Annual / Quarterly Financial Statement • May 6, 2019
Annual / Quarterly Financial Statement
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2018
Separate Financial Statements
2018
These Financial Statements are available at the website www.a2a.eu
| Overview of performance, financial conditions and net debt | 4 |
|---|---|
| 1 Financial statements | |
| Balance sheet | 10 |
| Income statement | 12 |
| Statement of comprehensive income | 13 |
| Cash-flow statement | 14 |
| Statement of changes in equity | 16 |
| 2 Financial statements pursuant | |
| to Consob Resolution no. 17221 of March 12, 2010 | |
| Balance sheet pursuant to Consob Resolution no. 17221 of March 12, 2010 | 20 |
| Income statement pursuant to Consob Resolution no. 17221 of March 12, 2010 | 22 |
| 3 Notes | |
| General information on A2A S.p.A. | 25 |
| Financial statements | 26 |
| Basis of preparation | 27 |
| Changes in international accounting standards | 28 |
| Accounting standards and policies | 32 |
| Notes to the balance sheet | 45 |
| Net debt | 65 |
| Notes to the income statement | 67 |
| Note on related party transactions | 83 |
| Consob Communication no. DEM/6064293 of July 28, 2006 | 86 |
| Guarantees and commitments with third parties | 88 |
| Other information | 89 |
| 1. Statement of changes in tangible assets | 116 |
|---|---|
| 2. Statement of changes in intangible assets | 118 |
| 3/a. Statement of changes in investments in subsidiaries | 120 |
| 3/b. Statement of changes in investments in affiliates | 122 |
| 3/c. Statement of changes in investments in other companies | 124 |
| 4/a. List of investments in subsidiaries | 126 |
| 4/b. List of investments in affiliates | 128 |
| Key data of the financial statements of the main subsidiaries and affiliates | |
| prepared according to IAS/IFRS (pursuant to art. 2429.4 of the Italian Civil Code) | 130 |
| Key data of the financial statements of the main subsidiaries and affiliates | |
| prepared according to ITALIAN GAAP (pursuant to art. 2429.4 of the Italian Civil Code) | 132 |
| Certification of the financial statements pursuant | |
| to article 154-bis, paragraph 5 of Legislative Decree no. 58/98 | 134 |
| 5 Independent Auditors' Report | 135 |
| 6 Report of the Board of Auditors | 141 |
This is a translation of the Italian original "Bilancio separato 2018" 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 at the website www.a2a.eu.
The Parent Company is responsible for strategic vision, planning, control, financial management and coordination of the A2A Group activities. It also provides services to support the business and operating activities of Group companies (administrative, legal, supply, and personnel management services, information technology and communications) in order to optimize the resources available and use existing expertise in the most efficient manner. These services are governed by intercompany service agreements.
Finally, A2A S.p.A. provides its subsidiaries with office space and operating areas, as well as related services.
A2A S.p.A. owns some hydroelectric plants in Valtellina, the hydroelectric unit in Calabria, as well as the hydroelectric plants of the units in Udine and Mese (former Edipower S.p.A.).
On July 1, 2018, the Merger and Demerger transactions were effective between ACSM-AGAM, Aspem, AEVV, Lario Reti Holding and A2A S.p.A., which constituted the Multiutility in the North as better described in the section "Significant events during the year" in the Report on Operations.
The items in the financial statements at December 31, 2018 of A2A S.p.A. include the effects of the following extraordinary transactions:
| Results millions of euro |
01 01 2018 12 31 2018 |
01 01 2017 12 31 2017 |
Changes |
|---|---|---|---|
| Revenues | |||
| Revenues from the sale of goods and services | 3,742.6 | 3,037.5 | 705.1 |
| Other operating income | 83.0 | 51.8 | 31.2 |
| Total revenues | 3,825.6 | 3,089.3 | 736.3 |
| Operating expenses | (3,515.9) | (2,787.9) | (728.0) |
| Labour costs | (134.5) | (127.8) | (6.7) |
| Gross operating income - EBITDA | 175.2 | 173.6 | 1.6 |
| Depreciation, amortization and write-downs | (87.5) | (81.3) | (6.2) |
| Provisions | (2.9) | (6.4) | 3.5 |
| Net operating income - EBIT | 84.8 | 85.9 | (1.1) |
| Result from non-recurring transactions | 5.7 | 0.1 | 5.6 |
| Financial balance | 276.1 | 239.4 | 36.7 |
| Result before taxes | 366.6 | 325.4 | 41.2 |
| Income taxes | (14.1) | (2.1) | (12.0) |
| Result after taxes from operating activities | 352.5 | 323.3 | 29.2 |
| Net result from discontinued operations | 20.6 | (54.8) | 75.4 |
| Net result of the year | 373.1 | 268.5 | 104.6 |
In the year in question A2A S.p.A. shows revenues for a total of 3,825.6 million euro (3,089.3 million euro in the previous year). Sales revenues (3,578.0 million euro) mainly refer to electricity sales to wholesalers, institutional operators, even on IPEX markets (Italian Power Exchange) and subsidiaries, sales of gas and fuels to third parties and subsidiaries and the sale of environmental certificates. Revenues from services (164.6 million euro) mainly refer to services to subsidiaries of an administrative, fiscal, legal, managerial and technical nature. Other revenues (83.0 million euro) include incentives on net production from renewable sources.
Operating expenses amounted to 3,515.9 million euro (2,787.9 million euro at December 31, 2017) and refer to costs for raw materials (2,983.3 million euro) related primarily to purchases of energy and fuels, both for electricity production and for resale, purchases of materials and environmental certificates; service costs (220.5 million euro), which refer to the costs for the transport and storage of natural gas, costs for plant maintenance as well as for professional and technical services costs and other operating costs (312.1 million euro), which include the contracting of thermoelectric production plants "tolling agreement" of both subsidiaries and associates, as well as water derivation fees, damages and penalties.
Labour costs amounted to 134.5 million euro (127.8 million euro at December 31, 2017), the increase is mainly attributable to the increase in the company's workforce.
Due to the dynamics mentioned above the Gross Operating Margin amounted to 175.2 million euro (173.6 million euro at December 31, 2017).
"Amortization and depreciation, provisions and write-downs" of the year amounted to 90.4 million euro (87.7 million euro at December 31, 2017) and include amortisation, depreciation and write-downs of the tangible and intangible assets for 87.5 million euro (81.3 million euro at December 31, 2017) and provisions for 2.9 million euro (6.4 million euro at December 31, 2017), mainly related to provisions for risks.
"Net operating income" was positive for 84.8 million euro (positive for 85.9 million euro at December 31, 2017).
The "Result from non-recurring transactions" amounted to 5.7 million euro and includes the gain deriving from the sale of the investment held in the company Rudnik Uglja ad Pljevlja. At December 31, 2017, this item had a balance of 0.1 million euro and included the income deriving from the sale of the business segment relating to "Security Control Room and Inspection Service" to the subsidiary A2A Security S.c.p.a..
Financial operations reported a positive balance of 276.1 million euro (positive for 239.4 million euro at December 31, 2017). This item includes dividends from investees for 366.8 million euro (345.8 million euro at December 31, 2017), impairment of equity investments for 73.1 million euro relative to A2A Energiefuture S.p.A. (1.5 million euro in the previous year), the measurement of the exchange deriving from the transaction on the equity investment of ACSM-AGAM S.p.A. (76.3 million euro) net of the capital loss deriving from the restoration of the float on the stock exchange of its shares (-7.9 million euro), as well as net financial expenses of 86.0 million euro (104.9 million euro at December 31, 2017).
The Result before taxes was positive for 366.6 million euro (positive for 325.4 million euro at December 31, 2017).
Income taxes were 14.1 million euro (2.1 million euro at December 31, 2017).
Taxation mainly derives from the booking of: i) current tax calculated on taxable income for IRES and IRAP; ii) reduction in deferred tax liabilities following reversal of the temporary differences from previous years, partly offset by a reduction in prepaid tax, also due to the reversal of temporary differences from previous years.
The "Net result from discontinued operations" was positive for 20.6 million euro (negative for 54.8 million euro at December 31, 2017) and includes for 15.8 million euro the collection of dividends by the investee company EPCG and for 4.8 million euro the discounting proceeds to adjust the value of equity investment of EPCG at fair value following the renegotiation of the agreement with the Government of Montenegro, and approved by the same on April 27, 2018, which provides for the execution of the put option exercised by A2A S.p.A. on July 3, 2017 in four tranches in the period between May 1, 2018 and July 31, 2019, with an acceleration compared to the terms set by the Shareholders' Agreement of August 29, 2016 (i.e. 7 tranches from May 1, 2018 to May 1, 2024). In the previous year, this item had a negative value of 54.8 million euro that was related for 29.0 million euro to the impairment and 25.8 million euro to the discounting expenses for the equity investment held in EPCG, so as to adjust the value to fair value.
1 Financial statements
2 Financial statements pursuant to Consob Resolution no. 17221 of March 12, 2010
3 Notes
4 Attachments
5 Independent Auditors' Report
The "Net result of the year" was positive for 373.1 million euro (268.5 million euro at December 31, 2017).
* * *
Investments for the year amounted to 51.8 million euro and in particular concerned work on hydroelectric plants, improvements to third party assets, investments on the Group's IT systems, as well as investments in shareholdings, mainly in connection with the business combination with ACSM-AGAM S.p.A, as further described in the paragraph "Significant events during the year" of the Report On Operations.
| Balance sheet and financial position millions of euro |
12 31 2018 | 12 31 2017 | Changes |
|---|---|---|---|
| CAPITAL EMPLOYED | |||
| Net fixed capital | 4,556.1 | 4,613.9 | (57.8) |
| - Tangible assets | 1,038.9 | 1,118.6 | (79.7) |
| - Intangible assets | 80.2 | 95.2 | (15.0) |
| - Shareholdings and other non-current financial assets (*) | 3,703.5 | 3,657.2 | 46.3 |
| - Other non-current assets/liabilities (*) | (9.9) | (9.9) | - |
| - Prepaid/deferred tax assets/liabilities | 66.0 | 61.2 | 4.8 |
| - Provisions for risks, charges and liabilities for landfills | (180.3) | (164.9) | (15.4) |
| - Employee benefits | (142.3) | (143.5) | 1.2 |
| of which with counter-entry to equity | (35.2) | (29.2) | |
| Working capital | 52.5 | (49.3) | 101.8 |
| - Inventories | 94.7 | 78.6 | 16.1 |
| - Trade receivables and other current assets (*) | 977.6 | 716.7 | 260.9 |
| - Trade payables and other current liabilities (*) | (1,026.5) | (931.7) | (94.8) |
| - Current tax assets/tax liabilities | 6.7 | 87.1 | (80.4) |
| of which with counter-entry to equity | 10.1 | 1.4 | |
| Assets/liabilities held for sale (*) | 109.0 | 224.2 | (115.2) |
| of which with counter-entry to equity | - | - | |
| TOTAL CAPITAL EMPLOYED | 4,717.6 | 4,788.8 | (71.2) |
| SOURCES OF FUNDS | |||
| Equity | 2,635.6 | 2,430.0 | 205.6 |
| Total financial position beyond one year | 2,233.4 | 3,339.2 | (1,105.8) |
| Total financial position within one year | (151.4) | (980.4) | 829.0 |
| Total net financial position | 2,082.0 | 2,358.8 | (276.8) |
| of which with counter-entry to equity | (14.7) | (24.2) | |
| TOTAL SOURCES | 4,717.6 | 4,788.8 | (71.2) |
(*) Excluding balances included in the Net Financial Position.
"Capital employed" totalled 4,717.6 million euro at December 31, 2018, partly covered by "Equity" in the amount of 2,635.6 million euro and net debt of 2,082.0 million euro; provided below are the main items that make up the Capital Employed.
