of electricity was produced and 9,002 GWh was
purchased to provide an overall availability of 11,773 GWh.
Produced output was 11.9% lower than the first quarter of 2011.
This was due to the drop in thermoelectric output (-209 GWh compared to the first quarter of
2011) caused by lack of rain, and reduced thermoelectric production (-166 GWh) caused by
lower load factor of combined cycle plants.
Purchases of electricity dropped by 4.5% compared to the first three months of 2011, going
from 9,423 GWh to 9,002 GWh. Lower sales on retail and wholesale markets (-4.9%) and on
the Ipex platform (-17.5%) were partially offset by growth in the electricity negotiated on
foreign markets (+5.3%).
143
Energy sector
Summary quantitative data are provided below for the EPCG Group energy sector:
GWh
03 31 2012
03 31 2011
Changes
%
2012/2011
Production
709
1,118
– thermoelectric production
399
379
20
5.3%
– hydroelectric production
310
739
(429)
(58.1%)
Import and other sources
488
215
273
n.a.
– import
335
272
63
23.2%
6
85.7%
204
n.a.
SOURCES
– other sources
(409)
(36.6%)
13
7
140
(64)
1,197
1,333
(136)
(10.2%)
Domestic market consumption
917
926
(9)
(1.0%)
Network losses
243
222
21
9.5%
– EPS (Serbian Electricity Company)
TOTAL SOURCES
USES
Other uses
Export
144
EPS (Serbian Electricity Company)
TOTAL USES
20
4
16
n.a.
8
154
(146)
(94.8%)
9
27
(18)
(66.7%)
1,197
1,333
(136)
(10.2%)
During the quarter under examination the production of electricity by the EPCG Group was 709
GWh, to which 488 GWh purchased power was added, for an overall availability of 1,197 GWh.
The drop in hydroelectric production can be attributed to decreased production in EPCG
Group plants, which in the quarter under examination were approximately 60% less in respect
to the first quarter of 2011 due to an exceptionally dry season.
The sizeable drop in hydroelectric production, given the considerably stable internal
demand, caused the increase in the amount imported (+63 GWh) and in coal-fuelled plant
production (+20 GWh), as well as the reduction in export quantities (-146 GWh).
Energy sector
Quantitative data - gas sector
Millions of cm
03 31 2012
03 31 2011
Changes
%
2012/2011
1,810
1,655
155
9.4%
518
392
126
32.1%
(6)
(13)
7
(53.8%)
2,322
2,034
288
End use
763
770
(7)
(0.9%)
Thermoelectric use
340
388
(48)
(12.4%)
SOURCES
Procurement
Withdrawals from stock
Internal consumption (unaccounted for gas)
TOTAL SOURCES
14.2%
USES
Heat use
124
118
6
5.1%
Wholesalers
1,095
758
337
44.5%
TOTAL USES
2,322
2,034
288
14.2%
The quantities are shown as standard cm, converted to a PCS of 38100 MJ on reconsignment.
In the quarter being reported, gas sales rose by 14.2% compared to the same quarter in the
previous year. This increase, determined by larger volumes sold on the wholesale market, was
partially compensated for by lesser demand in the Group’s thermoelectric plants. The
volumes sold to end users result as substantially in line with the same period in 2011.
Economic data
Millions of euro
Revenues
01 01 2012
03 31 2012
01 01 2011
03 31 2011
Changes
1,600
1,404
196
79
94
(15)
4.9%
6.7%
(34)
(56)
22
7
% of Revenues
Amortization, depreciation and provisions
% of Revenues
45
38
2.8%
2.7%
7
4
Investments
3
In the first three months of 2012, the Energy Sector reported revenues of 1,600 million euro,
75 million euro of which were generated by the EPCG Group (1,404 million euro in the first
quarter of 2011, 90 million euro of which by the EPCG Group).
The gross operating spread of 79 million euro was down 15 million euro on the first quarter of
the previous year: the reduced spread in the electricity sector (-26 million euro) was only
partially offset by growth in the gas sector spread (+11 million euro).
145
Energy sector
Gross operating spread for the electricity sector, less the contribution of the Montenegro
subsidiary EPCG, was consistent with the result posted for the same quarter in 2011 (38 million
euro). The industrial portfolio performed well, benefiting from an improvement in the spread
between sales prices and fuel costs and also from the careful management of gas
procurement; this was offset by the poorer performance of the trading portfolio caused by
the hugely volatile prices on European markets at certain times during the quarter being
reported.
The contribution of the EPCG electricity sector during the first three months of 2012 dropped by
26 million euro, compared to the same period last year. This drop can mainly be attributed to
decreased hydroelectric production in the first quarter of 2012, for the aforementioned reasons,
and to the subsequent increase in the quantities of imported electricity in the context of a market
characterized by rising prices.
The gas sector reported a margin over 11 million euro higher than the same quarter of the
previous year.
146
The balance for amortization, depreciation and provisions was 34 million euro (56 million euro
on March 31, 2011). This variation can be attributed to the decrease in amortization during the
period, as well as to the release of funds from the bad debt provision.
As a result of the aforementioned trends, net operating income equaled 45 million euro (the
EPCG Group electricity sector contributed a negative balance of -1 million euro to this), to
generate an overall increase of 7 million euro compared with the same period last year.
Capital expenditure in the first three months of 2012 amounted to 7 million euro and was
required primarily for extraordinary maintenance in the Timpagrande (0.9 million euro to
modernize and replace Group 2 turbine components), and Satriano (1.8 million euro to
replace the tank and Cardinale offtake regulator work) hydroelectric plants, as well the
Calabria (0.3 million euro) and Valtellina (1.3 million euro) plants.
Extraordinary maintenance work was also carried out on the Gissi (0.8 million euro), Cassano
D'Adda (0.6 million euro), Monfalcone (0.5 million euro) thermoelectric plants, mainly to
adapt the Groups 1 and 2, and on the Ponti sul Mincio (0.1 million euro) plant.
During the quarter under review, the EPCG Group invested 0.9 million euro in the Pljevlja
thermoelectric plant (0.7 million euro) and in the single hydroelectric plants in Perucica (0.1
million euro) and Piva (0.1 million euro).
Heat and services sector
The Heat and Services Sector includes co-generation, district heating and heat sales as well as
heat and facility management services. These areas of operation are described in brief below:
• Co-generation and district heating: production, distribution and sale of heat,
production and sale of electricity, as well as the operation and maintenance of cogeneration plants and district heating networks.
• Heat and other services: management of third party heating networks and systems.
The following companies work within the scope of the Heat and Services Sector:
Heat & services
Co-generation
plants
District heating
networks
Sale of heat and other
services
• A2A Calore & Servizi
• Gruppo Coriance
• Proaris
• Varese Risorse
147
Recent regulatory developments in the co-generation sector
High yield co-generation incentives
The decree dated September 5, 2011 dictates the measures applicable to incentives for High
Yield Co-generation (CAR), in accordance with the provisions set forth in Law no. 99/09 (socalled Development Law).
In particular, Legislative Decree no. 20/07, implementing the European provisions relative to
this type of combined electric power and heat production method, defined that for the entire
2010 year, all co-generation plants in accordance with Resolution no. 42/02 (with IRE and LT
indices superior to the indicated thresholds) would be classified as high yield co-generation
plants, and approved for access to the White Certificates system.
Moreover, the Development Law also includes a ten-year duration for the incentives
program, based on primary energy savings, also as pertains to on-site energy consumption,
applicable to newly implemented operational power (following new construction or
renovation of existing systems) after promulgation of the Law (and therefore after August
15, 2009).
148
The decree dated August 4, 2011 also integrates the provisions set forth in Legislative Decree
no. 20/07, for the purpose of defining criteria for qualification as CAR (High Yield Cogeneration) as of January 1, 2011.
Furthermore, the definitive incentives program also recognized these plants as White
Certificate systems:
• for a period of 10 years for plants which only produce power using the co-generation
operating methods described above;
• for a period of 15 years for the plants described above which are hooked-up to district
heating networks.
The certificates are assigned as follows:
• to be spent for discharging of mandatory quotas for operators subject to energy efficiency
restrictions;
• they can be sold (bilaterally) to obligors;
• they can be withdrawn by Gse upon request of the plant owner, at a controlled price (in
this case they can no longer be sold to obligors, but can only be accounted for the purpose
of quantitative national energy savings).
The number of White Certificates issued according to primary energy savings as a result of the
initiative is also increased by coefficient (K), differentiated into five power brackets, taking into
account the diverse average yield values of the plants and the potential for development of small
and medium co-generation systems.
The measurement is cumulative only with guarantee funds, detaxation and other capital account
contributions.
Specific standards are applied to determine incentives available for the renovation of existing
systems and for plants which commenced operation after April 1, 1999 and prior to
implementation of Legislative Decree no. 20/07, which are due 30% of the incentives granted
to new plants for a period of five years, in accordance with the provisions set forth in
Legislative Decree no. 28/2011, implemented by our order in the Third Energy Package
Directive for renewable energy production.
The inter-ministerial decree dated October 24, 2005 states that co-generation plants
combined with district heating networks admissible to the benefits of Green Certificates must
feature combined electric power and heat production sections that adhere to the criteria
defined by the Authority in accordance with article 2, section 8, of Legislative Decree no. 79/99
(by Resolution no. 42/02). Therefore, for plants which commenced operation after December
31, 2010, for the sole purpose of issuing a Green Certificate where applicable, the Authority, by
way of ARG/elt Resolution no. 181/11, confirmed the currently enforced values regarding the
reference parameters for acknowledgment of technical co-generation conditions, pursuant
to article 2 of Deliberation no. 42/02 for the systems described above.
The new definition of high yield co-generation, pursuant to Ministerial Decree dated August 4,
2011, lays the way for a co-generation plant or section also to be classified as partially high yield.
In order to assimilate recent completion of the regulatory framework governing high yield cogeneration, the Authority, by way of ARG/elt Resolution no. 181/11, states that for the purpose of
application of dispatch priority pursuant to Resolution no. 111/06, the plant meets the
qualification standards for High Yield Co-generation (CAR) according to the criteria set forth in
Ministerial Decree dated August 4, 2011, and that the relative ECHP dimensions are superior or
equal to half of the total gross electric power production of the same plant or plant section.
In a note dated September 6, 2011 and in effect as of January 1, 2012, the Customs Office
Verification and Controls Department, observing the progressive increase in the average yield
over the course of several years of the National Electricity Grid, introduced a new algorithm
for calculation of the excise tax applied to fuel used by co-generation plants, based on which
the excise tax levied on methane gas increases in proportion to the thermal energy recovered.
This provision penalizes the efforts made by operators for thermal efficiency established in
energy standards, causing a direct increase in the excise taxes on methane gas used as fuel in
co-generation plants, with the necessary and inevitable repercussions on the sales price
applied to electric power produced through co-generation.
Law no. 44 dated April 26, 2012 amending Legislative Decree no. 16/12 established that the
coefficients identified by the Electric Energy and Gas Authority by way of Resolution no. 16/98
dated March 11, 1998, published in the Official Gazette no. 82 dated April 8, 1998, reduced by 12
percent continue to apply to the identification of fuel quantities subject to tax rates for the
production of electric power in the combined production of electric power and heat from
January 1 to December 31, 2012.
149
Therefore, a reduction of the flat rate coefficient from 0.250 mc/kwh to 0.22 mc/kwh is applied for
the year 2012.
Highlights of the main quantitative and economic figures for the sector are provided below.
Quantitative data
GWht
03 31 2012
03 31 2011
Changes
%
2012/2011
Plants at:
919
859
60
7.0%
- Lamarmora
296
300
(4)
(1.3%)
- Famagosta
76
77
(1)
(1.3%)
SOURCES
150
- Tecnocity
28
32
(4)
(12.5%)
- Coriance Plants
321
284
37
13.0%
- Other plants
198
166
32
19.3%
Purchases from:
607
580
27
4.7%
- Third parties
244
248
(4)
(1.6%)
- Other sectors
363
332
31
9.3%
1,526
1,439
87
6.0%
TOTAL SOURCES
USES (*)
Sales to end customers
1,526
1,439
87
6.0%
TOTAL USES
1,526
1,439
87
6.0%
(*) Net of losses.
Note:
–
Figures are from district heating only. Sales from heat management are not included.
–
Purchases include heat purchased from the Environment Sector.
In the first three months of 2012, growth of 6.0% in heat sales to end users was recorded
compared with the first quarter of 2011, mainly due to the new supplies connected in the Milan
and Bergamo areas. As a result, the production and purchase of heat also increased, to 60
GWh (thermal) and 27 GWh (thermal) respectively.