Net fixed capital amounted to 4,556.1 million euro and includes:
intangible assets for 80.2 million euro that include software licenses and development projects of IT systems, goodwill and inventories of the environmental certificates related to the industrial portfolio;
shareholdings and other non-current financial assets for 3,703.5 million euro, which include shareholdings in subsidiaries (3,700.5 million euro), including the business combination with ACSM-AGAM S.p.A., in associates (2.1 million euro) and other minor shareholdings (0.9 million euro);
Working capital amounted to 52.5 million euro and includes:
Assets/liabilities held for sale amounted to 109.0 million euro and refer to the fair value of the investment in EPCG, 18.70% held by A2A S.p.A. (41.75% at December 31, 2017).
The decrease compared to December 31, 2017 is due to the collections made during the year under review under a new agreement negotiated with the Government of Montenegro, and approved by the same on April 27, 2018.
The Net debt of 2,082.0 million euro, improved by 276.8 million euro compared to December 31, 2017 and includes the effect of the non-recurring transactions during the year, which was positive by 0.1 million euro. Operations during the year generated resources of 494.8 million euro, partly offset by the resources absorbed by net investments in tangible and intangible assets and shareholdings of 51.8 million euro and dividends paid to shareholders of 179.7 million euro.
1 Financial statements
2 Financial statements pursuant to Consob Resolution no. 17221 of March 12, 2010
3 Notes
4 Attachments
5 Independent Auditors' Report
| millions of euro | 12 31 2018 | 12 31 2017 |
|---|---|---|
| NET FINANCIAL POSITION AT THE START OF THE YEAR | (2,358.8) | (2,726.9) |
| CONTRIBUTIONS FROM NON-RECURRING TRANSACTIONS | 0.1 | 2.8 |
| Result of the year (**) | 298.8 | 268.0 |
| Amortization and depreciation | 83.3 | 81.3 |
| Net interest for the year | 86.1 | 106.0 |
| Net interest paid | (90.0) | (74.0) |
| Net taxes paid/receivables for taxes paid | (6.2) | 23.4 |
| Write-downs on shareholdings and fixed assets | 77.4 | 1.9 |
| Change in the assets and liabilities (*) | 45.4 | 206.2 |
| Cash flow from operating activities | 494.8 | 612.8 |
| Cash flow from investment activities | (51.8) | (49.3) |
| Dividends paid | (179.7) | (153.0) |
| Other changes | 3.9 | (32.0) |
| Changes in financial assets/liabilities with counter-entry to equity | 9.5 | (13.2) |
| NET FINANCIAL POSITION AT THE END OF THE YEAR | (2,082.0) | (2,358.8) |
(*) Excluding balances with counter-entry to equity.
(**) Result of the year is exposed net of gains on shareholdings' and fixed assets' disposals.
| millions of euro | 12 31 2018 | 12 31 2017 |
|---|---|---|
| Medium/long-term debt | 2,849.4 | 3,411.4 |
| Medium/long-term financial receivables | (616.0) | (72.2) |
| Total non-current net debt | 2,233.4 | 3,339.2 |
| Short-term debt | 1,019.9 | 510.1 |
| Short-term financial receivables | (661.4) | (878.6) |
| Cash and cash equivalents | (509.9) | (611.9) |
| Total current net debt | (151.4) | (980.4) |
| Net debt | 2,082.0 | 2,358.8 |
1 Financial statements
| amounts in euro | Note | 12 31 2018 | 12 31 2017 |
|---|---|---|---|
| NON-CURRENT ASSETS | |||
| Tangible assets | 1 | 1,038,947,161 | 1,118,635,048 |
| Intangible assets | 2 | 80,249,610 | 95,200,291 |
| Shareholdings | 3 | 3,702,584,390 | 3,653,742,408 |
| Other non-current financial assets | 3 | 609,165,937 | 75,696,307 |
| Deferred tax assets | 4 | 65,999,810 | 61,172,835 |
| Other non-current assets | 5 | 8,401,311 | 604,072 |
| Total non-current assets | 5,505,348,219 | 5,005,050,961 | |
| CURRENT ASSETS | |||
| Inventories | 6 | 94,736,836 | 78,566,348 |
| Trade receivables | 7 | 717,191,968 | 551,660,011 |
| Other current assets | 8 | 260,381,762 | 164,991,718 |
| Current financial assets | 9 | 661,376,728 | 878,625,624 |
| Current tax assets | 10 | 35,542,548 | 87,134,265 |
| Cash and cash equivalents | 11 | 509,947,205 | 611,941,606 |
| Total current assets | 2,279,177,047 | 2,372,919,572 | |
| NON-CURRENT ASSETS HELD FOR SALE | 12 | 108,960,169 | 224,186,503 |
| TOTAL ASSETS | 7,893,485,435 | 7,602,157,036 |
(1) As required by Consob Resolution no. 17221 of March 12, 2010, the effects of relations with related parties in the separate financial statements are highlighted in the accounting statements in section 2 and commented on in Note 36. Significant non-recurring events and transactions in the separate financial statements are provided in Note 37 pursuant to Consob Communication DEM/6064293 of July 28, 2006.
| amounts in euro | Note | 12 31 2018 | 12 31 2017 |
|---|---|---|---|
| EQUITY | |||
| Share capital | 13 | 1,629,110,744 | 1,629,110,744 |
| (Treasury shares) | 14 | (53,660,996) | (53,660,996) |
| Reserves | 15 | 687,046,600 | 586,135,725 |
| Net result of the year | 16 | 373,091,108 | 268,461,294 |
| Total equity | 2,635,587,456 | 2,430,046,767 | |
| LIABILITIES | |||
| Non-current liabilities | |||
| Non-current financial liabilities | 17 | 2,841,406,962 | 3,392,948,136 143,512,115 |
| Employee benefits | 18 | 142,277,393 | |
| Provisions for risks, charges and liabilities for landfills | 19 | 180,304,233 | 164,897,725 |
| Other non-current liabilities | 20 | 18,622,107 | 28,945,973 |
| Total non-current liabilities | 3,182,610,695 | 3,730,303,949 | |
| Current liabilities | |||
| Trade payables | 21 | 776,005,156 | 689,579,544 |
| Other current liabilities | 21 | 250,475,901 | 242,079,728 |
| Current financial liabilities | 22 | 1,019,911,736 | 510,147,048 |
| Tax liabilities | 23 | 28,894,491 | - |
| Total current liabilities | 2,075,287,284 | 1,441,806,320 | |
| Total liabilities | 5,257,897,979 | 5,172,110,269 | |
| LIABILITIES ASSOCIATED WITH NON-CURRENT ASSETS HELD FOR SALE | - | - | |
| TOTAL EQUITY AND LIABILITIES | 7,893,485,435 | 7,602,157,036 |
Overview of performance, financial conditions and net debt
Income statement Statement of comprehensive income Cash-flow statement Statement of changes in equity
2 Financial statements pursuant to Consob Resolution no. 17221 of March 12, 2010
3 Notes
4 Attachments
5 Independent Auditors' Report
| amounts in euro | Note | 01 01 2018 12 31 2018 |
01 01 2017 12 31 2017 |
|---|---|---|---|
| Revenues | |||
| Revenues from the sale of goods and services | 3,742,583,396 | 3,037,519,957 | |
| Other operating income | 83,044,739 | 51,791,339 | |
| Total revenues | 25 | 3,825,628,135 | 3,089,311,296 |
| Operating expenses | |||
| Expenses for raw materials and services | 3,203,793,757 | 2,486,302,113 | |
| Other operating expenses | 312,079,537 | 301,574,408 | |
| Total operating expenses | 26 | 3,515,873,294 | 2,787,876,521 |
| Labour costs | 27 | 134,536,395 | 127,819,310 |
| Gross operating income - EBITDA | 28 | 175,218,446 | 173,615,465 |
| Depreciation, amortization, provisions and write-downs | 29 | 90,452,044 | 87,733,466 |
| Net operating income - EBIT | 30 | 84,766,402 | 85,881,999 |
| Result from non-recurring transactions | 31 | 5,723,742 | 156,721 |
| Financial balance | |||
| Financial income | 460,220,389 | 361,022,925 | |
| Financial expenses | 184,096,679 | 121,591,560 | |
| Result from disposal of other shareholdings | - | - | |
| Total financial balance | 32 | 276,123,710 | 239,431,365 |
| Result before taxes | 366,613,854 | 325,470,085 | |
| Income taxes | 33 | 14,172,353 | 2,177,578 |
| Result after taxes from operating activities | 352,441,501 | 323,292,507 | |
| Net result from discontinued operations | 34 | 20,649,607 | (54,831,213) |
| NET RESULT OF THE YEAR | 35 | 373,091,108 | 268,461,294 |
(1) As required by Consob Resolution no. 17221 of March 12, 2010, the effects of relations with related parties in the separate financial statements are highlighted in the accounting statements in section 2 and commented on in Note 36. Significant non-recurring events and transactions in the separate financial statements are provided in Note 37 pursuant to Consob Communication DEM/6064293 of July 28, 2006.
| amounts in euro | 12 31 2018 | 12 31 2017 |
|---|---|---|
| Net result of the year (A) | 373,091,108 | 268,461,294 |
| Actuarial gains/(losses) on Employee's Benefits booked in the Net equity | (2,276,775) | 17,889,911 |
| Tax effect of other actuarial gains/(losses) | 692,421 | (5,332,920) |
| Total actuarial gains/(losses) net of the tax effect (B) | (1,584,354) | 12,556,991 |
| Effective part of gains/(losses) on cash flow hedge | 19,453,212 | (19,968,842) |
| Tax effect of other gains/(losses) | (4,737,540) | 5,484,777 |
| Total other gains/(losses) net of the tax effect (C) | 14,715,672 | (14,484,065) |
| Gains/(losses) from recalculation of availiable for sale | - | - |
| Tax effect of other gains/(losses) | - | - |
| Gains/(losses) from the restatement of financial assets available for sale (D) | - | - |
| Total comprehensive result ( A ) + ( B ) + ( C ) + ( D ) | 386,222,426 | 266,534,220 |
With the exception of the actuarial effects on employee benefits recognized in equity, the other effects stated above will be reclassified to the Income Statement in subsequent years.
Overview of performance, financial conditions and net debt
Balance sheet
Statement of
Cash-flow statement Statement of changes in equity
2 Financial statements pursuant to Consob Resolution no. 17221 of March 12, 2010
3 Notes
4 Attachments
5 Independent Auditors' Report
| amounts in euro | 12 31 2018 | 12 31 2017 |
|---|---|---|
| CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE YEAR | 611,941,606 | 278,207,406 |
| Operating activities | ||
| Result of the year (**) | 298,845,667 | 268,044,777 |
| Tangible assets depreciation | 72,868,919 | 72,961,284 |
| Intangible assets amortization | 10,420,174 | 8,299,165 |
| Fixed assets write-downs | 4,317,618 | 423,449 |
| Shareholdings write-downs | 73,118,996 | 1,458,940 |
| Net financial interests | 86,063,433 | 106,326,911 |
| Net financial interests paid | (90,002,400) | (74,043,539) |
| Net taxes paid/receivables for disposed taxes (a) | (6,246,891) | 23,433,395 |
| Gross change in assets and liabilities (b) | 45,451,234 | 206,172,308 |
| Total change of assets and liabilities (a+b) (*) | 39,204,343 | 229,605,703 |
| Cash flow from operating activities | 494,836,750 | 613,076,690 |
| Investment activities | ||
| Investments in tangible assets | (22,021,758) | (24,753,413) |
| Investments in intangible assets and goodwill | (22,552,233) | (17,617,453) |
| Investments in shareholdings and securities (*) | (20,087,607) | (7,563,057) |
| Disposal of fixed assets and shareholdings | 12,849,050 | 660,869 |
| Cash flow from investment activities | (51,812,548) | (49,273,054) |
| FREE CASH FLOW | 443,024,202 | 563,803,636 |
(*) Cleared of balances in return of shareholders' equity and other balance sheet items.