Economic data
Millions of euro
Revenues
% of Revenues
% of Revenues
Investments
01 01 2012
03 31 2012
01 01 2011
03 31 2011
Changes
192
166
26
53
48
5
27.6%
28.9%
(13)
(13)
–
5
40
35
20.8%
21.1%
24
13
11
Revenues for the quarter being reported amounted to 192 million euro (166 million euro at
March 31, 2011).
Gross operating income equaled 53 million euro, an increase of 5 million euro compared with
the same quarter in 2011. This trend, which can be substantially attributed to greater sales
volumes in the District Heating Sector due to the newly connected supplies, was only partly
compensated by the effects of the mild temperatures. Growth in margins also contributed to
the good performance demonstrated by management activities in the heating systems owned
by end users.
Amortization, depreciation and provisions of 13 million euro were reported, which was
consistent with the first quarter of 2011.
As a result of these events, net operating income equaled 40 million euro (an increase of 5
million euro compared with the same period last year).
The investments in the quarter, equal to approximately 24 million euro, mainly pertained to
development and extraordinary maintenance work on district heating networks (6 million
euro) and co-generation plants (3 million euro) in the Milan, Brescia, Bergamo and Varese
areas. The Coriance Group made investments of 15 million euro, mainly on the construction of
the Drome biomass co-generation plant.
The acquisition of Tecnovalore business assets by the A2A subsidiary Calore & Servizi S.r.l.
resulted in an increase in assets equal to 7 million euro.
151
Environment sector
The Environment Sector includes activities across the entire waste management cycle. These
activities are described in brief below:
• Waste collection and street-cleaning: street cleaning and collecting waste,
transporting it to final destination.
• Treatment: carried out in dedicated centers specializing in the recovery or
transformation of waste to make it suitable for recycling, waste-to-energy systems or
152
disposed of in landfill sites.
• Disposal: final disposal of urban and special waste in combustion plants or landfill sites,
recovering the energy where possible via waste-to-energy plants or from biogas.
The following companies work within the scope of the Environment Sector:
Environment
Waste collection
and street-sweeping
Treatment
Disposal of waste
with energy recovery
• Gruppo Ecodeco
• Partenope Ambiente
• Amsa
• Aspem S.p.A.
• Aprica
• Montichiariambiente
• Ecofert
Environment sector
Recent regulatory developments in the environment sector
At the end of July 2010, the Italian Government introduced a regulation to implement the
provisions of Article 23b (local public services of economic significance) of Law 133/08 (2), as
amended by Decree Law 135/09 (so-called EU Obligations), converted to Law 166/09.
The Decree Law passed to meet European obligations also introduced an amendment of
regulations governing the transition period during which the current contracts for water and
waste management services, not awarded through public tenders, will continue to hold.
Following the results of referendum consultation on June 12 and 13 last year, article 23-bis of Law
no. 133/08 is awaiting formal repeal.
For further clarification in this regard, refer to the information contained in the Risks and
Uncertainties section.
Consolidated Environment Law
Legislative Decree 152 of April 3, 2006 entitled "Environmental regulations" (as subsequently
modified and added to most recently by Legislative Decree 205/10 setting forth the
implementation measures for Directive 2008/98/EC on waste) is the reference regulatory
framework for the waste sector, amended in 2008 by the so-called “Corrective Consolidated
Law”. These measures (Consolidated Law) ratified the express abrogation of Legislative
Decree 22 of February 5, 1997 ("Ronchi Decree") which until now, had represented the national
regulatory framework.
A number of technical regulations governing waste collection and transfer services have
remained from the previous legislative framework, either in a transition status or until
regulations are enacted to implement the provisions of the Consolidated Law.
Regarding changes to the framework law made by Decree 205/10, of particular interest is the
regulation specifying new ways of classifying waste which requires eco-toxicity testing to be
carried out to determine if the waste is hazardous or not.
Legislative Decree 216/2011 (the so-called "Milleproroghe" Decree) once again moved the term
date for prohibition of transfer of waste with "Pci" in excess of 13,000 kJ/kg to landfills to
December 31, 2012.
Law no. 28 dated March 24, 2012 (Converted into law with amendments to Legislative Decree
2/2012, containing extraordinary and urgent measures in the environmental sector)
introduced provisions relative to the disposal of wastes from the Tritovagliatura Facility and
Waste Packaging Plant (STIR) in the Campania Region and destined for sites outside of the
region, rendering this possible through an agreement between the Campania Region and the
(2) Converted to Law through amendments to Decree-Law 112 June 25, 2008 setting forth urgent measures for the economic development, simplification, competitiveness, and stabilization of public finances and tax equalization.
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Environment sector
other single region involved in the agreement, without the necessity of an inter-regional
agreement facilitated by the State-Regional Conference.
The same law also amends the article of the Consolidated Law relative to the identification of
hazardous wastes, as pertains to the H14 characteristic (Eco-toxicity). The law states that –
while awaiting the Ministerial Environmental Decree which establishes the technical
procedure for attribution, after consultation with Ispra - the eco-toxicity characteristic is
attributed to waste according to the ADR agreement method for Class 9 – M6 and M7.
Waste tracking control system
Ministerial Decree dated December 17, 2009, subsequently modified and added to Ministerial
Decrees of February 15, July 9, September 28 and December 22, 2010, established a waste
tracking control system - SISTRI in Italian), managed by the Carabinieri Military Police Corps,
Environmental Protection Squad; the purpose of this system is to computerize the special
waste sector at the national level (and for urban waste in the Campania region).
The System simplifies procedures and the obligations of operators in the sector, cutting the
154
costs incurred by companies and managing efficiently and innovatively a complex and varied
process with the guarantee of greater transparency, knowledge and prevention of crime.
With Law no. 148/2011, effective September 17, 2011, the Parliament restored SISTRI, repealed
by the Anti-Crisis Decree Law. The effective date of SISTRI was also extended by article 13
section 3, of Legislative Decree dated December 29, 2011 no. 216 (so-called "Milleproroghe")
on April 2, 2012.
The operative simplifications were implemented by Decree no. 219 of the Ministry for the
Environment on November 10, 2011.
Brescia provincial waste management plan
Decree no. 9/661 dated October 20, 2010 of the Regional Executive approved the provincial
waste management plan for the province of Brescia which proposes measures to achieve the
target of cutting the per capita production of waste and improving the use of waste separation
systems (which should account for 65% of all waste produced by 2016, in line with European
guidelines).
Lombardy Region
In compliance with the provisions set forth in article 19, section 3 of the Regional Law dated
December 12, 2003 no. 26, which establishes that “regional planning” is constituted of the
Waste Management Guidelines and Regional Program (PRGR), the Lombardy Regional
Environment sector
Council, by Resolution no. 280 dated November 8, 2011, definitively approved regional
guidelines for Waste Management. The Regional Government can proceed with compiling of
the paperwork for the Management Program.
By Decree of the Regional Government dated November 16, 2011 the Lombardy Region
approved new methods, contents and schedules to compile the O.R.SO. application (Regional
Wastes Observatory) relative to the collection of data pertaining to the production and
management of urban wastes and wastes managed by plants in the Region.
The Region also approved the Regional Regulation no. 5 dated November 21, 2011,
implementing the transfer of VIA (Environmental Impact Assessments) issues to Provinces
and Municipalities, establishing that as of May 19, 2012, VIA concerning waste disposalrecovery plants would become the responsibility of the Province.
European Standards
The decision of the European Commission dated November 18, 2011 no. 2011/753/EU institutes
rules and calculation methods for Member States to control compliance with reuse and
recycling objectives for urban waste and wastes from construction sites and demolition for
2020 (in the G.U.U.E. “European Union Official Gazette” dated November 25, 2011, no. 310).
Regulation 2011/753/EU implemented the framework decision 2008/98/CE requiring Member
States to increase the recycled and recovered quota of domestic waste and "similar materials"
including paper, metals, plastics and glass, as well as non-hazardous construction/demolition
materials by the year 2020 to 50% and 70% in terms of weight.
Quantitative data
03 31 2012
03 31 2011
Changes
%
2012/2011
Waste collected (Kton)*
232
242
(10)
(4.1%)
Waste disposed of (Kton)
635
670
(35)
(5.2%)
Electricity sold (GWh)
304
316
(12)
(3.8%)
Heat sold (GWht)**
388
360
28
7.8%
(*) Waste collected in the cities of Milan, Brescia, Bergamo and Varese.
(**) Quantities at intake point of waste plant.
In the first quarter of 2012, there was a 4.1% drop in the quantity of waste collected compared
to the same quarter of the previous year. The quantity of disposed waste also dropped (-5.2%),
in particular due to reduced transfer of industrial and urban waste to the landfills of the
Group.
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Environment sector
However, the production of heat by the waste-to-energy plants increased in respect to the
first quarter of 2011 (+28 thermal GWh). This increase can be substantially attributed to
commercial development in the District Heating Sector. The quantity of electricity sold
therefore decreased by 3.8% in respect to the same period in 2011.
Economic data
Millions of euro
Revenues
% of Revenues
% of Revenues
Investments
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01 01 2012
03 31 2012
01 01 2011
03 31 2011
210
210
–
71
76
(5)
33.8%
36.2%
(21)
(27)
6
1
50
49
23.8%
23.3%
8
3
Changes
5
In the first quarter of the 2012 fiscal year, the Environment Sector recorded revenues of 210
million euro (210 million euro at March 31, 2011).
Gross operating income of 71 million euro was a slight drop on the first quarter of 2011 (76 million
euro). This dynamic can be attributed mainly to the loss of the CIP incentive for our waste-toenergy plants in Milan, Bergamo and Filago.
The balance for amortization, depreciation and provisions was 21 million euro, which was 6
million euro less than the first quarter of 2011.
As a result of these events, net operating income equaled 50 million euro, consistent with the
first three months of the previous year (49 million euro at March 31, 2011).
The investments of 8 million euro during the period refer primarily to waste collection
vehicles and containers (5 million euro) and development and maintenance work on
treatment and landfill systems (2 million euro).
Networks sector
The Networks Sector includes activities regulated by the specialist Authorities and relating to
the management of electricity grids, gas networks and the integrated water cycle. These
activities are described in brief below:
• Electricity networks: transmission and distribution of electricity.
• Gas networks: transport and distribution of natural gas.
• Integrated water cycle: captation of water, management of water supply networks,
water distribution, sewers and water treatment.
• Other services: activities associated with public lighting, traffic lights, the management
of votive lamps, and plant engineering.
The following companies work within the scope of the Networks Sector:
Networks
Electricity Networks
Gas Networks
Integrated Water Cycle
• A2A Reti Elettriche
• Camuna Energia
• A2A Reti Gas
• Retragas
• A2A Ciclo Idrico
• Seasm
• EPCG
• Aspem S.p.A.
• Mincio Trasmissione
• A2A Servizi alla
distribuzione
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Networks sector
Recent changes in legislation governing distribution
Distribution of natural gas
Assigning and running the distribution service
In reference to the natural gas distribution sector, Law no. 99/2009, so-called “Development
Law” defines the new “Minimum Territorial Areas” for which calls for tenders will be issued to
assign services by the Ministry for Economic Development, in collaboration with the Ministry
for Regional Cooperation, after consultation with the Unified Conference and the Electric
Power and Gas Authority.
The decree dated January 19, 2011 passed by the Ministry for Economic Development
identifying the 177 territorial areas and providing details region-by-region in Annex 1, was
published in the official journal of the Italian Republic on March 31, 2011.
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Nevertheless, the identification of the single municipalities making up each Minimum
Territorial Area was delayed pending a subsequent decree by the Ministry for Economic
Development, so-called “Annex 2”, published in the Official Gazette dated October 28, 2011.
The criteria used to identify the municipalities included in the single areas allow for a
maximum of 50 municipalities in Areas with at least 50,000 actual customers; furthermore,
the municipalities supplied with power by the same distribution plant will be inserted in the
same Area. With reference to the definition of the areas, parameters such as population
density and territorial specificity will also be taken into consideration.
The legislator, by way of Legislative Decree no. 93 dated June 1, 2011 (so-called Third Energy
Package), specified that in reference to calls for tenders which as of the effective date of
the cited Legislative Decree, in case of an open procedure, where the call for tenders was
published, or in case of restricted procedure, where the invitations to bid were sent, these
may be implemented based on applicable procedures on their respective effective dates, as
long as these documents include the evaluation criteria of the offer and the reimbursement
value of the outgoing service provider. The calls for tenders which do not fall under the
aforementioned description, initiated as of June 29, 2011, must be implemented solely for
the Territorial Areas pursuant to article no. 46 – bis of Law no. 222 of 2007, and based on the
applicable criteria. Moreover, article 24 section 3 of the cited Legislative Decree guarantees
the incoming service provider the possibility to recover depreciation in a tariff calculated
over 12 years, of the sum of the difference between the cash surrender value of the plants
due to the outgoing service provider and the relative value of the plants valid for tariff
purposes.
Networks sector
With the Decree dated November 12, 2011, published in the Official Gazette on January 27,
2012, the relevant ministries issued regulations containing the applicable criteria for
conducting calls for tenders to assign distribution services in each of the 177 areas indentified
in the Decree dated January 19, 2011. In particular, the legislation identified the duties and
competences of the numerous entities involved in the process, and regulated the process and
exchange of information inherent in the call for tenders, identifying general implementation
criteria. In this regard, greater weight is assigned to the qualitative component, in terms of
service and environmental impact, development and safety of service, with a contextual
significant reduction of weight assigned to the economic component.
Following the publication of the aforementioned Decree, the Electric Energy and Gas
Authority, by way of Resolution no. 77/2012/R/gas, initiated a procedure for the issuance of
implementing provisions for the requirement posed by the Authority. The main duties
assigned consist of compiling the typical service contract, identification of criteria for
calculation of a single allowance in favor of the commissioning entity, definition of forms for
exchange of information relative to physical details, and finally definition of the price list for
evaluation of the values of the specific components for the distribution of gas in the absence
of a price list contained in the contracts and in those of the provincial or regional chamber of
commerce.
Furthermore, during the month of April 2011, the Ministerial Decree dated April 21 was
published, containing the provisions for governing the social effects connected with new
assignment methods for gas distribution concessions, or the so-called “Social Clause”. This
decree, processed by the Ministry of Economic Development and the Ministry of Labor and
Social Policy, contains the standards for the protection of employment of the staff of the
outgoing company following assignment of the service to another company, in addition to a
series of obligations to the latter.
The protections provided for employees concentrate substantially on the direct and
immediate transfer to the incoming company with guarantee of application of the same
conditions, both economic and those related to employee seniority applied previously.
Adequate unemployment benefits are applied to any staff deemed to be in excess, without
prejudice to the possibility to be hired if within the two years following the tender should the
incoming company proceed with new hires.
Finally, the legislation, through article 25 section 9.2 of Law dated March 24, 2012, no. 27
(Legislative Decree “Liberalizations”) section 34 of article 4 (Amendments to the standards
governing local public services by popular referendum and standards of the European Union)
of Legislative Decree dated August 13, 2011 no. 138, amended and implemented into Law no.
148 dated September 16, 2011. Following this amendment, gas distribution companies
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Networks sector
assigned to local public services through a direct contract, a non-public procedure or not
pursuant to section 12 (method for selection of a private partner and characteristics) will be
excluded from future calls for tenders to assign services if not listed in regulated markets or
not configurable as consortium companies in accordance with section 12. These companies
can nevertheless participate in calls for tenders throughout the national territory initiated
during the last year of assignment of the assigned services, on the condition that the
competitive procedure for assignment of the same services was initiated in a public forum.
Distribution tariffs and metering
By way of resolution ARG/gas 159/08 (Consolidated law regulating the quality and tariffs of
distribution and gas metering services for the "TUDG" regulation period 2009-2012: approval
of Part II "Regulating tariffs for Distribution Services and Gas Metering during the RTDG
regulation period 2009-2012), AEEG set a decoupling tariff for the third regulated period, split
into 6 tariff zones and to be applied to end users during the calendar year, as well as a
reference tariff to cover the cost of the distribution, metering and commercialization service.
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The tariff system makes provision for: return on invested capital (WACC, set at 7.6% for
distribution and 8% for metering); coverage of depreciation calculated on the basis of useful lives
for regulatory purposes; the coverage of operating costs which are determined through the
application of parameters and updated through the application of a price cap, using an x-factor
that varies depending on the size of the company. In turn, invested capital is calculated using the
revalued historical cost method, and only in part through the application of parameters.
Since the level of net invested capital on a national basis, calculated using definitive figures
obtained for the first year of the current regulatory period, varied by more than 5% of the
recognized value of these same companies for the thermal year 2007-2008, a gradual
application mechanism was applied. Hence the restrictions applicable to these companies
were reduced by the percentages laid down in Art.17 of the RTDG.
Nevertheless, in 2009 some operators filed a petition against this provision through the
Lombardy TAR, and their requests were accepted in part in TAR rulings 6912, 6914, 6915 and
6916, issued in 2010 but nonetheless after the definition of reference tariffs for 2009 in
Resolution ARG/gas 115/10, subsequently amended by Resolution ARG/gas 195/11. As a
consequence, the following tariff regulations are among those that have been annulled:
• the 10% reduction in the tariff restriction during the previous regulatory period for
operators failing to supply some or all of the required information;
• the failure to make provision for the so-called volume effect, i.e. exclusion from the
possibility of recovering via tariffs the adverse effect of the weather during the last two
years of the second regulatory period;
Networks sector
• provision for a recovered productivity coefficient, dubbed the x-factor and a constant for
the entire duration of the third regulatory period.
Pending both the outcome of the appeal against the aforementioned rulings lodged by the
Authority pursuant to Resolution AGI 19/10, and the procedure implemented to adopt
amendments to the current regulations governing tariffs for provision of distribution and
metering services for natural gas and other gases, the Authority deemed it necessary to define
the mandatory tariffs for 2011 and 2012, by way of Resolutions ARG/gas 235/10 and ARG/gas
195/11 respectively. Moreover, to partially safeguard the economic and financial stability of
operators, equalization payments were defined for 2011 and 2012, while the adjustment will
only be paid after the reference tariffs for these years have been published.
Finally, in light of the conclusion of the current regulatory period, the Electric Energy and Gas
Authority initiated procedures to formulate a regulatory framework for the definition of gas
distribution tariffs and metering services over the four year period 2013-2016 (fourth
regulatory period) by way of Resolution no. 44/2012/R/gas. In this regard, it should be
emphasized that future regulatory bodies must take the reform of the gas distribution sector
and the indications set forth in Resolution no. 28/2012/R/gas into account, which outline the
criteria to be applied to the recognition of capital employed for metering services and
operating costs to cover meter installation and maintenance.
For further details on this topic you are referred to the relevant sections.
Revision and adjustment of tariff regulations for gas metering services and
commissioning directives for metering units according to Resolution ARG/gas 155/08
The Electric Energy and Gas Authority, by way of Resolution no. 28/2012/R/Gas, amended the
mandatory requirements for the commissioning of metering units originally set forth in
Resolution no. ARG/gas 155/08 (see section Smart Metering Gas).
In the same Resolution, the Authority also laid down the principles and methods to be applied
to tariff regulations for metering services during the next regulatory period. More specifically,
in the definition of tariffs for the 2013-2016 period, the value used for new investments in local
electronic metering systems will be the arithmetic average between the point value of the
investments made by the operator and the value using standard costs defined by the
Authority; relative decommissioning will be determined using the FIFO method (First In, First
Out); the value of the residual amortization for decommissioned meters after substitution
with electronic metering systems of a class equal to or less than G6 will not be recognized.
Finally, differentiation was introduced starting from the year 2013 between the reference
tariff to cover operative costs for the installation and maintenance of meters for the t(tel) and
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Networks sector
t(con) components to cover relative costs, respectively, and the remote meter reading/
control system and concentrators.
This Resolution was challenged by some operators.
Default service
By way of Resolution ARG/gas n. 99/11, AEEG introduced the new "default service", making the
distributor responsible for handling the management and economic aspects of critical system
issues, such as:
• supplying services to customers who, even though not an entity's direct responsibility, no
longer have a supply company, are not eligible for the last resort service (FUI) or are
eligible for the service but can no longer use it (having reached their top limit or if no one
has tendered for the service);
• dealing with customers whose service cannot be disconnected and for whom technical
reasons have prevented the gas supply from being stopped following a suspension of
service request due to non-payment;
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• dealing with defaulting customers whose service cannot be disconnected (for recognized
social service providers such as hospitals, schools, care homes, prisons).
Further to the appeals lodged by several companies contesting this resolution, the third
section of TAR Lombardy accepted the request to suspend only the default part of the
measure. The ruling has been deferred to the public hearing on June 6, 2012.
By way of measure ARG/gas n. 207/11, the Authority extended the enforcement date of the
default service to May 1, 2012, notwithstanding the TAR sentence.
Smart gas metering
By way of the aforementioned resolution no. 28/2012/R/gas, the Authority reviewed obligations
to implement electronic gas metering as required under Resolution no. 155/08 and an associated
tariff regulation for the metering service. The revised requirements differ in the term granted to
replace 60% of all meters classed as less than or equal to G6, now two years. Furthermore, all
meters of the aforementioned classes with a metric stamp expiry date of December 31, 2008 and
therefore out of date, must be replaced, and it must be guaranteed that, by this date, all
installations installed from February 29, 2012 are fitted with electronic meters.
Gas Quality
With respect to the scheme to promote safe recovery in gas distribution, the Authority has
not yet defined the incentives and penalties for the year 2010 to apply to A2A Group
Networks sector
distribution companies. Indeed, you are reminded that pursuant to Resolution ARG/gas
120/08, this incentive system became obligatory for all natural gas distribution companies
with more than 50,000 end users at December 31, 2007, from January 1, 2010.
Distribution of other gases
By way of Resolution ARG/Gas n. 195/11, the Authority approved the tariff options applicable
for the period 2010-2012, to distribution and metering services for all non-natural gases.
Nevertheless, in the future, following the appeal against the TAR Lombardy sentences and
conclusion of the case to amend the current tariff regulation system governing natural and
other gas distribution and metering services, commenced by Resolution ARG/gas no. 235/11 in
order to comply with the TAR Lombardy sentences, the tariff options approved for 2010, 2011
and 2012 may require equalization as appropriate.
Electricity distribution
Distribution service tariff regime
In Resolution ARG/elt 199/11, AEEG adopted the Amended Text of provisions to regulate the
transmission and distribution of electricity, and the Amended Text of provisions regulating the
delivery of the Electricity Metering service (TIME) for the fourth regulatory period (2012-2015).
In relation solely to the tariff adjustment for metering services, variations in return on
invested capital (fixed at 7.6% annually) were recorded in the value of the X-factor (fixed at
7.1% annually) with respect to the previous regulatory period, and also in revenue equalization
for low voltage metering services; in reference to the distribution service, many of the tariff
regulations already enforced during the previous regulatory period were maintained, in
particular:
• the adoption of tariff decoupling, which requires a mandatory tariff to be applied to end
users and a reference tariff for the definition of revenue restrictions;
• the application of the profit-sharing method for the definition of initial operating costs
applied to the tariff;
• updating of the tariff quota covering operating costs through the price-cap method,
setting the annual objective for increased productivity (X-factor) at 2.8% for distribution
activities;
• the evaluation of invested capital using the re-evaluated historical cost method;
• the definition of the rate of returns on invested capital through Wacc – Weighted Average
Cost of Capital - (the rate set for the 2012-2013 period is 7.6% for investments made up to
December 31, 2011, and 8.6% for investments made subsequent to that date);
• calculation of amortization on the basis of the valid useful life for regulatory purposes.
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Networks sector
The primary differences in respect to the regulatory framework pertain to the methods used
to define the economic amounts to which the aforementioned methods are applied. In this
regard, it is particularly significant that invested capital is calculated in part using parameters
based on the Wacc value for the third regulatory period, the tariff revenues and the
equalization balances, including those specific to the company, recorded during 2012 by the
single operator. Similarly, the definition of the portion of amortization to be recognized in the
tariff is also based on a parameter–based mechanism using preset depreciation percentages
based on average useful life, calculated by year of formation of the total national invested
capital.
Other significant new features are the adoption of a specific reference tariff per operator
based on the number of users (PoD), and therefore less susceptible to variations caused by a
drop in distributed energy; recognition of a time-lag effect on the actual applied rate of return
starting with investments made in 2012; and finally the simplification of equalization
mechanisms, both general and specific.
In regards to this last point, the Authority believes the effects of Specific Company
164
Equalization (PSA) of its own invested capital, amortization and operating costs should be
incorporated directly into the value applied to each individual operator, thereby eliminating
the regulatory entitlement as of 2012.
The Authority, by way of the aforementioned Resolution, approved the mandatory tariffs for
the year 2012, stating that the reference tariffs for each individual operator and the
parameters needed to calculate capital and amortization must be published prior to April 30,
2012.