(**) Net Result is exposed net of gains on shareholdings' and fixed assets' disposals.
Balance sheet
Income statement Statement of comprehensive
Statement of changes in equity
2 Financial statements pursuant to Consob Resolution no. 17221 of March 12, 2010
3 Notes
4 Attachments
5 Independent Auditors' Report
| amounts in euro | 12 31 2018 | 12 31 2017 |
|---|---|---|
| Financing activities | ||
| Changes in financial assets | ||
| Monetary changes: | ||
| Change in intercompany currency accounts | 286,180,791 | (482,471,142) |
| Issuance of loans | (611,257,260) | (86,845,341) |
| Proceeds from loans | 10,538,593 | 403,389,260 |
| Other monetary changes | - | 200,000 |
| Total monetary changes | (314,537,876) | (165,727,223) |
| Non-monetary changes: | ||
| Other non-monetary changes | (4,210,394) | 3,144,944 |
| Total non-monetary changes | (4,210,394) | 3,144,944 |
| Total changes in financial assets (*) | (318,748,270) | (162,582,279) |
| Changes in financial liabilities | ||
| Monetary changes: | ||
| Change in intercompany currency accounts | 3,215,599 | (154,781,888) |
| Borrowings/bond issued | 30,000,000 | 742,000,000 |
| Repayment of borrowings/bond | (77,695,807) | (476,886,822) |
| Dividends paid | (179,710,827) | (152,971,846) |
| Other monetary changes | (2,651,742) | 2,649,117 |
| Total monetary changes | (226,842,777) | (39,991,439) |
| Non-monetary changes: | ||
| Amortized cost valuations | 3,237,235 | (1,826,939) |
| Other non-monetary changes | (2,664,791) | (25,668,779) |
| Total non-monetary changes | 572,444 | (27,495,718) |
| Total changes in financial liabilities (*) | (226,270,333) | (67,487,157) |
| Cash flow from financing activities | (545,018,603) | (230,069,436) |
| CHANGE IN CASH AND CASH EQUIVALENTS | (101,994,401) | 333,734,200 |
| CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR | 509,947,205 | 611,941,606 |
| Description | Share Capital |
Treasury Shares |
|
|---|---|---|---|
| amounts in euro | Note 13 | Note 14 | |
| Equity at December 31, 2016 | 1,629,110,744 | (53,660,996) | |
| Allocation of 2016 net result | |||
| Ordinary dividend distribution | |||
| Contribution from non-recurring transactions | |||
| Cash flow hedge reserves (*) | |||
| IAS 19 reserve "Employee Benefits" (*) | |||
| Other changes | |||
| Net result of the year (*) | |||
| Equity at December 31, 2017 | 1,629,110,744 | (53,660,996) | |
| IFRS9 - FTA | |||
| Equity at January 1, 2018 | 1,629,110,744 | (53,660,996) | |
| Allocation of 2017 net result | |||
| Ordinary dividend distribution | |||
| Cash flow hedge reserves (*) | |||
| IAS 19 reserve "Employee Benefits" (*) | |||
| Other changes | |||
| Net result of the year (*) | |||
| Equity at December 31, 2018 | 1,629,110,744 | (53,660,996) | |
| Availability of Equity Reserves | |||
| A: For share capital increase | |||
| B: To cover losses | |||
| C: For distribution to Shareholders - available for euro 407,031,497 (**) | |||
| D: Reserves not avaliable |
(*) These form part of the statement of comprehensive income.
(**) Of which to fyscal moderate suspension equal to euro 124,783,022.
Overview of performance, financial conditions and net debt
Balance sheet Income statement Statement of comprehensive income Cash-flow statement Statement of changes in equity
2 Financial statements pursuant to Consob Resolution no.
17221 of March
12, 2010 3 Notes
4 Attachments
5 Independent Auditors' Report
| Total equity |
Net result of the year |
Available for sale Reserve |
Cash Flow hedge Reserve |
Reserves |
|---|---|---|---|---|
| Note 16 | Note 15 | Note 15 | Note 15 | |
| 2,316,484,378 | 274,049,714 | (462,146) | (2,602,562) | 470,049,624 |
| (274,049,714) | 274,049,714 | |||
| (152,971,846) | (152,971,846) | |||
| 156,721 | 156,721 | |||
| (14,484,064) | (14,484,064) | |||
| 12,556,991 | 12,556,991 | |||
| 14 | 14 | |||
| 268,304,573 | 268,304,573 | |||
| 2,430,046,767 | 268,461,294 | (462,146) | (17,086,626) | 603,684,497 |
| (970,910) | (970,910) | |||
| 2,429,075,857 | 268,461,294 | (462,146) | (17,086,626) | 602,713,587 |
| (268,461,294) | 268,461,294 | |||
| (179,710,827) | (179,710,827) | |||
| 14,715,672 | 14,715,672 | |||
| (1,584,354) | (1,584,354) | |||
| 373,091,108 | 373,091,108 | |||
| 2,635,587,456 | 373,091,108 | (462,146) | (2,370,954) | 689,879,700 |
| D | A-B-C | |||
2 Financial statements pursuant to Consob Resolution no. 17221 of March 12, 2010
| amounts in euro | 12 31 2018 | of which Related Parties (note 36) |
12 31 2017 | of which Related Parties (note 36) |
|---|---|---|---|---|
| NON-CURRENT ASSETS | ||||
| Tangible assets | 1,038,947,161 | 1,118,635,048 | ||
| Intangible assets | 80,249,610 | 95,200,291 | ||
| Shareholdings | 3,702,584,390 | 3,702,584,390 | 3,653,742,408 | 3,653,742,408 |
| Other non-current financial assets | 609,165,937 | 608,312,150 | 75,696,307 | 72,258,893 |
| Deferred tax assets | 65,999,810 | 61,172,835 | ||
| Other non-current assets | 8,401,311 | 604,072 | ||
| Total non-current assets | 5,505,348,219 | 5,005,050,961 | ||
| CURRENT ASSETS | ||||
| Inventories | 94,736,836 | 78,566,348 | ||
| Trade receivables | 717,191,968 | 234,474,296 | 551,660,011 | 122,996,348 |
| Other current assets | 260,381,762 | 60,626,739 | 164,991,718 | 40,874,836 |
| Current financial assets | 661,376,728 | 660,176,728 | 878,625,624 | 877,425,624 |
| Current tax assets | 35,542,548 | 87,134,265 | ||
| Cash and cash equivalents | 509,947,205 | 611,941,606 | ||
| Total current assets | 2,279,177,047 | 2,372,919,572 | ||
| NON-CURRENT ASSETS HELD FOR SALE | 108,960,169 | 108,960,169 | 224,186,503 | 224,186,503 |
| amounts in euro | 12 31 2018 | of which Related Parties (note 36) |
12 31 2017 | of which Related Parties (note 36) |
|---|---|---|---|---|
| EQUITY | ||||
| Share capital | 1,629,110,744 | 1,629,110,744 | ||
| (Treasury shares) | (53,660,996) | (53,660,996) | ||
| Reserves | 687,046,600 | 586,135,725 | ||
| Net result of the year | 373,091,108 | 268,461,294 | ||
| Total equity | 2,635,587,456 | 2,430,046,767 | ||
| LIABILITIES | ||||
| Non-current liabilities | ||||
| Non-current financial liabilities | 2,841,406,962 | 3,392,948,136 | ||
| Employee benefits | 142,277,393 | 143,512,115 | ||
| Provisions for risks, charges and liabilities for landfills |
180,304,233 | 83,000,656 | 164,897,725 | 85,562,099 |
| Other non-current liabilities | 18,622,107 | 28,945,973 | ||
| Total non-current liabilities | 3,182,610,695 | 3,730,303,949 | ||
| Current liabilities | ||||
| Trade payables | 776,005,156 | 98,608,894 | 689,579,544 | 76,991,347 |
| Other current liabilities | 250,475,901 | 34,114,640 | 242,079,728 | 73,865,565 |
| Current financial liabilities | 1,019,911,736 | 411,429,595 | 510,147,048 | 414,817,753 |
| Tax liabilities | 28,894,491 | - | ||
| Total current liabilities | 2,075,287,284 | 1,441,806,320 | ||
| Total liabilities | 5,257,897,979 | 5,172,110,269 | ||
| LIABILITIES ASSOCIATED WITH NON-CURRENT ASSETS HELD FOR SALE |
- | - | ||
| TOTAL EQUITY AND LIABILITIES | 7,893,485,435 | 7,602,157,036 |
Overview of performance, financial conditions and net debt
1 Financial statements
Resolution no. 17221 of March 12, 2010
Balance sheet pursuant to Consob Resolution no. 17221 of March 12, 2010
Income statement pursuant to Consob Resolution no. 17221 of March 12, 2010
3 Notes
4 Attachments
5 Independent Auditors' Report
| amounts in euro | 01 01 2018 12 31 2018 |
of which Related Parties (note 36) |
01 01 2017 12 31 2017 |
of which Related Parties (note 36) |
|---|---|---|---|---|
| Revenues | ||||
| Revenues from the sale of goods and services | 3,742,583,396 | 1,193,615,688 | 3,037,519,957 | 824,056,295 |
| Other operating income | 83,044,739 | 23,939,509 | 51,791,339 | 7,987,565 |
| Total revenues | 3,825,628,135 | 3,089,311,296 | ||
| Operating expenses | ||||
| Expenses for raw materials and services | 3,203,793,757 | 182,341,644 | 2,486,302,113 | 111,509,436 |
| Other operating expenses | 312,079,537 | 208,425,315 | 301,574,408 | 183,350,873 |
| Total operating expenses | 3,515,873,294 | 2,787,876,521 | ||
| Labour costs | 134,536,395 | 1,696,754 | 127,819,310 | 1,787,280 |
| Gross operating income - EBITDA | 175,218,446 | 173,615,465 | ||
| Depreciation, amortization, provisions and write-downs |
90,452,044 | 87,733,466 | ||
| Net operating income - EBIT | 84,766,402 | 85,881,999 | ||
| Result from non-recurring transactions | 5,723,742 | 5,723,742 | 156,721 | |
| Financial balance | ||||
| Financial income | 460,220,389 | 456,524,317 | 361,022,925 | 356,932,677 |
| Financial expenses | 184,096,679 | 80,950,478 | 121,591,560 | 1,498,808 |
| Result from disposal of other shareholdings | - | - | ||
| Total financial balance | 276,123,710 | 239,431,365 | ||
| Result before taxes | 366,613,854 | 325,470,085 | ||
| Income taxes | 14,172,353 | 2,177,578 | ||
| Result after taxes from operating activities | 352,441,501 | 323,292,507 | ||
| Net result from discontinued operations | 20,649,607 | 20,649,607 | (54,831,213) | (54,831,213) |
| NET RESULT OF THE YEAR | 373,091,108 | 268,461,294 |
A2A S.p.A. is a company with legal personality organized under the laws of the Italian Republic which operates, also through its subsidiaries ("Group"), both in Italy and abroad.
In particular, as the "Parent Company", A2A S.p.A. is responsible for the guiding strategy, administration, planning and control, financial management and coordinating the activities of the A2A Group.
Therefore, Group companies benefit from administrative, tax, legal, personnel management, procurement and communication services, so as to optimize the resources that are available within the Group and to use the existing known how in a cost-effective way.
The A2A Group mainly operates in the following sectors:
The separate financial statements for A2A S.p.A. are presented in euro, which is also the functional currency in the economies in which the company operates. In particular, the following notes are prepared in thousands of euro.