Specific company-based equalization
The Electric Energy and Gas Authority will update the Specific company correction factor
(Csa) for Allowed Equalized Revenues (RAP) to cover the costs of distribution relative to the
company A2A Reti Elettriche S.p.A using the mechanism provided by TIT, adopted in
Resolution no. 348/07, and valid for the period 2008-2011. For this purpose the Authority, by
way of Resolution 5/2012/R/eel, calculated the percentage variations of the single tariff
parameters necessary for the calculation of the Csa factor for the year 2011.
Equalization measure and integration of metering revenues covering the residual
non-depreciated cost of electromechanical meters replaced with electronic meters
in accordance with Resolution no. 292/06.
The Electric Energy and Gas Authority by way of Resolution ARG/elt 199/11 adopted the
Amended Text of provisions for distribution of Electric power metering services (TIME),
Networks sector
which includes, among other things, the equalization mechanism for metering revenues for
low voltage point of measurement starting from the year 2012, for which the differences in
respect to the previous year are limited to technical aspects, with the fundamental underlying
logic remaining the same.
By way of this resolution, the Authority also introduced the mechanism to top-up metering
revenues to cover the residual non-depreciated cost of replacing electromechanical meters
with electronic meters in accordance with Resolution no. 292/06. In this regard, in the third
regulatory period the residual non-depreciated cost was directly recognized in the tariff
quota to cover depreciation, calculated without taking into consideration the
decommissioning of meters needed replaced with compliant meters. On the contrary, the
new mechanism renders this acknowledgment explicit and not dependent on tariff
calculation; this mechanism will be apply for the 2012-2027 period, but operators may request
compensation due in a lump sum.
Investments in Smart Grids
With resolution ARG/elt 12/11, AEEG published the list of eligible projects for the incentive
scheme set forth in sub-section 11.4(d) of the Amended Transmission Regulations (TIT).
In particular, investments in pilot projects submitted by A2A Reti Elettriche S.p.A., including
automation, protection and control systems for active MV grids (smart grids) relating to the
Lambrate primary station (Milan area) and Gavardo primary station (Brescia area) were
ranked first and third.
Under sub-section 11.4 of the Amended Transmission Regulations (TIT), a greater rate of
return on invested capital, equal to 2% for 12 years, is recognized for the new investments in
pilot projects including automation, protection and control systems for MV active grids
(smart grids). The higher rate is also recognized in the fourth regulatory period (Art. 12.5 of
the Amended Transmission Regulations (TIT) 2012-2015).
Electrical Cars
In Resolution ARG/elt no. 96/11, the Authority paved the way for the recognition of incentives
to install public recharging points for electrical vehicles, as proposed in the A2A S.p.A's pilot "emoving" project.
Quality and continuity in the electrical sector
In Resolution ARG/elt 198/11, the Authority published the new Amalgamated Law (TIQE)
governing service continuity and defining the specific and general commercial quality levels
for the period from 2012-2015, and which took effect from January 1, 2012.
165
Networks sector
Said revised text confirms the principle championed by the Authority at the consultation
stage, which is to offer special incentives in territorial areas where the starting length of the
suspended services is one and a half times longer than the target level, as well as the aim of
decelerating incentives in territorial areas which have recorded indicator D, equal to or more
than the target level, every year in the 2008-2011 period. Moreover, the target levels set by the
Authority will have to be reached by each territorial area by the 2015 deadline for the duration
indicator, and by 2019 for the number indicator.
Measures common to both sectors (gas distribution and electricity)
Energy Efficiency
The December 21, 2007 decree of the Ministry for Economic Development reformed and
updated the July 20, 2004 decrees of the Ministry for Production Activities and the
Environment which oblige electricity and natural gas distributors who at December 31, 2001
166
served at least 100,000 end users to comply with energy saving objectives quantified in
proportion to the energy distributed. In order to achieve these targets, distributors must
develop energy saving projects in accordance with the provisions of Law 239/04 (dubbed the
Marzano Law) and relative implementation mechanisms, especially regarding post-metering
activities. The 2007 decree set the new targets for the three-year period from 2010 to 2012.
Legislative Decree 28/2011 implementing European Directive 2009/28/EC promoting the use
of energy from renewable sources took effect on March 29, 2011. The main measures
envisioned cannot be implemented until further ministerial decrees (most of which by the
Ministry for Economic Development and the Ministry of the Environment) have been issued,
which is not yet the case. Drawing on the Ministerial Decree dated July 20, 2004, Ministerial
Decree dated December 21, 2007 set the energy-saving objectives applicable to obligors for
each year up to 2012. In accordance again with Legislative Decree 28/11, ENEA should have sent
Mse 15 the technical files for the work required in each sector by September 2011.
The ongoing delay in implementing the aforementioned measures, and in equal measure also
the lengthy delay in introducing renewable energy legislation, are having severe
consequences for reference markets and causing a degree of uncertainty.
In Resolution EEN 9/11, the Authority amended the Guidelines (by replacing annex A to
Resolution 103/03 as amended) regarding the preparation, execution and assessment of
projects, as per article 5.1 of the Ministerial Decree dated July 20, 2004, as amended. The
Authority also formally stated that the new method used to calculate energy-efficiency
savings must be applied to all projects, for savings made from November 1, 2011 until the end
Networks sector
of the useful life of each intervention, in compliance with the provisions of Legislative Decree
No. 28/11.
The final point worthy of note is that Decree no. 226 dated November 12, 2011 of the Ministry
for Economic Development, described in the earlier section discussing gas distribution, also
requires as one of the economic conditions of the tender, that tendering companies invest in
energy-efficiency in their relevant areas over and above their annual distributor targets, in
order to achieve white certificate status, which is recognized by local authorities awarding
concessions. These additional efforts must focus on the end use of natural gas.
Tariff contribution
The value of the single tariff contribution recognized for each obligatory year (t+1) after 2008
is defined by AEEG within 30 November of the previous year (t).
The value of the tariff contribution recognized on achievement of the energy saving objectives
for the year 2011, determined in Resolution EEN 16/10 (corrected in Resolution EEN 17/10),
equals 93.68 euro / ton of oil equivalent saved.
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Pending the full definition of the regulatory measures planned to reform the energy efficiency
mechanism, in Resolution EED no. 12/11, the Authority has updated the single tariff
contribution to achieve energy-saving targets for the year 2012, equal to €86.98 euro/tep.
Energy saving objectives for 2012
In Resolution EEN 13/11, AEEG established the specific primary energy-saving objectives for
the year 2012, applicable to gas and electricity distributors. The reference objectives for A2A
Group distributors are listed in the table below:
Distributor
Objective
2011 (toe)
A2A Reti Elettriche S.p.A.
140,961
A2A Reti Gas S.p.A.
164,738
Provisions regarding separation in accounting and functional terms
(unbundling)
In Resolution 11/07, which was partially amended by Resolutions 253/07 and ARG/com 57/10,
AEEG ratified the Amended Regulations governing administrative and accounting separation
for businesses operating in the electricity and gas sectors, modifying the current legislation
(established in Resolutions 310/01 and 311/01).
Networks sector
The resolution requires separate annual accounts to be sent to the Authority every year, in
order to guarantee amongst other things, that there are no cross-over subsidies between
regulated and non-regulated operations, as well as a guaranteed, coherent and detailed flow
of information regarding the financial situations of businesses in order to calculate the tariffs
of regulated services; it also obliges vertically integrated groups to introduce the functional
separation of electricity and gas distribution activities, electricity transmission and
transportation of gas from activities carried out in a free market context; the objective is to
guarantee the neutral management of these infrastructures and prevent any discrimination in
access to commercially sensitive information and cross-over of resources between sectors
(this purpose is pursued more directly by accounting separation measures). In Resolution
36/2012/R/com, the Authority introduced a penalty system to be applied to operators failing to
comply with the requirement to send their separate annual accounts or the specific
communications regarding functional separation, within the deadline.
On the basis of applicable regulations, activities to which functional separation applies are
given decision-making and organizational independence by allocating the relative
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administration to an "Independent Operator".
In implementing the resolutions adopted by AEEG in resolution 6/10 passed by the Tariff
Management Director, A2A Reti Elettriche S.p.A., A2A Reti Gas S.p.A. and Azienda Servizi
Valtrompia S.p.A. made the necessary changes required under the Amended Unbundling
Regulation (TIU) for 2010 and 2011, whilst during the first six months of the year, Independent
Operators were appointed for Retragas S.r.l., Mincio Trasmissione S.r.l. and Seasm S.r.l..
Changes to regulations concerning the Robin Tax
Law no. 148/11 converting by amendment the Decree Law no. 138 dated August 13, 2011 setting
forth further urgent measures to restore financial stability and promote development (the
"Ferragosto Maneovre"), modified applicable provisions regarding the Robin Tax, establishing
both a surcharge on IRPEF (personal income tax - taking it to 10.5%) for the three tax years
after the year ended December 31, 2011, and an extension to the scope of the tax; entities
obliged to pay it now include companies distributing, transporting and transmitting electricity
and natural gas. Moreover, exemption thresholds have been reduced: entities generating
revenues of more than 10 million euro in the previous tax year and with taxable income greater
than 1 million euro are now subject to pay it. With regards to the A2A Group, as a result of these
amendments, the two distributors Elettriche S.p.A. and A2A Reti Gas S.p.A. now fall within the
scope of the tax (along with the operators already eligible).
Networks sector
Integrated water cycle
Law Decree no. 225 dated December 29, 2010 (the so-called Milleproroghe Decree) moved the
term of a number of regulatory frameworks expiring before March 15, 2011 to March 31, 2011.
In fact, the conversion into legislation of Decree Law No. 2 of January 25, 2010 abolished
optimal territorial area authorities, giving regions the task of assigning the functions exercised
by the Optimal Area Authorities (reassigning as necessary), in compliance with the principals
of subsidiarity, differentiation and adequacy. By way of Regional Law no. 21 dated 27 December
2010, Lombardy Region ruled that the functions currently exercised by the Area Authorities
should be reassigned to provincial authorities.
The Decree of the President of the Italian Council of Ministers dated March 25, 2011 and
entitled "Further extension of the terms applicable to the Ministry for Environment, Land and
Sea" set a December 31, 2011 deadline within which action must commence to abolish the
relevant authorities and meet the subsequent obligations. Following the results of the
referendum consultation on June 12 and 13 this year, the Presidential Decrees proclaiming the
revocation of the legislation referred to in the aforementioned consultation, were published
in the Official Journal no. 167 dated July 20, 2011.
As a consequence, regulations regarding integrated water services will be subject to further
amendments and reform.
Finally, article 21, sections 13 and 14 of Legislative Decree no. 201/11 (the so-called Salva Italia
Decree) institute the abolition of the (recently established) national agency for water
regulation and monitoring, stating that the functions of this body, its financial resources and
any plant, property or equipment, including direct and indirect legal relations, are to be
transferred directly, with neither liquidation nor legal procedures, to the Authority for
Electricity and Gas and to the Ministry for the Environment and the Protection of the Land and
Sea.
The functions to be transferred to the Authority, will be defined by a Decree by the
President of the Council of Ministers, based on proposals from the Ministry for the
Environment and Protection of the Land and Sea.
Law No. 27 dated March 24, 2012 (converted to law through amendments to Decree-Law no. 1
January 24, 2012 setting forth urgent measures for competition, development of
infrastructures and competitiveness - the Liberalization Decree) established moreover the
requirement that water service providers pay a contribution to the Authority for Electricity
and Gas.
For more detailed information on this, you are referred to the paragraph on risk.
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Networks sector
Tariff Framework
In article 26, section 19 of Law 214/11 (Salva Italia – Save Italy Law) the Italian legislator
transferred all responsibilities associated with the regulation and control of water services to
the Authority for Electricity and Gas, to be exercised with the same powers conferred on the
Authority by Law 481/95; a comprehensive definition of these functions has been deferred to
the Decree of the President of the Council of Ministers, as in article 21, section 19 of the
previously mentioned law. Following this, by way of Resolution no. 29/2012/A/idr of February 2,
2012, the Authority set up a working party to carry out the preparatory and observation stage
regarding the new functions to be regulated and controlled by the Authority.
Nevertheless, in a letter dated February 24, 2012, the Ministry for the Environment and
Protection of the Land and Sea pointed out that the tariff-related measures, especially those
resulting from the June 2011 referendum regarding the elimination of the return on invested
capital, must be adopted even though the presidential decree mentioned above has not yet
been issued.
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This resulted in the Authority introducing measures, by way of Resolution no. 74/2012/R/idr, of
March 1, 2012, to adopt tariff measures for water services in order to align this regulation with
the principles laid down in European and national legislation, guaranteeing services of suitable
quality standards.
Local water authority - Brescia Province
The Board of the Brescia Area Office passed resolution No.18 on December 28, 2011,
approving tariffs to be applied in 2012 to the various categories of use and towns within the
area, and the definition of the obligatory purification component of the tariff to be applied to
private users of the purification service, for the year 2012.
The structure and modulation of the tariff framework for 2012 sets forth the single tariff
values to match the consumption bands and different categories of use applied to the towns
and cities falling within the three tariff catchment groups (A, B and C), plus a specific tariff
catchment group, called Entry Catchment, with lower tariffs for uses and consumption levels
than catchment group A, to which the lowest tariffs are applied and with a view to aligning
them within three years to the Average Reference Tariff (TRM) for the territorial area; this
catchment group comprises the remaining towns in the Brescia province local water authority
(ATO) to whom the relative tariff scheme will be applied from the date Integrated Water
System management commences.
Networks sector
Quantitative data
Gas distributed (Mcm)
Gas supply points (number)
03 31 2012
03 31 2011
Changes
%
2012/2011
2,930
2,908
22
0.8%
950
965
(15)
(1.6%)
1,281,514
1,255,821
25,693
2.0%
Gas transported (Mcm)
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171
(2)
(1.2%)
Water distributed (Mcm)
17
15
2
13.3%
A total of 2,930 GWh of electricity was distributed in the first three months of the year, which
was on the whole consistent with the same period in 2011.
The quantity of gas distributed reached 950 Mcm, which was 1.6% less than the first three
months of the previous year, due to the milder temperatures recorded during the first quarter
of this year.
For the same reasons, the gas transported equaled 169 Mcm (171 Mcm at March 31, 2011).
Water distributed in the quarter totaled 17 Mcm, which was an increase of 13.3% on the same
period last year.
In the first quarter of 2012, the EPCG Group distributed 2.7% more electricity, as indicated in
the following table:
EPCG
03 31 2012
03 31 2011
Changes
%
2012/2011
761
741
20
2.7%
01 01 2012
03 31 2012
01 01 2011
03 31 2011
Changes
Revenues
169
165
4
68
65
3
40.2%
39.4%
(27)
(28)
1
4
Economic data
Millions of euro
% of Revenues
Amortisation, depreciation and provisions
% of Revenues
Investments
41
37
24.3%
22.4%
24
25
(1)
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Networks sector
In the first three months of 2012, the Networks Sector reported revenues of 169 million euro,
of which 21 million can be attributed to the EPCG Group (165 million euro at March 31, 2011, 20
million euro of which by the EPCG Group).
Gross operating income was 68 million euro (65 million euro in the first three months last
year). This growth in income, generated for the most part by the gas distribution sector, can
be explained by the greater margins achieved in the quarter under review as a result of the
application of the revenue steps mechanism prescribed in current legislation.
Amortization, depreciation and provisions totaled 27 million euro (28 million euro at March 31,
2011).
As a result of the above movements, net operating income amounted to 41 million euro (37
million euro in the first quarter of 2011).
Investments in the Milan and Brescia areas amounted to 23 million euro at March 31, 2012, and
concerned:
• development and maintenance work on the electrical distribution sector, in particular to
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connect new users, maintenance of substations, extend and replace the medium and low
voltage network, and for maintenance and upgrading work on primary stations (11 million
euro);
• development and maintenance work on gas distribution networks in order to connect new
users, replace medium and low pressure pipes and gas meters (10 million euro);
• work on water transportation and distribution in the integrated water cycle, as well as for
work on sewerage and treatment plants (2 million euro).
The EPCG Group made investments of 0.7 million euro to develop and maintain the
distribution network and to replace meters.
Other services and corporate
sector
Activities in these areas of operation are described in brief below:
• Corporate (3): steering, coordination and control activities such as business
development, strategic guidance, planning and control, financial management and the
coordination of group operations; central services supporting business and operating
activities (e.g. administrative, accounting, legal, procurement, HR, information technology
and communication etc. services) provided by the parent company under specific
intercompany service agreements.
• Other services: activities associated with video surveillance systems, data transmission,
telephone services, and Internet access.
In addition to the activities conducted directly by A2A S.p.A., the following companies also
come under this Sector:
Other services and
corporate sector
Other Services
Corporate
• Selene
• A2A Logistica
• Aspem S.p.A.
• EPCG
(3) This includes the General Manager's Office (Corporate and Market Area), the General Manager's staff (Technical and Operations
Area) and staff of the Office of the Chairman of the Management Board and the Chairman of the Supervisory Board.
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Other services and corporate sector
Economic data
Millions of euro
01 01 2012
03 31 2012
01 01 2011
03 31 2011
Changes
Revenues
60
57
3
–
(5)
5
% of Revenues
–
(8.8%)
7
(7)
14
7
(12)
19
11.7%
(21.1%)
% of Revenues
Investments
4
4
–
The Other Services and Corporate Sector reported revenues for the quarter under review
that amounted to 60 million euro (57 million euro at March 31, 2011).
Gross operating income was seen to improve slightly on the first quarter of 2011 (up 5 million
euro).
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A positive balance of 7 million was posted for amortization, depreciation and provisions
(negative 7 million euro for the first quarter of 2011). This growth can for the most part be
attributed to the release of previously allocated risk funds.
After amortization, depreciation and provisions, the balance for net operating income was +7
million euro.
Investments of 4 million euro in the first three months of the year mainly concerned work on
IT systems (3.7 million) and on TLC networks (0.2 million euro).
Outlook for operations
Based on the forthcoming consolidation of Edipower scheduled for the end of May, further
growth in district heating sales, and improved results of the subsidiary EPCG, we expect gross
operating income to progressively improve on the 2011 year-end figure disclosed.
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The A2A Group has a risk assessment and reporting process based on the Enterprise Risk
Management method as stated by the Committee of Sponsoring Organizations of the
Treadway Commission (COSO report); the aim of this process is to make the management of
business risk an integral part of management processes.
In particular, A2A S.p.A. has defined a risk model that takes account of the nature of the Group,
its multi-business vocation and sector of operation. It also commenced a process of self176
assessment of risks in 2010 which directly involves management. The Group introduced a new
Risk Management function, that both the Enterprise Risk Management and Energy Risk
Management (already consolidated) managers report to, the aim being to further develop risk
management activities and incorporate them into organizational processes.
A description now follows of the main risks and uncertainties to which the Group is exposed,
considering the sectors in which it operates and the specific aspects of its business model.
Financial risks
Commodity price risk
As part of its remit, the Risk Management Unit manages commodity price risk, i.e. market risk
connected with changes in the prices of raw material prices such as electrical energy, natural
gas, coal, fuel oil, as well as their relative derivative products.
Market risk related to fluctuations in energy commodity prices and exchange rates associated
with these are managed centrally by means of a netting process applied to the entire exposure
of the Group's portfolio, which is constantly monitored.
By dealing in financial derivative instruments, the aim is to stabilize cash flows generated by
the asset and contracts portfolio in order to assure the Group's economic and financial
stability.
Each year the Management Board of A2A S.p.A. defines the commodity risk limits for the
Group.
Consistent with the Group’s Energy Risk Policy, the Risk Committee ensures compliance with
these limits and where necessary defines the hedging strategies designed to bring risk within
the set limits.
For more information on the price risk on commodities and methods of governance, please
see the paragraph entitled “Other information” of the Consolidated Annual Report.
Interest rate risk
Interest rate risk is linked to medium and long-term loans and has a different effect
depending on whether the loan bears interest at a fixed or floating interest rate. If interest
is payable at a floating rate then the interest rate risk is on the cash flows, while if interest
is payable at a fixed rate then the interest rate risk is on the fair value.
The interest rate risk management policy that has been adopted is designed to reduce any
losses arising from a fluctuation in interest rates in the floating rate case to a minimum by
converting these to fixed rates or arranging collar contracts, and to reduce the increased
cost of the fixed rate over the floating rate (“negative carry”) to a minimum.
A structured model for interest rate risk analysis and management has been developed
in-house. The method used to calculate the exposure to this risk is based on the
Montecarlo method, which enables the effect that fluctuations in interest rates have on
future cash flows to be calculated. The method simulates at least ten thousand scenarios
for each important variable, depending on the volatility and correlations associated with
each of them, using market rate forward curves for future levels. In this way a probability
distribution of the results is obtained from which the worst case scenario and best case
scenario are extrapolated using a 99% confidence level.
Liquidity risk
The Group is not currently exposed to short-term liquidity risk, having 1,765 million euro
of committed lines of credit available at the balance sheet date. These lines are mainly
used to satisfy temporary liquidity requirements.
In addition, the Group has medium to long-term loans, forming part of agreements but
not yet used, totaling 112 million euro.
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Default risk and covenants
In October 2003 and May 2004, A2A S.p.A. issued two bond loans each having a nominal
value of 500 million euro and a 10-year maturity. In 2009, the Company issued a bond loan
of 1 billion euro maturing in November 2016.
There is also a Credit Rating clause in the agreement with the EIB for the loan originally for
100 million euro, repayable in 2012 (rating lower than BBB), for the EIB loan originally of
100 million euro, repayable in 2014-2016 (rating lower than BBB), for the EIB loan
originally of 200 million euro, repayable in 2023 (rating lower than BBB), for the EIB loan
originally of 200 million, repayable in 2025/2026 (rating lower than BBB), in the
agreement with CDP for the loan originally of 200 million, repayable in 2025 (rating lower
than BBB-), for the EIB loan originally of 95 million euro repayable by 2026 (rating less
than BBB), and in the agreement with CSA for a bond loan in yen repayable in 2036, and
related cross-currency swap ("put right" with rating lower than BBB-).
• There is a credit rating clause in the agreement for the A2A S.p.A. loan of 85 million
178
euro, brokered by EIB, which bears floating rate interest and is repayable in June 2018;
more specifically, the company has undertaken to maintain an investment grade
rating throughout the whole term of the loan.
If that commitment is not met, there are balance sheet, income statement and financial
covenants linked to the debt/equity ratio, the debt/gross operating income ratio and the
gross operating income/financial expenses ratio. The Company calculates these
covenants each year on the basis of its consolidated financial statements.
The A2A Group has stipulated a number of committed lines of credit with various financial
institutions for a total of 2,815 million euro (of which 2,760 million euro stipulated by A2A
S.p.A.) which are not subject to any covenants.
As regards the bond loans, the above-mentioned loans and the committed lines of credit
contain (i) negative pledge clauses under which A2A S.p.A. undertakes not to set up
collateral guarantees on the assets of A2A S.p.A. and those of its directly held subsidiaries
over and above a specific threshold; (ii) cross default/acceleration clauses which entail
immediate reimbursement of the loans in the event of serious non-performance; and (iii)
clauses that provide for immediate repayment in the event of declared insolvency on the
part of certain directly held subsidiaries.
Agreements with EIB for loans of 200 million euro repayable in 2025 and 95 million euro
repayable in 2026 contain a clause stating that the bank is entitled to request early
repayment of the loan if control of A2A S.p.A should change, and only after notifying the
company of the grounds for the decision.
A2A S.p.A. has undertaken not to give up control over Delmi S.p.A. for certain committed
lines of credit and for all lines to reserve the same treatment for the lending banks as that
due to creditors under other unsecured loan agreements (pari passu).
In addition, the loan of the subsidiary Abruzzoenergia S.p.A. is backed by a mortgage for
up to 264 million euro.
There a number of financial covenants on a loan of EPCG for 35 million euro, 10 million
euro of which had been used at March 31, 2012.
As matters currently stand there has been no default on the part of companies of the A2A
Group nor a breach of any of the covenants mentioned above, with the exception of the
aforementioned loan of EPCG, the covenants of which were not fully fulfilled. In this
regard, an agreement has already been drawn up and will soon be formalized with the
funding bank; this agreement suspends the effects of these covenants for a backdated
period of time to be agreed.
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Context risk
Legislative and regulatory risk
The Group operates in a highly regulated sector. As a consequence, one of the risk factors in
the group's normal operations is the constant and not always predictable evolution of the
legislative and regulatory context for the electricity and natural gas sectors, as well as for the
management of the water cycle and environmental services.
In order to deal with these risk factors the Group has adopted a policy of monitoring and
managing legislative risk in order to mitigate the impact of this as far as possible. This involves
collaborative dialogue with the institutions and with the bodies which govern and regulate the
sector, active participation in trade associations and the work groups set up at these entities
and a detailed review of changes in legislation and the provisions issued by the sector
Authority.