The separate financial statements of A2A S.p.A. at December 31, 2018, have been prepared on a going-concern basis and comprise the balance sheet, income statement, statement of comprehensive income, cash flow statement, statement of changes in equity and these notes.
The separate financial statements of A2A S.p.A. at December 31, 2018 have been prepared:
In preparing the separate financial statements, the same standards used for the financial statements at December 31, 2017 were applied, other than the principles and interpretations described in detail in the paragraph below "Changes in accounting principles" adopted for the first time on January 1, 2018.
These explanatory notes include the supplemental information required by the Italian civil code, by Consob Resolutions no. 15519 and 15520 of July 27, 2006, and Consob communication no. 6064293 of July 28, 2006.
In this file, use has been made of some alternative indicators of performance (APM) that are different from the financial indicators expressly provided for by the IAS/IFRS international accounting standards adopted by the company; for details of these indicators, please see the specific paragraph "Alternative Indicators of Performance (APM)" in the file of the "Report on Operations".
These separate financial statements for the year ended December 31, 2018, were approved on April 3, 2019, by the Board of Directors, which authorized its publication, and has been audited by EY S.p.A. in accordance with their appointment by the shareholders of June 11, 2015, for the nine years from 2016 to 2024.
Overview of performance, financial conditions and net debt
1 Financial statements
2 Financial statements pursuant to Consob Resolution no. 17221 of March 12, 2010
General information on A2A S.p.A.
Financial statements
Basis of preparation
Changes in international accounting
standards Accounting
standards and policies
Notes to the balance sheet Net debt
Notes to the income statement
Note on related party transactions
Consob Communication no. DEM/6064293 of July 28, 2006
Guarantees and commitments with third parties
Other information
4 Attachments
5 Independent Auditors' Report
For the balance sheet, the company A2A S.p.A. has adopted a format which separates current and non-current assets and liabilities, as required by paras. 60 et seq. of IAS 1.
The income statement is presented by nature, a format which is considered more representative than a presentation by function. The selected format is in agreement with the presentation used by the Group's major competitors and in line with international practice.
The specific line items "Result from non-recurring transactions" and "Result from disposal of other shareholdings" are in the format of the income statement in order to provide clear and immediate identification of the results arising from non-recurring transactions forming part of continuing operations, separating these from the results from discontinued operations/held for sale. In particular, it should be noted that the item "Result from non-recurring transactions" is intended to include the results from the sale of investments in subsidiaries and associates and other non-operating expenses/ income. This item is presented between net operating income and the financial balance. In this way net operating income is not affected by non-recurring operations, making 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 IAS 1.
The formats adopted for the financial statements are the same as those used to prepare the annual separate financial statements at December 31, 2017.
The separate financial statements as at December 31, 2018, have been prepared on a historical cost basis, with the exception of those items which under IFRS must be or can be measured at fair value, as discussed in further detail in the accounting policies.
The accounting principles, the accounting policies and the methods of measurement used in the preparation of the separate financial statements are consistent with those used to prepare the annual separate financial statements at December 31, 2017, except as specified below in relation to new principles of new emanation.
Overview of performance, financial conditions and net debt
1 Financial statements
2 Financial statements pursuant to Consob Resolution no. 17221 of March 12, 2010
General information on A2A S.p.A.
Financial Basis of preparation
Changes in international accounting standards
Accounting standards and policies
Notes to the balance sheet Net debt
Notes to the income statement
Note on related party transactions
Consob Communication no. DEM/6064293 of July 28, 2006
Guarantees and commitments with third parties
Other information
4 Attachments
5 Independent Auditors' Report
Pursuant to IAS 8, the subsequent paragraph "Accounting standards, amendments and interpretations applicable by the company as of the current year" indicates and briefly illustrates the amendments in force as of January 1, 2018.
The following paragraphs, "Accounting standards, amendments and interpretations approved by the European Union" and "Accounting standards approved by the European Union but applicable in future years" instead detail the accounting standards and interpretations already issued, whether not yet approved or approved by the European Union and therefore not applicable for the preparation of the financial statements at December 31, 2018, any impacts of which will then be transposed as of the financial statements of the following years.
As from January 1, 2018, applicable to the Group are the following standards or additions to specific paragraphs of the international accounting standards already adopted by the company in previous years.
• IFRS 9 "Financial instruments": this standard, approved by the European Union on November 29, 2016, entirely replaces IAS 39 "Financial instruments: recognition and measurement" and introduces two new criteria to recognize and measure financial assets and liabilities. The main changes introduced by IFRS 9 may be summarized as follows: financial assets can be measured either at fair value or at their amortized cost. As a result, the categories "loans and receivables", "available- for-sale financial assets" and "held-to-maturity investments" disappear. Classification within the two categories is carried out on the basis of an entity's business model and the contractual cash flow characteristics of the financial asset. A financial asset is measured at amortized cost if both of the following requirements are met: the objective of the entity's business model is to hold assets to collect contractual cash flows (and therefore in substance not to earn trading profits) and the characteristics of the cash flows of the asset are solely payments of principal and interest. A financial asset is measured at fair value if it is not measured at amortized cost. The rules to account for derivatives have been simplified, as the embedded derivative and the host financial asset are no longer recognized separately.
All equity instruments - listed or unlisted - must be measured at fair value (IAS 39 established on the other hand that unlisted equity instruments should be valued at cost if fair value could not be reliably measured).
An entity has the option of presenting changes in the fair value of equity instruments that are not held for trading in equity; that option is not permitted for equity instruments that are held for trading. This designation is permitted on initial recognition, may be adopted for each individual instrument and is irrevocable. If an election is made for this option, changes in the fair value of these instruments may never be reclassified from equity to the income statement. Dividends on the other hand continue to be recognized in the income statement.
IFRS 9 does not permit reclassifications between the two categories of financial asset except in the rare case of a change in an entity's business model. In this case the effects of the reclassification are applied prospectively.
The disclosures required to be made in the notes have been adjusted to the classification and measurements rules introduced by IFRS 9. On November 19, 2013, the IASB issued an amendment to this standard which mainly regards the following:
A partial amendment to the standard was issued in July 2014 on the subject of the valuation of financial instruments, with the introduction of the expected-loss impairment model for loans which replaces the impairment model based on realized losses.
Said impairment model uses a "forward looking" information in order to obtain early recognition of losses on receivables with respect to the "incurred loss" model that defers the recognition of the loss until occurrence of the event with reference to financial assets measured at amortized cost, financial assets measured at fair value recorded in other items of the comprehensive income statement, receivables arising from lease contracts, as well as assets arising from contracts and certain loan commitments and financial guarantee contracts.
In 2017, the A2A Group carried out an in-depth analysis of the financial instruments in the portfolio impacted by the application of IFRS 9 and the write-down of receivables from customers according to the new logic (expected losses). The analysis ended with the identification of non-significant impacts on the valuation of financial assets and liabilities and on the method used to calculate the Group's provision for risks on receivables.
The Group has adopted the new standard starting from January 1, 2018, without restating the comparative figures. The consequent impacts are not significant both on the valuation of financial assets and liabilities and on the calculation method of the provision for risks on receivables.
IFRS 15 also includes the disclosure requirements that are significantly more extensive than the existing standard concerning the nature, amounts, timing and uncertainty of revenues and cash flows arising from contracts with customers.
The provisions of IFRS 15, following the amendments made with the amendment issued respectively on September 11, 2015 and April 12, 2016, will be effective for years beginning on or after January 1, 2018. The A2A Group applied IFRS 15 using the modified retrospective approach. The impacts on the consolidated financial statements are not significant.
• IFRIC 22 "Transactions in foreign currency and recognition of prepayments or collections": approved on April 3, 2016, the interpretation of IAS 21 "Transactions in foreign currency" aims to clarify the date on which to use the exchange rate for the purpose of recording the non-monetary asset/ liability relating to transactions in foreign currency. Specifically, the recognition of the advance asset/liability must be carried out at the exchange rate on the day of payment/collection of the advance and in the same terms the "derecognition" of the same, once the transaction is concluded with the recognition of the related sales revenues, will take place at the same exchange rate with which the non-monetary asset/liability was recorded.
No impacts are expected on the Group's economic and financial situation.
• IAS 40 "Property Investments": approved on March 15, 2018, the amendment introduced clarifies when an entity must transfer ownership of the properties (including those under construction). It also establishes that the only intention of the management to change the use of a property is not evidence of a change in the use of the property investment. There were no impacts on the Group's economic and financial situation.
Overview of performance, financial conditions and net debt
1 Financial statements
2 Financial statements pursuant to Consob Resolution no. 17221 of March 12, 2010
General information on A2A S.p.A. Financial statements Basis of preparation
Changes in
Accounting standards and policies
Notes to the balance sheet Net debt
Notes to the income statement
Note on related party transactions
Consob Communication no. DEM/6064293 of July 28, 2006
Guarantees and commitments with third parties
Other information
4 Attachments
5 Independent Auditors' Report
• IFRS 16 "Leases": the standard issued by the IASB on January 13, 2016 and approved by the European Union in November 2017, fully replaces all the previous IFRS accounting requirements for the accounting of leases (IAS 17 and IFRIC 4). The standard applies to all contracts concerning the right to use an asset for a certain period of time in exchange for a specific fee. IFRS 16 sets, for lessees, a single accounting model for all leases (with specific cases of exclusion and exemption), eliminating the distinction, in terms of accounting treatment, between operating and financial leasing. The accounting forecasts for lessors remain substantially unchanged compared to the previous provisions.
The initial recognition, for the lessee, involves the recording of assets equal to the right to use the asset and a financial liability corresponding to the present value of the future fees to be paid. The subsequent valuation involves the recognition of the amortization of the right of use on the basis of IAS 16 (or alternative valuation method) and the discounting of the financial liability created during initial recognition using a discount rate defined in the leasing contract. Financial expenses and depreciation/amortization are recognized separately in the income statement.
The new standard will be in force for the financial years closed from January 1, 2019, with early application permitted on condition that the new IFRS 15 is already adopted or is applied on the same date as the first application of the IFRS 16 in question.
In 2018, the A2A Group completed its analysis in order to adopt the standard as from January 1, 2019. The analyses carried out have identified substantial impacts and changes in the economic and financial situation, as summarized in the section "Other information" of this report.
• IFRS 9 "Financial instruments": approved on March 26, 2018 and applicable starting January 1, 2019, an addition that allows valuing at amortized cost the expenses related early repayment of financial instruments that were previously measured at fair value through profit and loss.
Overview of performance, financial conditions and net debt
1 Financial statements
2 Financial statements pursuant to Consob Resolution no. 17221 of March 12, 2010
General information on A2A S.p.A. Financial statements Basis of preparation
Changes in
Accounting
standards and policies
Notes to the balance sheet Net debt
Notes to the income statement
Note on related party transactions
Consob Communication no. DEM/6064293 of July 28, 2006
Guarantees and commitments with third parties
Other information
4 Attachments
5 Independent Auditors' Report
Transactions in currencies other than the euro are initially recognized at the exchange rates at the date of the transaction. Monetary assets and liabilities denominated in a foreign currency are converted into euro at the exchange rates at the balance sheet date.
Non-monetary items measured at historical cost in foreign currency are translated at the exchange rates at the date of the transaction. Non-monetary items measured at fair value are translated at the exchange rates at the date when the fair value was determined.
Assets for business use are classified as tangible assets, while non-business assets are classified as investment property.
Tangible assets are measured at cost, including any additional charges directly attributable to bringing the asset into an operating condition (e.g. transport, customs duty, installation and testing costs, notary and land registry fees and any non-deductible VAT), increased when material and where there are obligations by the present value of the estimated cost of restoring the location from an environmental point of view or dismantling the asset. Borrowing costs, where directly attributable to the purchase or construction of an asset, are capitalized as part of the cost of the asset if the type of asset so warrants.