It also involves constant dialogue with the business units affected by legislative changes in
order to assess the potential effects in full.
The main topics involved in current changes in legislation are as follows:
• laws governing the terms and conditions of large-scale derivation hydroelectric
concessions;
• changes to rules concerning CIP 6/92 conventions;
• legislation governing local public services, especially in light of changes and additions made
to Art. 23-b of Law No. 133/08 regarding the length of the transition period of current
delegations, as provided in Art. 15 of Law 166/2009 (mentioned above), as subsequently
repealed following the June 2011 referendum, replaced by Art. 4 of Italian Leg. Decree
No.138/11 and converted to law with amendments to Law No. 148/11;
• changes in legislation governing the Green Certificates market.
Large hydroelectric concessions
Changes to Italian Legislation
The 2006 Finance Law provided for a 10-year extension of large concessions regarding water
for hydroelectric use in exchange for adequate investment in the modernization of the
installations. (This 10-year extension was based on paragraphs 6, 7 and 8 of article 12 of
Legislative Decree no. 79/99, the "Bersani Decree"). Sentence no. 1/2008 of the Constitutional
Court declared that part of the law was illegitimate as it violated constitutional provisions
180
regarding the jurisdiction of regions over energy matters with respect to the State. This ruling
by the court led to a situation where it was no longer possible to extend the concessions,
although it did not entirely reinstate the rules contained in article 12 of the Bersani Decree
were not fully restored (paragraphs 3 and 5 remain repealed, paragraph 2 has been repealed
and paragraph 1 has been replaced by the first part of paragraph 483 of article 1 of the 2006
Finance Law). According to the sentence of the Constitutional Court, the determination of the
tender parameters (minimum organizational and financial requisites for operators,
parameters for the increase in power and energy generated) by the Ministry for Economic
Development will also have to provide for the suitable involvement of the regions which can be
achieved through the Joint Conference.
Article 15, paragraph 6 of Decree Law no. 78/2010 (the Budget Decree Law), published in the
Official Journal of May 31, intervened on this matter by raising the bases for the calculation of
the extra fees payable on large hydroelectric concessions (article 15, paragraph 6).
With an amendment to the text, in view of the conversion of the decree into law which was
carried out at the end of July by means of Law no. 122/2010, the above legislation was
supplemented by additional provisions concerning the duration of outstanding
concessions.
The European Union issued a letter of default to the Republic of Italy on March 15, 2011,
requesting clarification about the orders under Law 122/2010, arguing that the methods of
granting the extension described therein can represent a violation of regulations on freedom
of establishment provided by Article 49 of the TFUE. The above law specifically included a
general 5-year extension of all the licenses and an additional 7-year extension to grant upon
certain conditions.
The infraction case should be dismissed further to the provisions under Decision 205/2011
(published on July 13, 2011) with which the Constitutional Court has allowed the petition filed
by the Region of Liguria as regards the issues in question, declaring the illegitimacy:
– the regulations under Law 122/10 aimed at extending the licenses for use of rivers for
hydroelectric power use (for periods of 5 and 7 years), since inconsistent with the
constitutional regulations on breakdown of the State and Region responsibilities (the
issue is subject to regional legislative authority);
– the regulation that included operation of the regulations in question “... until adoption of a
diversity of legislative regulations by the regions, to the extent of their jurisdiction …” (also
known as the “transferability clause”) since “… the need to fill - for the time required to
issue of the regional law - a legislative gap in application of the fundamental state principles
does not exist…”.
As to the time necessary to the impending announcements, the regulatory framework
upstream of the aforementioned decisions is full of holes and characterized by a de facto
return to the regulations defined by Legislative Decree 79/99. As a result, the legislature issued
article 24-bis of Law 27 (enacted March 24, 2012), known as the Liberalization Decree Law, to
set April 30, 2012 as the date by which the competent ministers had to define the
organizational requirements and minimum financial needs, parameters and terms concerning
the announcement procedure to grant the hydro-electrical supply.
Large dams regulation
Finally, with Decree Law 201 of June 12, 2011, converted to Law 214 dated December 22, 2011,
the government introduced provisions for identifying no later than December 12, 2012 the
large dams for which, “having certified the real risk of obstruction of the drainage outlets, it is
necessary to urgently adopt actions and remove the sediment accumulating in the tanks”, to
be carried out by the license holders. Furthermore, the law introduced requirements for the
license holders to communicate with the ministers on the plan of maintenance of the dams
with a useful life longer than 50 years, the documents on the works to change the course,
including through forced channels, the related testing certification, maintenance, and
extraordinary certification of the safety conditions and state of maintenance of the above
works, plus, via electronic transmission and in real time, the hydrological and hydraulic data
acquired at the dams, including the flows being drained and deviated; finally, some types of
works require communication, or execution, of the static testing.
181
Changes to Regional Legislation
On a local level, the Region of Lombardy, in view amongst other things of the expiration of a
number of the concessions in their territorial area, modified its regional law 26 of December
12, 2003 in article 14 of Law no. 19 of December 23, 2010, integrating it also with Article 53-bis
“temporary extension of operation”, based on which the regional assembly may allow a
temporary extension of the license to the outgoing licenser, only for licenses terminating by
December 31, 2015, for the time necessary to complete the assignment procedures and only
for periods shorter than five years.
a. Expiry of concession
On expiry of an existing concession, the Regional Council assumes title of the works and
plants serving the concession, in order to assign them within 6 months of this date to
special purpose regionally-controlled holding companies, the capital of which is 100%
public and non-transferable, and in which local authorities and/or associated business
combinations have at least a 30% stake at no charge. Industrial exercise of the works and
the plant can be assigned to third parties by means of competitive, public procedures, or
182
directly to mixed public and private enterprise in which the territorially competent
mountain province is involved.
b. Running of infrastructures and plants
To run infrastructures and plants, the concession holder has possessory title through the
special purpose holding company in return for a payment that is part fixed (calculated on
the basis of the average annual nominal output of the plants) and part variable
(proportional to the output achieved and valued in relation to trends in electricity
markets).
Resolution No. 1205 of December 29, 2010 was the Regional Executive Council's initial action to
implement these provisions, granting A2A S.p.A a “temporary continuation” to run the
concessions and hydroelectric plants in Stazzona, Lovero and Grossotto which had in theory
expired on December 31, 2010, despite the aforesaid state regulations. The resolution also
confirmed the requirement to pay the fees and surcharges set forth and to complete the
ordinary and extraordinary maintenance work required by article 53-bis; furthermore, it
deferred to a later resolution the establishment of the additional charge to pay starting from
January 1, 2011.
A2A S.p.A. and other operators lodged the aforementioned appeal against this provision with
the High Court of Public Waters.
The Constitutional Court issued decision no. 339/2011, pursuant to the petition of the Council
of Ministers against articles 3, section 2 and 14, sections 3, 7, 8, 9 and 10, which declared the
unconstitutionality of the appealed provisions. As a result, section 4 and 5 of article 53-bis
remain in effect, which include the temporary continuation of the exercise for the licenses
expiring at year-end 2010 and the ability of the Regional Assembly to set forth the operating
conditions prevailing during this period, including from an economic perspective. These
sections were not appealed by the government, but by A2A S.p.A. with cross appeal in the
framework of the legal case promoted against the decision of the Regional Assembly at yearend 2010, before the TSAP, which has not yet issued its decision.
Changes to rules concerning CIP 6/92 conventions
Law No. 99/2009 (otherwise known as the Development Law) calls for the Ministry for
Economic Development to establish criteria to update the Avoided Cost of Fuel and
mechanisms to be offered to manufacturers for the early termination of CIP 6/92 Conventions
in order to cut the cost of maintaining said conventions.
For the time being, the regulation has been enacted by way of a Decree dated December 2,
2009, which applies solely to power stations fuelled by process fuels or residual or recovered
energy, or by similar systems powered by fossil fuels, and a Decree dated August 2, 2010
concerning the early termination of CIP 6 conventions for approximately 2,000 MW of similar
plants powered by fossil fuels.
Both decrees indicate how to calculate the respective amounts payable in the extent the
conventions continue until their expiry and the amounts to pay out in the event of early
termination; GSE is assigned the responsibility of checking if there is a positive difference
between the two and therefore a saving in absolute terms for consumers before the
convention can be terminated.
The types of plants for which provision has been made in legislation enacted to implement the
regulations laid down in the Development Law do not include plants supplied by renewable
energy sources and waste; the device will be implemented by way of procedures to be defined
after GSE, the Ministry for Economic Development and AEEG have further assessed the
situation.
Regulation of local public services
After the government enacted the Executive Order no. 168/10 and adopted the implementing
regulation of the provisions under article 23-bis of Law no. 133/08, completing the ruling
originally set forth and after the Decree Law no. 70/11, as converted into law with
amendments by Law 106/11, had innovated the regulation on participating in contract
announcements for the companies controlled by listed companies, the issue of local public
services of economic relevance was involved in Query 1 of the abrogating referendum of 12
and 13 June of that year, as well as proclaimed by the Executive Order no. 113 of July 18, 2011
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and by the subsequent article 4 of Legislative Decree no. 138/11, as converted into law with
amendments by Law 148/11.
Article 4 of the Decree Law no. 138/2011 (correcting the Summer Budget Measure, in effect as
from August 13, 2011), as converted with Law no. 148/2011 (in force as from September 17, 2011)
includes a reform of the provisions on local public services which, as pertains to the Group,
impacts on waste management (the integrated water service, the distribution of natural gas,
and the electricity distribution are excluded from the framework of application of the
regulation).
The law provides that the local authorities must verify the ability for competitive management
of economically relevant local public services ("local public services"), liberalizing all economic
activities according to the characteristics of universality and accessibility of the service,
limiting assignment of exclusive rights to the cases where market analyses suggest that private
economic initiative would not be appropriate to ensuring a service that responds to the needs
of the community.
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The verification described above must be done initially no later than twelve months after the
entry into force of Decree Law 138/2011 and periodically thereafter, according to the
respective ordinances of the local authorities. It must be done before granting and renewing
the services management. The resolution of the local authorities must be sent to the Antitrust
and Market Authority for the purpose of the annual report to Parliament.
Where necessary, local authorities make a preliminary definition of the public service
obligations, including compensation to companies providing the services, accounting for the
earnings from tariffs and within the budget available for this purpose. If the local authority
intends to assign exclusive rights, granting services management licenses to entrepreneurs or
companies in any form they are set up, even if 100% publicly-owned (unless there are specific
laws prohibiting this) identified by public, competitive procedures.
The regulation also outlines provisions relating to the methods of defining the announcement,
including in the particular case where the procedures also define the quality of shareholder, to
which a shareholding of not less than 40 percent is granted, and assignment of specific
operating duties related to management of the service.
Without prejudice to public ownership of the networks, management can be assigned to
private entities.
Upon expiration of the local public service management contract, or if it is terminated early,
the previous manager transfers to the new manager the capital goods and their
appurtenances necessary to continue the service, since these cannot be duplicated at
sustainable cost levels. The assigning body will identify the capital goods to transfer free of
charge. If the capital goods and object of transfer have not been fully depreciated when the
service is terminated, the new service manager shall pay the previous manager an amount
equal to the originally value not yet depreciated, net of public contributions that refer directly
to the goods (such amount shall be specified in the announcement). The provisions contained
in the industry regulations, including regional, in force at the date of the decree, and any other
agreements between the parties stipulated before the entry into force of this decree.
As regards anything specifically referring to the assignments to the Group companies, the
transitory regime of assignments not conforming to the provisions established by the decree set
forth, as provided by article 23-bis, that the direct assignments made at the date of October 1, 2003
to publicly owned companies already listed on the stock markets at that date and their subsidiaries
in accordance with article 2359 of the Civil Code cease at the expiration date set forth in the service
contract, as long as the public ownership is gradually decreased through the use of public
procedures or forms of private placement at qualified investors and industrial operators, at a
quota not more than 40 percent by June 30, 2013 and not more than 30 percent by 31 December,
2015; if these conditions do not occur, the assignments shall cease without further resolution by
the assigning authority at the dates of June 30, 2013 and December 31, 2015, respectively.
The companies, their subsidiaries, parent companies and associated companies, including
those not belonging to European Union member states, which in Italy or abroad, manage local
public services – either de facto, or by means of legal provision, administrative record, or
contract – by virtue of direct assignment, a private procedure, or pursuant to procedures due
to their nature as shareholder and assignment of specific operating duties connected to
management of the service, as well as the subjects to which management of the networks,
plant and other capital equipment of the local authorities, if separate from the services
distribution activity, cannot acquire the management of additional services in other territorial
areas, nor provide services or activities for other private or public authorities, whether
directly, or through parent companies or subsidiary or associated companies, or by
participating in announcements.
The ban remains in effect throughout the life of the management contract and does not apply
to companies listed on regulated markets and to companies directly or indirectly controlled
by these in accordance with article 2359 of the Italian Civil Code and the shareholder selected
as a result of the procedures pertaining to the quality of shareholder and attribution of
specific operating duties connected with management of the service.
The entities assigned to provide local public services can compete across the national
territory in the first announcement after termination of the service, carried out by means of
competitive, public procedures whose object are the services provided.
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This does not include assignment procedures already initiated before the entry into force of
the decree.
As regards possible market developments, note that article 4 states that if local authorities
must assign exclusive rights – which, as mentioned in the beginning, would be infrequent and
which would require explanation - the organizational tools available include assignment to the
third party selected through a public procedure, the assignment to mixed companies, whose
shareholder that provides functional activities have the prerequisites and are selected in
conformity with the matters indicated in detail in section 12 and assignment to in house
providers, only on the condition that the annual amount is worth 900 million euro.
Article 4 includes a large portion of the rules contained in the Executive Order no. 168/10,
which was invalidated pursuant to the abrogation of article 23-bis; it already referred to the
rule on issues of devolution of assets, but it is important to remember that it also includes the
issue of incompatibility, formation of decision-making commissions and special regulations
that in-house companies and mixed companies must adhere to as regards supplies and
personnel recruitment.
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By enacting Law no. 183 of November 12, 2011, the legislature also noted how the “Stability Law
2012” has brought additional changes to the regulation on economically relevant local public
services. Specifically, article 9 introduced a number of changes and additions to article 4 of
Decree Law 138 of August 13, 2011, in order to:
• establish a liberalized system of economically relevant local public services through a fully
competitive market;
• pursue objectives toward liberalization and privatization of the services according to the
provisions of article 4 of Decree Law no. 138/2011;
• employ a system of benchmarking to bring the gradual improvement in the quality and
efficiency of management of the services.
As noted in article 36, the new rules introduced will take effect from January 1, 2012.
The result of the consultation as regards the referendum Query no. 2, as proclaimed by
Executive Order no. 166 of July 18, 2011, led to the abrogation of article 154, section 1 of
Legislative Decree 152/2006 (described below), solely for the section highlighted below:
• “The tariff constitutes the consideration of the integrated water service and is calculated
by considering the quality of the water resource and the service provided, the required
works and the adjustments to make, the amount of the works management costs, the
sufficiency of the remuneration of the capital invested and the costs of the areas to
protect, as well as a portion of the operating costs of the local authority, so that the
investment and operating costs are covered completely and according to the principle of
cost recovery and "the polluter must for clean up". All the amounts of the tariffs of the
integrated water service are intended to be consideration."
For the purpose of defining the tariff for the integrated water service, the normalized method,
described by Ministerial Decree of August 1, 1996, delegated provision of article 13 of Law
34/96, shall continue to apply; this sets forth remuneration of the invested capital until which
time that the legislature issues the delegated decree set forth under article 154 thereof.
Note that, even in the event of generic application of the principles included in the EU Water
Framework Directive (2000/60/EC), article 9 of this law establishes the principle of
“recovering the costs of the water service” which must be achieved starting with an economic
analysis (Annex III) that considers the estimate of the investments associated with satisfaction
of the long term supply and demand.
Note that the inter-ministerial decrees that must be issued in implementation of article 154 of
Legislative Decree 152/2006 must account for the abrogation ordered by the referendum and
regulate the tariff in view of the additional factors also present in section 1:
• quality of the water resource;
• quality of the service provided;
• required works and adjustments to make;
• management costs;
• management costs of the protection areas;
• portion of the operating costs of the AATO (which should be shortly replaced by other
authorities).
Finally, the legislature has issued article 25, section 9.2 of Law 27, enacted on March 24, 2012
(also known as the Liberalization Decree) to amend section 34 of article 4 (Adjustment of the
regulation of local public services to the popular referendum and the European Union
regulation) of Law Decree 138 of August 13, 2011, converted with amendments into Law 148 of
September 16, 2011. Further to this change, companies operating in distribution of gas and
license-holders of the local public services by virtue of a direct assignment, a private selection
procedure, or according to section 12 (method for selecting the private partner and its
characteristics) will be excluded from future competitions for the service if not listed on
regulated markets and not definable as mixed companies according to section 12. These
companies can compete across Italy in competitions called in the last year of the license of
managed services, provided a public, competitive procedure is announced to assign the
service.
Article 21, section 19 of Decree Law 201 of December 6, 2011, converted into Law 214 of
December 22, 2011 (also known as “Save Italy”) transferred to the Authority all the regulation
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and control functions of the water services previously assigned to the national agency for
regulation and supervision of the water (Agency) which was simultaneously eliminated; also,
on the request of the minister of the environment and protection of the territory and the sea,
it devolved to a DPCM to adapt to recognition of the functions transferred by law and the
other functions to transfer.
Distribution of natural gas and electricity
As far as the distribution of electricity is concerned, article 1, paragraph 2 c) of Law no. 239/04
states that concessions are granted for electricity distribution on the basis of the
requirements of law, while at article 9 the Bersani Legislative Decree (no. 79/99) identifies the
Ministry for Economic Development as the body granting the local concession, comprising
one or more municipalities.
With respect to the natural gas distribution service, in safeguarding the provisions of
Legislative Decree no. 164/2000 and article 46-bis of Decree Law no. 159 of October 1, 2007,
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converted with amendments into Law no. 222 of November 29, 2007 regarding the
distribution of natural gas, Law no. 99/2009, the “Development Law”, defines the new
“Minimum Territorial Areas” for which tenders will be called to allocate the service to the
Ministry for Economic Development, in conjunction with the Ministry for Regional Affairs,
after consulting with the Joint Conference and the Electricity and Gas Authority.
The decree dated January 19, 2011 passed by the Ministry for Economic Development
identifying the 177 territorial areas and providing details region-by-region in Annex 1, was
published in the official journal of the Italian Republic on March 31, 2011. Nevertheless, the
precise listing of the single municipalities falling under the designated Territorial Areas was
deferred to a subsequent decree of the Ministry of Economic Development, issued on
October 18, 2011.
The criteria followed to identify the municipalities included in the individual Areas envisage a
maximum of 50 municipalities with at least 50,000 effective clients; furthermore, the metal
interconnection of plants is safeguarded and account is taken of population density and the
specifics of the area.
With reference to the ability to announce contract competitions to assign distribution
activities, with Legislative Decree no. 93 of June 1, 2011 (see also Third Energy Packet), article
24, section 4 specified that, for open procedures, all the competitions already publicly
announced at the date of entry into force of the Legislative Decree, or for restricted
procedures, whose letters of invitation had been sent by that date can be carried out based on
the methods applicable at the date of their announcement, provided that these documents
include the valuation criteria of the offer and the reimbursement value to the outgoing
manager.
On the other hand, as from June 29, 2011 - the date of entry into force of the aforementioned
decree - competitions that do not fall under the previous case in point must be called only by
Territorial Areas as under article 46-bis of Law 222 of 2007 and based on criteria applicable,
soon to be enacted.
The Regulation with which the Minister of Economic Development defined the “competition
criteria for assigning the distribution service” was signed on November 11, 2011; however, it
was published in the Official Gazette on January 27, 2012.
Finally, the Ministerial Decree dated April 21, 2011, which bears the provisions for governing
company effects related to the new methods of assigning gas distribution licenses (also
known as “Company Provision”) dictates the regulations aimed at safeguarding the jobs of the
personnel of the outgoing distribution company following the awarding of the service to
another company, together with a series of obligations for this latter company. The incoming
operator is required to hire at least a number of employees not exceeding the sum of the staff
at the plants forming part of the tender and a portion of the personnel with central functions
supporting distribution and measurement.
The protection envisaged for employees with the above hiring requirement consists in the
fact that they will be transferred directly and immediately to the company taking over, with
guarantees being made of their previous employment conditions of an economic nature and
long-term service schemes to which they are party. Suitable lay-off schemes will be applied for
those members of staff who on the basis of the above-mentioned conditions turn out to be in
excess to needs, without prejudice to the possibility of being rehired should the new company
seek additional personnel within two years of the date of the tender.
Finally, the above article 25, section 92 of Law 27 of March 24, 2012 (also known as the
Liberalization Decree Law) also applies in relation to gas distribution activity assignments.
Changes in Green Certificate market regulations and standards regarding incentives
for renewable energy production
The legislative decree implementing European Directive 2009/28/EC promoting the use of
energy from renewable sources took effect on March 29, 2011.
The main measures adopted by the decree can only be implemented though, after further
ministerial decrees have been issued (the majority of which by the Ministry for Economic
Development and the Ministry for the Environment), and for which six-monthly deadlines
exist , starting from the effective date of the legislation.
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Reform of renewable energy incentives – reference provisions when fully operational
The decree requires that production from renewable sources for plants entering use after
December 31, 2012 should be encouraged by:
• recognizing a feed-in tariff for plants of up to 5 MW of installed power (this threshold will
vary on the basis of the characteristics of the various renewable sources used);
• dutch auction mechanisms run by the GSE for plants having installed power exceeding the
above limits.
The feed-in tariff will be attributed exclusively to the output of new plants, including those
built following complete reconstruction, upgraded plants, limited to the additional
production available, and hybrid power plants, limited to the portion of energy produced from
renewable sources.
The incentive will also be allocated, “for power quotas”, to the production of plants which
have been fully or partially refurbished, up to a maximum of 25% for partial refurbishment and
50% for total refurbishment. The two portions can increase to 80% and 90% (respectively in
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the cases of partial and total refurbishment) for plants fuelled by biomasses, which includes
those fuelled by the biodegradable fraction of waste.
Reform of incentives to encourage renewable energy sources – transition to full
operational status
Production from renewable sources for plants entering use by December 31, 2012 will be
encouraged under the existing mechanisms. For the Green Certificate mechanism a gradual
reduction of the required portion is however envisaged, which will fall to zero by 2015, as well
as the repeal of the reference legislation (as per article 11 of the Bersani Decree): starting from
2016, producers from renewable sources will no longer receive the Certificates.
From 2012 to 2015, GSE will also withdraw unsold certificates issued for production powered by
renewable sources, at 78% of the price established by paragraph 148 of article 2 of the 2008
Finance Law. Over the same period of time, GSE will also withdraw the unsold certificates issued
for production powered by co-generation sources connected with district heating, at the
average market certificate price in 2010.
From January 1, 2012, imported electricity will not be subject to the requirement to purchase
Green Certificates only if it forms part of national energy saving objectives.
The implementation decrees for the incentive mechanisms planned for fully operational
systems (feed-in tariffs and Dutch auctions) will govern the transition from the old to the new
incentive mechanism, in particular as far as the right to use the Green Certificates for the
years after 2015 is concerned.
Support system for the production of thermal energy from renewable sources to
achieve energy efficiency
The decree provides incentives for work done to increase energy efficiency and produce
thermal energy from renewable sources through the following support systems:
a) subsidies with regard to natural gas tariffs for small-scale interventions;
b) issue of White Certificates for all work that does not fall under the afore-mentioned
point.
a) Incentives are awarded for the production of thermal energy from renewable sources and
the increase of energy efficiency of small plants installed after December 31, 2011. The
incentive aims to assure fair remuneration for investments, commensurate with energy
savings obtained from the work carried out, and cannot exceed a period of ten years from the
date this work ended.
b)Consistent with the provisions of article 7 of Legislative Decree no. 115 of May 30, 2008, the
means are established by which the obligations of the distribution companies as per article 9.1
of Legislative Decree no. 79 of 1999 and article 16.4 of Legislative Decree no. 164 of 2000 tie in
with the national energy efficiency objectives.
The decree links the period of entitlement to Green Certificates to the useful life of the
intervention and envisages that the energy savings realized by efficiency measures for the
electricity and gas networks may contribute to reaching the obligations of the distribution
companies without the issue of White Certificates.
Third Energy Package
On June 29, 2011, Legislative Decree no. 93/2011 implementing the Third Energy Package
Directives 2009/72/EC, 2009/73/EC and 2008/92/EC regarding community legislation on the
internal electricity and natural gas markets, a community procedure on the transparency of
the price of gas and electricity for the end industrial user and the repealing of Directives
2003/54/EC and 2003/55/EC.