If important components of tangible assets have different useful lives, they are accounted for separately using the "component approach", assigning to each component its own useful life for the purpose of calculating depreciation (the component approach).
Land, whether occupied by residential or industrial buildings or devoid of construction, is not depreciated as it has an unlimited useful life, except for land used in production activities that is subject to deterioration over time (e.g. landfills, quarries).
Ordinary maintenance costs are fully expensed to the income statement in the year they are incurred. Costs for maintenance carried out at regular intervals are attributed to the assets to which they refer and are depreciated over the specific residual possibility of use of such.
Assets acquired under finance and operating leases are accounted for in accordance with IFRS 16, which requires the recognition of assets equal to the right to use the asset and a financial liability corresponding to the present value of future lease payments. The subsequent valuation involves the recognition of the amortization of the right of use on the basis of IAS 16 (or alternative valuation method) and the discounting of the financial liability created during initial recognition using a discount rate defined in the leasing contract. Financial expenses and depreciation/amortization are recognized separately in the income statement.
Tangible assets are stated net of accumulated depreciation and any write-downs. Depreciation is charged from the year in which the individual asset enters service on a straight-line basis over the estimated useful life of the asset for the business. The estimated realizable value which is deemed to be recoverable at the end of an asset's useful life is not depreciated. The useful life of each asset is reviewed annually and any changes, if needed, are made with a view to showing the correct value of the asset. During the reporting year, the useful lives of the CCGT plants were reviewed, as described in note "1) Tangible assets".
Landfills are depreciated on the basis of the percentage filled, which is calculated as the ratio between the volume occupied at the end of the period and the total volume authorized.
The main depreciation rates used, which are based on technical and economic considerations, are as follows:
| • buildings ___________ |
0.1 % - 11.1 % |
|---|---|
| • production plants _________ |
0.2 % - 40.7 % |
| • distribution networks ____________ |
1.4 % - 10 % |
| • fiber-optic networks _____________ |
5% |
| • miscellaneous equipment ________ |
10% - 33.3 % |
| • mobile phones ____________ |
100 % |
| • furniture and fittings _____________ |
6 % - 16.7 % |
| • electric and electronic office machines _________ |
10 %- 33.3 % |
| • means of transport ________ |
10% |
| • improvements to third-party assets - buildings ________ |
6.3 % |
Tangible assets are subjected to impairment testing if there is any indication that an asset may be impaired in accordance with the paragraph below "Impairment of assets"; write-downs may be reversed in subsequent periods if the reasons for which they were recognized no longer apply.
When an asset is disposed of or if future economic benefits are no longer expected from using an asset, it is removed from the balance sheet and any gain or loss (being the difference between the disposal proceeds and the carrying amount) is recognized in the income statement in the year of the derecognition.
Intangible assets are identifiable non-monetary assets without physical substance which are controlled by the enterprise and able to produce future economic benefits, and include goodwill when acquired for consideration.
The fact of being identifiable distinguishes an intangible asset that has been acquired from goodwill; this requirement is normally met when: (i) the intangible asset is attributable to a legal or contractual right, or (ii) the asset is separable, in other words it can be sold, transferred, rented or exchanged individually or as an integral part of other assets.
Control by the enterprise consists of the right to enjoy the future economic benefits flowing from the asset and to restrict the access of others to those benefits.
Intangible assets are stated at purchase or production cost, including ancillary charges, determined in the same way as for tangible assets. Intangible fixed assets produced internally are not capitalized but recognized in the income statement in the year in which the costs are incurred.
Intangible assets with a definite useful life are reported in the financial statements net of the related accumulated amortization and impairments in the same way as for tangible assets. Changes in the expected useful life or in the ways in which the future economic benefits of an intangible asset are achieved by the Company are accounted for by suitably adjusting the period or method of amortization, treating them as changes in accounting estimates. The amortization of intangible fixed assets with a definite useful life is charged to income statement in the cost category that reflects the function of the intangible asset concerned.
Intangible assets are subjected to impairment testing if there are specific indications that they may be impaired, in accordance with the paragraph below "Impairment of assets"; impairment losses may be reversed in subsequent periods if the reasons for which they were recognized no longer apply.
Intangible assets with an indefinite useful life and those that are not yet available for use are subjected to impairment testing on an annual basis, whether or not there are any specific indications that they may be impaired, in accordance with the paragraph below "Impairment of assets". Impairment losses recognized for goodwill are not reversed.
Overview of performance, financial conditions and net debt
1 Financial statements
2 Financial statements pursuant to Consob Resolution no. 17221 of March 12, 2010
General information on A2A S.p.A. Financial statements Basis of preparation Changes in international accounting standards
Notes to the balance sheet Net debt
Notes to the income statement
Note on related party transactions
Consob Communication no. DEM/6064293 of July 28, 2006
Guarantees and commitments with third parties Other information
4 Attachments
5 Independent Auditors' Report
Gains or losses on the disposal of an intangible asset are calculated as the difference between the disposal proceeds and the carrying amount of the asset and recognized in the Income Statement at the time of the disposal.
The following amortization rates are applied to intangible assets with a definite useful life:
| • | industrial patents and intellectual property rights _____ | 20 % - 33.3 % |
|---|---|---|
| • | concessions, licenses, trademarks and similar rights _________ | 4.8 % - 33.3 % |
| • | other intangible assets ___________ | 2.1% - 20.0 % |
IFRIC 12 states that, based on the characteristics of the concession arrangement, the infrastructures used in the provision of public services under concession are to be recognized as intangible assets if the operator has the right to receive a payment from the customer for the service provided, or as a financial asset if the operator has the right to receive payment from the public sector entity.
Tangible and intangible assets are subjected to impairment testing if there is any specific indication that they may be impaired.
Goodwill, other intangible assets with an indefinite useful life and assets not available for use are tested for impairment at least annually or more frequently if there is any specific indication that they may be impaired.
Impairment testing consists of comparing the carrying amount of an asset with its recoverable amount.
The recoverable amount of an asset is the higher of its fair value less costs to sell and its value in use. To determine an asset's value in use, the entity calculates the present value of the estimated future cash flows on the basis of business plans prepared by management, before tax, applying a pre-tax discount rate which reflects current market assessments of the time value of money and the risks specific to the asset. If the recoverable amount of an asset is lower than its carrying amount, a loss is recognized in the Income Statement. If a loss recognized for an asset other than goodwill no longer exists or is reduced, the carrying amount of the asset or cash-generating unit is increased to the new estimate of recoverable value, which may not exceed the carrying amount that would have been determined had no impairment loss been recognized for the asset. Reversals of impairment losses are immediately recognized in the income statement.
When the recoverable amount of the individual asset cannot be estimated, it is based on the cash generating unit (CGU) or group of CGUs that the asset belongs to and/or to which it may be reasonably allocated.
CGUs are identified on the basis of the company's organizational and business structure as homogeneous aggregations that generate independent cash inflows deriving from the continuous use of the assets allocated to them.
Different accounting policies are applied to quotas or certificates held for own use in the "Industrial Portfolio" and those held for trading purposes in the "Trading Portfolio".
Surplus quotas or certificates held for own use in the "Industrial Portfolio" which are in excess of the Group's requirements in relation to the obligations accruing at year end are recognized as other intangible assets at the actual cost incurred. Quotas or certificates assigned free of charge are recognized at a zero carrying amount. Given that they are assets for instant use, they are not amortized but subjected to impairment testing. The recoverable amount is the higher of value in use and market value. If, on the other hand, there is a deficit because the requirement exceeds the quotas or certificates in portfolio at the balance sheet date, a provision is recognized for the amount needed to meet the residual obligation, estimated on the basis of any purchase contracts, spot or forward, already signed at the balance sheet date; otherwise on the basis of market prices.
Quotas or certificates held for trading in the "Trading Portfolio" are recognized in inventories and measured at the lower of purchase cost and estimated realizable value based on market trends. Quotas or certificates assigned free of charge are recognized at a zero carrying amount. Market value is established on the basis of any sales contracts, spot or forward, already signed at the balance sheet date; otherwise on the basis of market prices.
Subsidiaries are those companies over which A2A S.p.A. exercises control as it "is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee", as defined by IFRS 10.
Associates are companies in which the company has a significant influence over strategic decisions, despite not having control, also considering potential voting rights, meaning voting rights deriving from convertible financial instruments; significant influence is assumed to exist when A2A S.p.A. holds, either directly or indirectly, more than 20% of voting rights exercisable at an ordinary shareholders' meeting.
A joint venture is a contractual agreement whereby two or more parties undertake an income generating activity subject to joint control.
Investments in subsidiaries, associates and joint ventures are recognized in the separate financial statements at their purchase cost less any distributions of capital or impairment losses determined through the Impairment Test.
Should the portion attributable to the company of any impairment losses for the shareholding exceed the carrying value of the investment, the value of the investment is set to zero, and the excess share of the loss is recognized among liabilities as a provision in the event the company in responsible for said liability.
The cost is restored in subsequent periods if the reasons for the impairment should cease to apply.
Construction contracts with durations exceeding one year in progress are valued in accordance with IFRS 15. In particular, over-the-time revenues are recognized if it can be demonstrated that: a) the customer simultaneously receives and consumes the benefits of the contract in force at the same time as the service is provided b) the service provided improves.
Construction contracts currently in progress are measured on the basis of the contractual fees that have accrued with reasonable certainty on the basis of the stage of completion, using the "cost to cost" method, so as to allocate the revenues and net result of the contract to the individual periods to which they belong in proportion to the progress being made on the project. Any difference, positive or negative, between the value of the contracts and advances received is recognized as an asset or a liability respectively.
In addition to the contractual fees, contract revenues include variants, price revisions and incentive awards to the extent that it is probable that they represent actual revenues that can be reliably determined. Ascertained losses are recognized independently of the stage of completion of contracts.
Inventories of materials and fuel are measured at the lower of weighted average cost and market value at the balance sheet date. Weighted average cost is determined for the period of reference for each inventory code. Weighted average cost includes any additional costs (such as sea freight, customers charges, insurance and lay or demurrage days in the purchase of fuel). Inventories are constantly monitored and, where necessary, obsolete stocks are written down with a charge to the Income Statement.
Overview of performance, financial conditions and net debt
1 Financial statements
2 Financial statements pursuant to Consob Resolution no. 17221 of March 12, 2010
General information on A2A S.p.A. Financial statements Basis of preparation
Changes in international accounting standards
Notes to the balance sheet
Net debt Notes to the income statement
Note on related party transactions
Consob Communication no. DEM/6064293 of July 28, 2006
Guarantees and commitments with third parties Other information
4 Attachments
5 Independent Auditors' Report
They include shareholdings (excluding shareholdings in subsidiaries, joint ventures and associates) held for trading (so-called trading shareholdings) or available for sale, non-current receivables and loans and other non-current financial assets, trade and other receivables deriving from company operations and other current financial assets such as cash and cash equivalents. The latter consist of bank and postal deposits, readily negotiable securities used as temporary investments of surplus cash and financial receivables due within three months. Financial instruments also include financial payables (bank loans and bonds), trade payables, other payables and other financial liabilities and derivatives.
Financial assets and liabilities are recognized at the time that the contractual rights and obligations forming part of the instrument arise.
Financial assets and liabilities are accounted for in accordance with IFRS 9 "Financial Instruments".
Financial assets are classified into two categories alone - "at fair value" or "at amortized cost". Classification within the two categories is carried out on the basis of an entity's business model and the contractual cash flow characteristics of the financial asset. A financial asset is measured at amortized cost if both of the following requirements are met: the objective of the entity's business model is to hold assets to collect contractual cash flows (and therefore in substance not to earn trading profits) and the characteristics of the cash flows of the asset are solely payments of principal and interest. A financial asset is measured at fair value if it is not measured at amortized cost.