The following is a summary of the main provisions of interest which have to be implemented
by the Regulator.
Provisions concerning accounting and functional unbundling
The provisions laid down in the decree for the two sectors concerning functional unbundling
for distribution activities, in substance follow those already in force, as contained in AEEG
Resolution no. 11/07.
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The decree establishes measures concerning accounting unbundling for the gas sector only, but
in this case too these relate to provisions already implemented pursuant to Resolution no. 11/07.
On November 3, 2011, the Authority issued ARG memo no. 153/11 in which it specifically
outlined the regulations for certifying companies that act as managers of natural gas
transport system or electricity transmission, also applicable to subjects that own sections of
the National Transmission Network. In December 2011, Mincio Trasmissione S.r.l. and Seasm
S.r.l. submitted the documentation requested to guarantee respect for the obligations to
Terna S.p.A., independence of the owner and confidentiality of the sensitive information.
Further provisions relating to the natural gas sector – protection of end customers
The eligibility of all customers is confirmed and categories of “vulnerable” end customers are
identified (domestic customers, hospitals, nursing homes, retirement homes and similar
institutions, for whom there is a requirement to assure supply with the highest safety level,
also at critical times.
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For these customers, AEEG will also continue on a transitional basis to determine the
reference prices.
In addition to the last resort service, if these customers find themselves without any supply and
lacking the requirements to activate such service (FUI), the distributor will guarantee the
balancing of its network in relation to withdrawal at that point for the period when physical
disconnection is not possible, in accordance with the terms and conditions established by AEEG,
which has to ensure that the distribution company receives adequate remuneration for the
service provided (in addition to the costs it incurs). The Electricity and Gas Authority has
incorporated the above provisions into its regulations by means of Resolutions ARG/gas no. 71/11
and no. 99/11 respectively, obliging distribution companies to provide a default service. Against
this order, ASPEM Spa and A2A Reti Gas Spa distribution companies have submitted a petition to
the Regional Administrative Court, which granted the suspension of the order until next June 6.
In addition, a period of up to three weeks is envisaged to satisfy requests for a change of
supplier, with the additional clarification that the switch-over must begin from the first day of
the month.
Further provisions relating to the electricity sector – protection of end customers
The regulation confirms the suitability of all end customers and takes up the measures already
adopted in Law no. 125/07 to confirm their reference framework (the setting up of protected
markets and safeguarding).
In addition, the three week term for the activation of a new supply after a switchover was also
introduced for the sale of electricity (the regulation is consistent with the provisions
introduced for natural gas).
Further provisions relating to the electricity sector – retail markets
The provisions as per article 41 require communication and branding policies for sales to
customers on the free market or to customers in protected markets not to create confusion
between the businesses or between the companies performing such activities.
In particular, commercially sensitive information concerning each activity must be disclosed
in a non-discriminatory way.
Finally, it is stated that in the case where a single company performs both activities, AEEG should
take the necessary steps to prevent that company from obtaining a competitive advantage from
the availability of data relating to the same user, both as far as end customers are concerned and
“from the standpoint of the assessments which the Authority makes as to the quality of the
service”, with respect to a corporate structure in which the two activities are entrusted to
different companies within the same group.
Powers of the Electricity and Gas Authority
The Decree allows companies sanctioned by AEEG to propose commitments which serve to
effectively pursue the interests protected by the regulations for which the violation was raised.
In this respect, with Resolution ARG/com no. 136/11, AEEG initiated a procedure to adopt the
new regulation governing the sanction process for which it is responsible and the procedural
means to assess these commitments.
Process risk
Risk of business interruptions
In each of the Group’s areas of activity, technologically and operationally complex production
sites are managed (electrical power plants, waste disposal plants, co-generation power plants,
distribution networks etc.), the malfunction/accidental damage of which may cause economic
loss and potentially damage their image due to the interruption of service.
Such risks are linked to diverse factors which for some types of plants, may be heightened by
changes in the competitive context and reference markets. Given that risks of plant
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breakdowns are considered an inevitable part of the business, and cannot be completely
eliminated. A2A S.p.A. has set up strategic measures to prevent or reduce the probability of
such risks, along with strategic actions to lessen the impact of such possible events.
To safeguard the Group’s assets, best practices are adopted and continually updated; routine
and preventive maintenance schedules (to prevent potentially critical situations, which are
also identified on the basis of specific engineering studies carried out be dedicated personnel)
are carried out; plants and networks are regularly inspected and serviced; and specific training
courses are organized for technical staff which includes instruction on existing operating
procedures. Furthermore, control instruments and the remote control of technical
parameters are widely used throughout plants to adequately monitor and immediately detect
possible faults, and wherever possible, using back-up components to ensure 24/7 production
processes.
The gradual adoption of the protection listed above is also required in the event of acquisition
of new production sites to foster alignment with Group standards.
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In 2011, the company continued in the upgrading process to further lower the risk of service
interruptions. This process has seen investment in both the Group’s assets (through specific
actions taken on critical plants and networks) and in the development of interconnections
between transmission grids to avoid the risk of congestion. Thanks to the launch of a system
of pooling on critical parts, monitoring and integration of the warehouse inventories of
system parts and the constant updates to the procedural documentation supporting
operations, the process for safely managing the systems is generally well supervised.
With reference to the Environmental Supply Chain, specific actions and tools are in use for
preventing the possible occurrence of the risk of stoppage of the services to give and dispose
of waste. Specific controls have been put in place to check for substances that would be
inappropriate in waste intended for waste to energy plant fuel.
To mitigate any possible negative effects on the Group’s reputation caused by a temporary
inability to obtain the waste, the option of mutual assistance between Group companies is
available.
With reference to the distribution networks, there are technical security tools and
contingency plans in place in the event of particularly serious natural events (for example,
earthquakes or weather events).
Operating methods aimed at influencing customers' consumption (in district heating) have
been used to some success in avoiding excessive peaks in the installed power, in certain time
bands, with the resulting possible critical points for optimal functioning of the networks.
Finally, to hedge residual risks, the Group has entered into insurance policies to cover direct
and indirect damages that could occur.
Environmental risk
The risks associated with events that impact the environment or the health of the population
living in areas affected by the Group's activities (the disposal of production waste, emissions
from production processes, waste collection and disposal management for example) are the
subject of increasingly close attention by public regulators and ever more stringent
legislation.
The Group pays constant attention to the prevention of such risks, and in particular has
adopted a policy document entitled "Policy for Quality, Environment and Safety of the A2A
Group", which is now the instrument that lays down the Group's approach to such questions.
This document, which is widely distributed both internally and externally, explains the values
underlying the Group's operations and which the Quality, Environment and Safety
Department is committed to spreading and sharing as guidance for the day-to-day work of all
concerned.
The purpose of the Quality, Environment and Safety Department is also to support top
management in establishing company policy in these areas, checking that it is implemented
properly in compliance with the rules applicable in all areas and in internal processes.
Operationally, the policy is implemented though an Environmental Management System
(EMAS) in Group entities that are more exposed to both direct and indirect potential
environmental impact. This system provides for a program of progressive extension and
upgrading to the standards of ISO14001 certification for the Group's main activities, as well as
the management of EMAS certification for the Group's main plants. In order to create a single
model, action is currently underway and nearing completion which will allow all Group
operating companies to have a single, integrated Quality, Environment and Safety system.
Organizational control units have also been set up, which amongst other things carry out
periodic environmental analyses and audits to monitor and prevent conduct that does not
comply with the environmental procedures established for all of the Group’s operating
companies.
In the perspective of having a constant evolution of the systems controlling environmental
risk, the Group joined ARPA Lombardia (Lombardy Regional Agency for the Protection of the
Environment), whose purpose is to improve the efficiency of the system to control the most
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significant emissions, also in light of technical developments in the sector, by connecting all
the Emission Monitoring Systems (SMEs) to a single control centre.
The A2A Group has taken out insurance against damage from both accidental and gradual
pollution in order to cover any residual environmental risk.
Each year the Group also publishes a Sustainability Report which reports key data and
information on environmental issues in order to raise public awareness. Starting in 2010, the
Sustainability Report is certified by independent auditors, who attest that it is in compliance
with the Sustainability Reporting Guidelines issued by the Global Reporting Initiative. Finally,
a process to further grow the Sustainability Report is being planned to respond to the
requirements of the DJSE sustainability index, which represents a reference parameter to
achieve excellence.
Information tecnology risks
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ICT infrastructure
The activities of the A2A Group are managed through complex ICT systems supporting the
main business processes in operational, administrative and commercial terms. The
inadequacy and upgrading of these systems compared to satisfy business needs, possible
interruptions making them unavailable and the inadequate handling of the aspects linked to
the integrity and confidentiality of information represent potential risk factors that the Group
mitigates through specific mechanisms implemented by the Information & Communication
Technology Management.
In 2011, the Group continued to integrate and consolidate its information systems also in light
of the changes in the corporate structure, introduced over the past few years. Reinforcing the
integration process, a program was defined to update the key information systems to support
administrative and commercial activities with a view to increasing their reliability and
integration.
In order to mitigate the potential risk of interruptions to strategic business processes, A2A
S.p.A. has installed back-up technological infrastructure to guarantee continued service in the
event of unexpected faults or breakdowns. The Group also has a Disaster Recovery service to
ensure the continuity of service and data via an alternative data processing centre, the
efficiency of which is regularly checked. To provide even greater protection, the Group has
completed the mutual recovery of the company’s central data processing centers in Milan and
Brescia.
Given the importance of the activities that are carried out every day on the Italian Power
Exchange, particular attention is given to protecting the systems interfacing with the market;
these systems have in fact been duplicated and are subject to specific management and
maintenance procedures to ensure their stability.
In order to make the software dedicated to Energy Trading and Risk Management activities
more appropriate to supporting a progressive increase in the operating complexity and
volumes treated, an integration policy was initiated to develop the current ETRM application
platform.
The confidentiality and security of information is guaranteed by specific measures
introduced by the Group, through both internal policies and tools to segregate access to
information, as well as specific contractual agreements signed with third-parties who may
need access to the information managed. Specific measures have also been introduced to
verify the alignment between organizational job descriptions and the technical
descriptions included in the Segregation of Duties implemented within the systems. In line
with this activity, it is planned to gradually adopt Identity Management and Access Control
tools so as to assure increasingly effective control over the processing of business-critical
information. A team dedicated to preventing and monitoring damaging attacks on the
company information systems was set up and specific applied solutions have been acquired
to manage and control IT security.
Human resource risk
Health and safety risk
The Group operates in a heterogeneous business context characterized by a strong
technology element and the presence of personnel at its plants and throughout its territory.
Certain Group activities are, by their nature, more exposed to the risk of “typically workrelated” accidents linked to the operational services in the territory and the performance of
technical services and activities at the plants.
Through the Quality, Environment and Safety Policy (which provides for a program to
upgrade the personnel safety management system to comply with ISO 14001 and OHSAS
18001 standards), the prevention measures adopted aim for a "zero risk" objective,
encouraging a constant rise in safety levels in the workplace.
A central Prevention and Protection Service has been set up as part of the Quality,
Environment and Safety Department in order to harmonize the safety and protection
197
objectives of Group companies and to monitor that these standards are also being followed by
contractors at both the pre-qualification and execution stages on site.
Control section monitoring the organizational structure will be further strengthened,
responsible amongst other things for carrying out specific inspections to monitor compliance
with the procedures to implement occupational health and safety legislation as well as
ongoing personnel training.
There is also a employee health monitoring program, conducted with the aid of a team of
doctors located in the various areas carrying out periodic assessments of employee health.
A system to record and report accidents has been set up to assist in the process of constantly
improving safety. In particular, specific indicators and increasing detailed information is being
used in periodic reporting to provide support in identifying the causes and the corrective and
mitigation actions to take.
198
0.6
Certification by the
Manager in charge of
preparing accounting
documents
Certification by the Manager in
charge of preparing accounting
documents pursuant to article
154-bis, paragraph 2 of Legislative
Decree no. 58/1998
The Manager in charge of preparing the corporate accounting documents of A2A S.p.A,
Stefano Micheli, declares pursuant to article 154-bis, paragraph 2 of the Consolidated Finance
Law (Italian Legislative Decree no. 58/1998) that the accounting information contained in this
Interim report on operations at March 31, 2012 corresponds to the underlying documents, the
books of account and the accounting entries.
200
Milan, 10 May 2012
Manager in charge of preparing
corporate accounting documents
Stefano Micheli

Interim report on operations – March 31, 2012

Transcription

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