All equity instruments both listed and unlisted – must be measured at fair value.
An entity has the option of presenting changes in the fair value of equity instruments that are not held for trading in equity; that option is not permitted for equity instruments that are held for trading. This designation is permitted on initial recognition, may be adopted for each individual instrument and is irrevocable. If an election is made for this option, changes in the fair value of these instruments may never be reclassified from equity to the income statement. Dividends on the other hand continue to be recognized in the income statement.
In addition, the method of expected credit losses is modified, moving to an impairment model that leads to the early recognition of forward-looking losses.
Measurement subsequent to initial recognition depends on which of the following categories the financial instrument falls into:
These are valued using the effective interest method and are subject to impairment.
Gains and losses are recognized in the income statement when the asset is derecognized, modified or revalued.
On initial recognition, the Group may irrevocably choose to classify its equity investments as equity instruments recognized at fair value through profit and loss when they meet the definition of equity instruments pursuant to IAS 32 "Financial instruments: Presentation" and are not held for trading. The classification is determined for each individual instrument.
Gains and losses on these financial assets are never reclassified to the income statement. Dividends are recognized as other income in the income statement when the right to payment has been approved, except when the Group benefits from such income as a recovery of part of the cost of the financial asset, in which case such profits are recognized in OCI. Equity instruments recognized at fair value through OCI are not subject to impairment testing.
This category includes assets held for trading, assets designated at the time of initial recognition as financial assets at fair value with changes recognized in the income statement, or financial assets that must be measured at fair value. Assets held for trading are all those assets acquired for sale or repurchase in the short term. Derivatives, including those separated, are classified as financial instruments held for trading unless they are designated as effective hedging instruments. Financial assets with cash flows that are not represented solely by principal and interest payments are classified and measured at fair value through profit or loss, regardless of the business model. Notwithstanding the criteria for debt instruments to be classified at amortized cost or at fair value through OCI, as described above, debt instruments may be recognized at fair value through profit or loss upon initial recognition if this results in the elimination or significant reduction of an accounting mismatch.
Financial instruments at fair value with changes recognized in the income statement are recognized in the statement of financial position at fair value and net changes in fair value are recognized in profit or loss.
This category includes derivative instruments and listed equity investments that the Group has not irrevocably chosen to classify at fair value through OCI. Dividends on listed equity investments are also recognized as other income in the statement of profit/(loss) for the year when the right to payment is established.
The embedded derivative contained in a non-derivative hybrid contract, in a financial liability or in a principal non-financial contract, is separated from the principal contract and accounted for as a separate derivative, if: its economic characteristics and the risks associated with it are not closely correlated with those of the principal contract; a separate instrument with the same terms as the embedded derivative would meet the definition of a derivative; and the hybrid contract is not measured at fair value through profit or loss. Embedded derivatives are measured at fair value, with changes in fair value recognized in the income statement. A restatement occurs only when there is a change in the terms of the contract that significantly changes the cash flows otherwise expected or a reclassification of a financial asset to a category other than fair value through profit or loss.
An embedded derivative included in a hybrid contract that contains a financial asset is not separated from the host contract. The financial asset together with the embedded derivative is classified entirely as a financial asset at fair value through profit or loss.
A financial asset is derecognized when:
In cases where the company has transferred the rights to receive cash flows from an asset or signed an agreement under which it retains the contractual rights to receive the cash flows from the financial asset but assumes a contractual obligation to pay the cash flows to one or more beneficiaries (passthrough), it assesses whether and to what extent it has retained the risks and rewards of ownership. In the cases in which it has neither transferred nor retained substantially all of the risks and rewards or has not lost control of the asset, it continues to be recognized in the financial statements of the Group to the extent of its continuing involvement in the asset. In this case, the Group also recognizes Overview of performance, financial conditions and net debt
1 Financial statements
2 Financial statements pursuant to Consob Resolution no. 17221 of March 12, 2010
General information on A2A S.p.A. Financial statements Basis of preparation
Changes in international accounting standards
Notes to the balance sheet Net debt
Notes to the income statement
Note on related party transactions
Consob Communication no. DEM/6064293 of July 28, 2006
Guarantees and commitments with third parties Other information
4 Attachments
5 Independent Auditors' Report
an associated liability. The transferred asset and the associated liability are valued to reflect the rights and obligations that remain with the Group.
When the entity's continuing involvement is a guarantee of the transferred asset, involvement is measured on the basis of the lower of the amount of the asset and the maximum amount of consideration received that the entity might have to repay.
Financial liabilities are classified, at the time of initial recognition, at fair value through profit or loss, as mortgages and loans or as derivatives designated as hedges.
Directly attributable transaction costs are added to the valuation.
The Group's financial liabilities include trade payables and other payables, mortgages and loans, including current account overdrafts and derivative financial instruments.
The subsequent evaluation depends on the classification of the main instrument:
A financial liability is derecognized when the obligation underlying the liability is settled or cancelled.
These are initially recognized at fair value on the date the contract is signed and the subsequent measurement is also at fair value.
To classify a derivative as a hedge, the company formally designates and documents the hedging relationship, its risk management objectives and the strategy pursued.
From January 1, 2018, the following must be identified: a) the hedging instrument b) the nature of the risk being hedged c) the way in which the company will assess the effectiveness of the hedge.
The hedging relationship is effective if:
Transactions that meet the above criteria are accounted for as follows:
If a derivative financial instrument is designated as a hedge against exposure to changes in the fair value of an asset or liability attributable to a specific risk, the gain or loss resulting from subsequent changes in fair value of the hedging instrument is recognized in the Income Statement. The profit or loss deriving from the adjustment to fair value of the item hedged, for the part attributable to the hedged risk, changes the book value of this item and is recognized in the Income Statement. Cash flow hedge - If a derivative financial instrument is designated to hedge the exposure to the variability of the cash flows of an asset or a liability recognized in the Financial Statements or of a highly probable transaction, the effective portion of the resulting profits or losses deriving from the fair value adjustment of the derivative instrument is recognized in a specific equity reserve. The cumulative profit or loss is reversed from the equity reserve and recorded in the Income Statement in the same years in which the effects of the hedged transaction are recognized in the Income Statement. The profit or loss associated with the part of the ineffective hedge is recognized in the Income Statement immediately. If the hedged transaction is no longer considered probable, the unrealized gains or losses recognized in the equity reserve are immediately recognized in the Income Statement.
The portion of gain or loss on the hedged instrument relating to the effective portion of the hedge is recognized in other comprehensive income in the cash flow hedge reserve, while the ineffective portion is recognized directly in profit or loss. The cash flow hedge reserve is adjusted to the lower of the cumulative gain or loss on the hedging instrument and the cumulative change in the fair value of the hedged item.
Amounts accumulated under other components of the comprehensive income statement are recorded, depending on the nature of the underlying hedged transaction. If the hedged transaction subsequently results in the recognition of a non-financial component, the accumulated amount in equity is removed from the separate component of equity and included in the cost or other carrying amount of the asset or liability hedged. This is not considered a reclassification of the items recognized in OCI for the period. This also applies in the case of a hedged forecast transaction of a non-financial asset or a non-financial liability that subsequently becomes an irrevocable commitment to which fair value hedge accounting is applied.
For any other cash flow hedge, the amount accumulated in OCI is reclassified to the income statement as a reclassification adjustment in the same period or periods during which the hedged cash flows impact the income statement.
If the cash flow hedge accounting is discontinued, the accumulated amount in OCI must remain so if the hedged future cash flows are expected to occur. Otherwise, the amount shall be immediately reclassified to profit or loss for the period as a reclassification adjustment. After suspension, once the hedged cash flow occurs, any accumulated amount remaining in OCI must be accounted for depending on the nature of the underlying transaction as described above.
Non-current assets held for sale, disposal groups and discontinued operations whose carrying amount will be recovered principally through sale rather than continuous use are measured at the lower of their carrying amount and fair value less costs to sell. A disposal group is a group of assets to be disposed of together as a group in a single transaction together with the liabilities directly associated with those assets that will be transferred in that transaction. Discontinued operations/held for sale on the other hand consist of a significant component of the Group such as a separate major line of business or a geographical area of operations or a subsidiary acquired exclusively with a view to resale.
In accordance with IFRSs, the figures for non-current assets held for sale, disposal groups and discontinued operations are shown on two specific lines in the balance sheet: non-current assets held for sale and liabilities directly associated with non-current assets held for sale.
Non-current assets held for sale are not depreciated or amortized and are measured at the lower of carrying amount and fair value less costs to sell; any difference between carrying amount and fair value less costs to sell is recognized in the income statement as a write-down.
The net economic results arising from discontinued operations, and only discontinued operations, pending the disposal process, any gains or losses on disposal and the corresponding comparative figures for the previous year or period are recognized in a specific line of the income statement: "Net result from discontinued operations/held for sale".
The employees' leaving entitlement (TFR) and pension provisions are determined using actuarial methods; the rights accrued by employees during the year are recognized in the income statement as "labour costs", whereas the figurative financial cost that the company would have to bear if it were to ask the market for a loan of the same amount as the TFR is recognized as part of the "financial balance". Actuarial gains and losses arising from changes in actuarial assumptions are recognized in income statement taking into account the residual average working life of the employees.
Following the introduction of Finance Law no. 296 of December 27, 2006, only the portion of accrued employees' leaving entitlement that remained in the company has been measured in accordance with IAS 19, as amounts are now paid over to a separate entity as they accrue (either to a supplementary pension scheme or to funds held by INPS). As a result of these payments the company no longer has any obligations in connection with the services employees may render in the future.
Overview of performance, financial conditions and net debt
1 Financial statements
2 Financial statements pursuant to Consob Resolution no. 17221 of March 12, 2010
General information on A2A S.p.A. Financial statements Basis of preparation Changes in international
accounting
Notes to the balance sheet
Net debt Notes to the
income statement Note on
related party transactions
Consob Communication no. DEM/6064293 of July 28, 2006
Guarantees and commitments with third parties Other information
4 Attachments
5 Independent Auditors' Report
Guaranteed employee benefits paid on or after the termination of employment through defined benefit plans (energy discount, health care or other benefits) or long-term benefits (loyalty bonuses) are recognized in the period when the right vests.
The liability for defined benefit plans, net of any plan assets, is determined by independent actuaries on the basis of actuarial assumptions and recognized on an accrual basis in line with the work performed to obtain the benefits.
Gains and losses arising from actuarial calculations are recognized in a specific equity reserve.
Provisions for risks and charges regard costs of a determinate nature and of certain or probable existence which at year-end are uncertain in terms of timing or amount. Provisions are recognized when there is a legal or constructive present obligation arising from past events, the settlement of which is expected to result in an outflow of resources embodying economic benefits, and it is possible to make a reasonable estimate of the obligation.
Provisions are recognized at the best estimate of the amount that the company would have to pay to settle the liability or to transfer it to third parties at the balance sheet date. If the effect of discounting is significant, provisions are calculated by discounting expected future cash flows at a pre-tax discount rate that reflects the current market assessment of the time value of money. If discounting is used the increase in the provision due to the passage of time is recognized as financial expense.
If the liability relates to tangible assets (such as the dismantling and reclamation of industrial sites), the initial provision is recognized as a counter-entry to the assets to which it refers; expense is then charged to income statement as the asset in question is depreciated.
Treasury shares are accounted for as a deduction from equity. In particular, treasury shares are recognized as a negative equity reserve.
Grants, both from public entities and from third party private entities, are measured at fair value when there is the reasonable certainty that they will be received and that the Group will be able to comply with the terms and conditions for obtaining them.
Grants received to provide support for the cost of specific assets are recognized as a direct deduction from the assets concerned and credited to the income statement over the life of the depreciable asset to which they refer.
Revenue grants (given to provide the company with immediate financial support or as compensation for expenses or losses incurred in a previous accounting period) are recognized in their entirety in the income statement as soon as the conditions for recognition thereof are met.
The recognition of revenues is based on the following five steps: (i) identification of the contract with the customer; (ii) identification of the performance obligations, represented by the contractual promises to transfer goods and/or services to a customer; (iii) determination of the transaction price; (iv) allocation of the transaction price to the performance obligations identified on the basis of the stand-alone sale price of each good or service; (v) recognition of the revenue when the relative performance obligation is satisfied, i.e. when the promised good or service is transferred to the customer; the transfer is considered completed when the customer obtains control of the good or service, which can occur continuously over time diluted and extended or at a point in time. Depending on the type of transaction, revenues are recognized on the basis of the following specific criteria:
• revenues for the sale and transport of electricity and gas are recognized at the time that the energy is supplied or the service rendered, even if invoicing has not yet taken place, and are determined by adding estimates of consumption to amounts resulting from pre- established meter-reading schedules. Where applicable, these revenues are based on the tariffs and related tariff restrictions in force during the year prescribed by the law of the Italian Regulation Authority for Energy Networks and Environment and similar foreign bodies;
Revenues are stated net of returns, discounts, allowances and rebates, as well as directly related taxes.
Expenses relate to goods or services sold or consumed during the year or as a result of systematic allocation; if no future use is envisaged they are recognized directly in the income statement.
The item "Non-recurring transactions" consists of the gains and losses arising from the measurement at fair value less costs to sell or from the sale or disposal of non- current assets (or disposal groups) classified as held for sale within the meaning of IFRS 5, the gains or losses arising on the disposal of shareholdings in unconsolidated subsidiaries and associates and other non-operating income and expense.
Financial income is recognized when interest income arises using the effective interest method, i.e. at the rate that exactly discounts expected future cash flows over the expected life of the financial instrument.
Financial expense is recognized in the Income Statement on an accrual basis on the basis of the effective interest.
Dividend income is recognized when it is established that the shareholders have a right to receive payment, and is recognized as financial income in the Income Statement.
Current income taxes are based on an estimate of taxable income in compliance with tax regulations in force or substantially approved at the balance sheet date, bearing in mind any exemptions or tax credits due. Account is also taken of the fact that the Group now files for tax on a consolidated basis.
Deferred tax assets and liabilities are calculated on the temporary differences between the carrying amount of assets and liabilities in the balance sheet and their tax bases, with the exception of goodwill which is not deductible for tax purposes and any differences resulting from investments in subsidiaries which are not expected to reverse in the foreseeable future. The tax rates used are those expected to apply to the period when the temporary differences reverse. Deferred tax assets are recognized to the extent that it is probable that taxable profit will be available against which the deductible temporary differences can be utilized. Deferred tax assets are reduced to the extent that it is no longer probable that the tax benefit will be realized. The measurement of deferred tax assets takes account of the period for which business plans are available.
When transactions are recognized directly in equity, any related current or deferred tax effects are also recognized directly in equity. Deferred taxes on the undistributed profits of Group companies are only provided for if there is the real intention to distribute such profits and, in any case, if the taxation is not offset as the result of filing a Group tax return.
Overview of performance, financial conditions and net debt
1 Financial statements
2 Financial statements pursuant to Consob Resolution no. 17221 of March 12, 2010
General information on A2A S.p.A. Financial statements Basis of
preparation Changes in international accounting
policies
Notes to the balance sheet
Net debt Notes to the
income statement Note on
related party transactions
Consob Communication no. DEM/6064293 of July 28, 2006
Guarantees and commitments with third parties
Other information
4 Attachments
5 Independent Auditors' Report
Deferred tax assets and liabilities are classified as non-current assets and liabilities.
Taxes are only offset when they are levied by the same tax authority, when there is the legal right of set-off and when settlement of the net balance is expected.
Preparing the financial statements and notes requires the use of estimates and assumptions in determining certain assets and liabilities and measuring contingent assets and liabilities. The actual results after the event could differ from such estimates.
Estimates have been used for making assessments for impairment testing, for calculating certain sales revenues, provisions for risks and charges, provisions for receivables and other provisions, depreciation and amortization and for measuring derivatives, employee benefits and taxation. The underlying estimates and assumptions are regularly reviewed and the effect of any change is immediately recognized in the income statement.
The following are the key assumptions made by management as part of the process of making these accounting estimates. The inherently critical element of such estimates comes from using assumptions or professional opinions on matters that are by their very nature uncertain. Changes in the conditions underlying the assumptions and opinions used could have a material impact on subsequent results.
The book value of the investments is subjected to periodic verification and whenever circumstances or events require more frequent verification. If it is considered that the carrying amount is impaired, the same is written down to its recoverable amount which is estimated with reference to its use or future disposal, depending on the company's latest plans. Management is of the opinion that the estimates of such recoverable amounts are reasonable, although possible changes in the factors underlying the estimates on which these recoverable amounts have been calculated could produce different measurements. For further details on the way in which impairment testing was carried out on the shareholdings of the Parent Company and the results of such testing, reference is made to the specific paragraph.
Revenues are recognized to the extent that it is probable that the economic benefits are achieved by the company and the related amount can be determined reliably, regardless of the date of collection. Revenues are valued at the fair value of the amount received or to be received, taking into account the payment terms contractually defined and excluding commercial discounts and rebates.
The recognition of revenues presupposes the use of estimates based on the best information available that may be subject, however, to changes as a result of new information, not available at the time of estimation.
In certain circumstances it is not easy to identify whether a legal or constructive present obligation exists. The directors assess these situations case by case, together with an estimate of the economic resources required to settle the obligation. Estimating such provisions is the result of a complex process that involves subjective judgements on the part of company management. When the directors are of the opinion that it is only possible that a liability could arise, the risks are disclosed in the section on commitments and contingent liabilities without making any provision.
The provision for bad debts reflects the estimated losses in the company's receivables portfolio. Provisions have been made to cover specific cases of insolvency as well as estimated losses expected on the basis of past experience with balances of similar credit risk
Although the provision is considered adequate, the use of different assumptions or changes in prevailing economic conditions, even more so in this period of recession, could give rise to adjustments to the bad debts provision.
Depreciation and amortization charges are a significant cost for the company. Non-current assets are depreciated or amortized on a straight-line basis over the useful lives of the assets. The useful lives of the company's non-current assets are established by the directors, with the assistance of expert appraisers, when they are purchased. The company periodically reviews technological and sector changes, dismantling/closure charges and the recovery amount of assets to update their residual useful lives. This periodic update could lead to a change in the period of depreciation or amortization and hence also in the depreciation or amortization charge in future years.
The derivatives used are measured at fair value based on the forward market curve at the balance sheet date, if the underlying of the derivative is traded on markets that provide official, liquid forward prices. If the market does not provide forward prices, forecast price curves are used based on simulation models developed by Group companies internally. However, the actual results of derivatives could differ from the measurements made.
The serious turbulence on markets for the energy commodities traded by the company, as well the fluctuations in exchange and interest rates, could lead to greater volatility in cash flows and in expected results.
The calculations of expenses and the related liabilities are based on actuarial assumptions. The full effects of any changes in these actuarial assumptions are recognized in a specific equity reserve.
Accounting for business combinations entails allocating the difference between purchase cost and net carrying amount to the assets and liabilities of the acquired business. For the majority of assets and liabilities this difference is allocated by recognizing the assets and liabilities at fair value. If positive, the unallocated portion is recognized as goodwill. If negative, it is recognized in the income statement. A2A S.p.A. bases its allocations on available information and, for the more significant business combinations, on external appraisals.
The uncertainties that exist regarding the way of applying certain tax regulations have led the company to taking an interpretative stance when providing for current taxes in the financial statements; such interpretations could be overturned by official clarifications on the part of the tax authorities.
Deferred tax assets are accounted for on the basis of the taxable profit expected to be available in future years. Assessing the expected taxable profit for the purpose of accounting for deferred taxation depends on factors that can vary over time, and may lead to significant effects on the measurement of deferred tax assets.
Overview of performance, financial conditions and net debt
1 Financial statements
2 Financial statements pursuant to Consob Resolution no. 17221 of March 12, 2010
General information on A2A S.p.A. Financial statements Basis of preparation Changes in
international accounting standards
Notes to the balance sheet Net debt
Notes to the income statement
Note on related party transactions
Consob Communication no. DEM/6064293 of July 28, 2006
Guarantees and commitments with third parties Other information
4 Attachments
5 Independent Auditors' Report
The Balance Sheet of A2A S.p.A. includes, with respect to the situation at December 31, 2017, the effect of the following non-recurring transactions:
Overview of performance, financial conditions and net debt
1 Financial statements
2 Financial statements pursuant to Consob Resolution no. 17221 of March 12, 2010
General information on A2A S.p.A. Financial
statements Basis of
preparation Changes in international
accounting standards Accounting standards and
policies
Notes to the income statement
Note on related party transactions
Consob Communication no. DEM/6064293 of July 28, 2006
Guarantees and commitments with third parties Other information
4 Attachments
5 Independent Auditors' Report
| thousands of euro | Balance at | Effect of | Changes during the year | Balance at | |||||
|---|---|---|---|---|---|---|---|---|---|
| 12 31 2017 | non recurring transactions |
Invest. | Others changes |
Reclassi fications net of the provision |
Write downs |
Amort. | Total changes |
12 31 2018 | |
| Land | 33,240 | (752) | 12 | 232 | (58) | 186 | 32,674 | ||
| Buildings | 240,782 | (1,332) | 1,145 | 1,514 | (4,196) | (12,925) | (14,462) | 224,988 | |
| Plant and machinery | 812,465 | (21,684) | 3,854 | 15,428 | (64) | (55,567) | (36,349) | 754,432 | |
| Industrial and commercial equipment | 1,398 | 409 | (321) | 88 | 1,486 | ||||
| Other assets | 13,237 | (706) | 3,150 | 17 | (4,053) | (886) | 11,645 | ||
| Construction in progress and advances | 17,500 | (19) | 13,452 | (17,221) | (3,769) | 13,712 | |||
| Leasehold improvements | 13 | (3) | (3) | 10 | |||||
| Total tangible assets | 1,118,635 | (24,493) | 22,022 | (30) | (122) | (4,196) | (72,869) | (55,195) | 1,038,947 |
| of which: | |||||||||
| Historical cost | 2,836,170 | (57,186) | 22,022 | (30) | (1,752) | (4,196) | 16,044 | 2,795,028 | |
| Accumulated amortization | (1,351,562) | 19,209 | 1,630 | (72,869) | (71,239) (1,403,592) | ||||
| Write-downs | (365,973) | 13,484 | (352,489) |
At December 31, 2018, "Tangible assets" amounted to 1,038,947 thousand euro (1,118,635 thousand euro in the previous year) and include the negative effect of non-recurring transactions for the year for a total of 24,493 thousand euro.
"Tangible assets" in 2018, net of non-recurring transactions, show a decrease of 55,195 thousand euro resulting from the following:
For a detailed analysis of changes in the year, reference shall be made to annex "1 Statement of changes in tangible assets".
Investments made during the year refer to:
interventions on the buildings of Bormio;
• "Plant and machinery" for 3,854 thousand euro.
In particular, they refer to interventions for 2,739 thousand euro at the power stations of the Unit of Calabria; for 382 thousand euro to the power stations of the Valtellina Unit; for 467 thousand euro to the power stations of the Mese and Udine Unit; 266 thousand euro for telematic and telephone wiring of buildings in Valtellina;
"Tangible assets" include "Construction in progress and advances" for 13,712 thousand euro (17,500 thousand euro at December 31, 2017), presenting, net of non-recurring transactions, a decrease of 3,769 thousand euro resulting from the counter effects of the following items:
With regard to large-scale diversion hydroelectric concessions, it is noted that when they are converted into law (Law no. 12/2019) with amendments to Decree Law December 14, 2018, no. 135 ("Competitiveness Decree Law"), the Legislator intervened in article 11-quater with overall review of the regulations governing large-scale diversion hydroelectric concessions (> 3 MW), as explained in greater detail in the Report on Operations in the section "Regulatory Changes and Impacts on the Business Units of the A2A Group - Generation and Trading Business Unit". While waiting for the Regions to regulate with their own laws the methods, procedures and criteria for awarding concessions, the company is analysing the possible impacts of the new regulations and confirms, to date, that the values recorded in the financial statements of dry and wet works linked to hydroelectric concessions are prudent and recoverable even if they are applied.
| thousands of euro | Balance at | Changes during the year | ||||
|---|---|---|---|---|---|---|
| 12 31 2017 | Invest. | Others changes |
Amort. | Total changes |
12 31 2018 | |
| Industrial patents and intellectual property rights |
6,880 | 3,036 | 2,120 | (4,462) | 694 | 7,574 |
| Concessions, licences, trademarks and similar rights |
7,772 | 4,741 | 10,459 | (5,947) | 9,253 | 17,025 |
| Goodwill | 38,687 | 38,687 | ||||
| Assets in progress | 12,426 | 14,775 | (13,075) | 1,700 | 14,126 | |
| Other intangible assets | 29,435 | (26,586) | (11) | (26,597) | 2,838 | |
| Total intangible assets | 95,200 | 22,552 | (27,082) | (10,420) | (14,950) | 80,250 |
Overview of performance, financial conditions and net debt
1 Financial statements
2 Financial statements pursuant to Consob Resolution no. 17221 of March 12, 2010
General information on A2A S.p.A. Financial
statements Basis of
preparation
Changes in international accounting standards
Accounting standards and policies
Net debt
Notes to the income statement
Note on related party transactions
Consob Communication no. DEM/6064293 of July 28, 2006
Guarantees and commitments with third parties Other information
4 Attachments
5 Independent Auditors' Report
At the reporting date, "Intangible assets" amounted to 80,250 thousand euro (95,200 thousand euro at December 31, 2017).
A decrease of 14,950 thousand euro was the result of the combined effect of the following:
More specifically, investments made during the year refer to the following:
Included in the total balance of "Intangible assets" are "Assets in progress" for 14,126 thousand euro (12,426 thousand euro as at December 31, 2017), resulting in an increase of 1,700 thousand euro due to the combined effect of the following items:
For more in-depth information, refer to annex "2. Statement of changes in intangible assets".
| thousands of euro | Balance at | Changes during the year | Balance at | ||||
|---|---|---|---|---|---|---|---|
| 12 31 2017 | Invest. | Reclass./ Other changes |
Disp./ Write downs |
Amort. | Total changes |
12 31 2018 | |
| Goodwill | 38,687 | 38,687 | |||||
| Total goodwill | 38,687 | 38,687 |
Goodwill equal to 38,687 thousand euro at December 31, 2018 (unchanged compared to December 31, 2017), was formed as a result of non-recurring transactions with third parties.
This goodwill was allocated to the following CGUs: "A2A Reti elettriche" for 4,000 thousand euro, "A2A Reti Gas" for 3,700 thousand euro, "A2A Gas" for 6,800 thousand euro, "A2A Calore" for 18,000 thousand euro and "A2A Ambiente" for 6,187 thousand euro.
Under IAS 36 goodwill, an intangible asset with an indefinite useful life, is not amortized systematically but tested at least once a year ("Impairment Test"). As goodwill neither generates independent cash flow nor can it be sold separately, IAS 36 calls for a secondary audit of its recoverable amount, determining cash flows generated by a set of assets that constitute the business to which it belongs, i.e. the Cash Generating Unit (CGU).
The verification of the recoverable value has been carried out within the broader Impairment Test activities of the various CGU carried out for the Consolidated Financial Statements, which includes the goodwill in question.
From the impairment test carried out, the recoverable value of the CGU revealed no need for writedowns. More specifically, the future cash flows associated with the goodwill of A2A S.p.A. allow the recovery thereof.
The parameters used for the purposes of the Impairment Test are set out in note 2 of the Consolidated Annual Financial Report, to which reference is made for further details.
| thousands of euro | Balance at 12 31 2017 |
Effect of non |
Changes during the |
Balance at 12 31 2018 |
of which included in the NFP |
|
|---|---|---|---|---|---|---|
| recurring transactions |
year | 12 31 2017 | 12 31 2018 | |||
| Shareholdings in subsidiaries | 3,610,546 | 21,744 | 68,217 | 3,700,507 | ||
| Shareholdings in affiliates | 43,196 | (41,119) | 2,077 | |||
| Other non-current financial assets | 75,696 | 533,470 | 609,166 | 72,216 | 608,269 | |
| Total shareholdings and other non-current financial assets |
3,729,438 | 21,744 | 560,568 | 4,311,750 | 72,216 | 608,269 |
"Shareholdings in subsidiaries" amounted to 3,700,507 thousand euro (3,610,546 thousand euro as at December 31, 2017).
The following table illustrates the changes during the year:
| Shareholdings in subsidiaries thousands of euro |
TOTAL |
|---|---|
| Balance at December 31, 2017 | 3,610,546 |
| Effect of non-recurring transactions | 21,744 |
| Changes during the year: | |
| - acquisitions and capital increases | 20,088 |
| - sales and decreases | (271) |
| - revaluations | - |
| - write-downs | (73,000) |
| - exchange assessments | 93,209 |
| - losses for free float recovery | (7,946) |
| - reclassifications | 36,055 |
| - other changes | 82 |
| Total changes in the year | 68,217 |
| Balance at December 31, 2018 | 3,700,507 |
The value of shareholdings in subsidiaries, net of the positive effect of non-recurring transactions for the year 2018 for 21,744 thousand euro, a total increase of 68,217 thousand euro compared to the previous year-end and is due:
Overview of performance, financial conditions and net debt
1 Financial statements
2 Financial statements pursuant to Consob Resolution no. 17221 of March 12, 2010
General information on A2A S.p.A. Financial statements
Basis of preparation
Changes in international accounting standards
Accounting standards and policies
Net debt
Notes to the income statement Note on
related party transactions
Consob Communication no. DEM/6064293 of July 28, 2006
Guarantees and commitments with third parties Other information
4 Attachments
5 Independent Auditors' Report
Further information regarding movements involving shareholdings in subsidiary companies may be found within annexes 3a and 4a to compare their book value and corresponding portions of net assets.
"Shareholdings in affiliates and joint ventures" amounted to 2,077 thousand euro (43,196 thousand euro as at December 31, 2017).
The changes in the year are shown below:
| Shareholdings in affiliates and joint ventures thousands of euro |
TOTAL |
|---|---|
| Balance at December 31, 2017 | 43,196 |
| Changes in the year: | |
| - effect of non-recurring transactions | - |
| - acquisitions and capital increases | - |
| - sales and decreases | (7,068) |
| - revaluations | - |
| - write-downs | - |
| - reclassifications | (34,051) |
| Total net changes in the year | (41,119) |
| Balance at December 31, 2018 | 2,077 |
T he value of investments in associated companies amounted to 2,077 thousand euro (43,196 thousand euro at December 31, 2017), and the changes during the reporting year are detailed below:
Further details regarding shareholdings in affiliates may be found in annexes 3/b and 4/b.
The recoverable value of shareholdings has been measured based on the present value of the corresponding expected net cash flows attributable to the shareholdings of A2A S.p.A.. The cash flows used are in line with those used for the Impairment Test of the CGU for the consolidated financial statements. The same applies to the methodological approach and discount rates adopted further detailed in the Consolidated Annual Financial Report (note 2).
Shown below are the carrying values of the individual shareholdings subject to Impairment Test by an external expert, along with a specification of the type and discount rate applied. It shall be recalled that the Impairment Test is carried out for all investments which have a carrying value higher than the corresponding fraction of shareholders' equity of competence and/or in the presence of specific impairment indicators.
In 2018, the Impairment Test conducted on A2A Energiefuture S.p.A. resulted in a write-down of 73,000 thousand euro, while the other equity investments did not require any write-down.
| Shareholdings millions of euro |
Pre impairment test values at 12 31 2018 |
Recoverable amount (use value) at 12 31 2018 |
Post-tax WACC |
Growth rate g |
Write-down |
|---|---|---|---|---|---|
| A2A Energiefuture S.p.A. | 263 | 190 | 7.4% | 0.0% | (73) |
"Other non-current financial assets" amounted to 609,166 thousand euro (75,696 thousand euro as at December 31, 2017), of which:
Overview of performance, financial conditions and net debt
1 Financial statements
2 Financial statements pursuant to Consob Resolution no. 17221 of March 12, 2010
General information on A2A S.p.A.
Financial statements
Basis of preparation
Changes in international accounting standards
Accounting standards and policies
Net debt
Notes to the income statement
Note on related party transactions
Consob Communication no. DEM/6064293 of July 28, 2006
Guarantees and commitments with third parties
Other information
4 Attachments
5 Independent Auditors' Report
| thousands of euro | Balance at 12 31 2017 |
Effect of non-recurring transactions |
Changes during the year |
Balance at 12 31 2018 |
|---|---|---|---|---|
| Deferred tax assets | 61,173 | 2,730 | 2,097 | 66,000 |
This item, which includes the net effect of deferred tax liabilities and deferred tax assets as per corporate income tax and regional tax as well as provisions made solely for tax purposes, resulted in a net asset of 66,000 thousand euro. The recoverability of "Deferred tax assets" recognized in the financial statements is considered likely, since future plans include IRES taxable income sufficient to absorb the temporary differences that will be reversed; for the years of the plan for which the IRAP taxable income is not provided sufficiently to absorb IRAP temporary differences, it was decided to repay the related IRAP deferred tax assets and liabilities.
Deferred tax assets are calculated using the tax rate applicable at the time of repayment.
At December 31, 2018, the amounts relative to deferred tax assets/deferred tax liabilities have been expressed as net ("offsetting") as per IAS 12 standards.
This item is detailed within the table below:
| thousands of euro | Balance at 12 31 2018 |
Balance at 12 31 2017 |
|---|---|---|
| Value differences of tangible assets | 142,605 | 159,959 |
| Application of financial lease standard (IAS 17) | 5,374 | 5,528 |
| Measurement differences of intangible assets | 2,922 | 2,906 |
| Deferred capital gains | 23 | 30 |
| Employee leaving entitlement (TFR) | 1,226 | 1,226 |
| Other deferred tax liabilities | 9,066 | 5,980 |
| Deferred tax liabilities (A) | 161,216 | 175,629 |
| Taxed risk provisions | 82,997 | 83,586 |
| Amortization, depreciation and write-downs | 78,083 | 85,392 |
| Application of the financial instrument standard (IFRS 9) | 359 | 359 |
| Bad debts provision | 2,716 | 2,716 |
| Grants | 2,654 | 2,654 |
| Goodwill | 50,466 | 50,466 |
| Other deferred tax assets | 9,941 | 11,629 |
| Deferred tax assets (B) | 227,216 | 236,802 |
| Net effect deferred tax assets (B-A) | 66,000 | 61,173 |
For further details and information, please refer to the item "Income/expenses for income tax" on the income statement.
| thousands of euro | Balance at Effect Changes Balance at 12 31 2017 of non during the 12 31 2018 recurring year |
of which included in the NFP |
||||
|---|---|---|---|---|---|---|
| transactions | 12 31 2017 | 12 31 2018 | ||||
| Non-current derivatives | - | - | 7,693 | 7,693 | - | 7,693 |
| Other non-current assets | 605 | - | 103 | 708 | - | - |
| Total other non-current assets | 605 | - | 7,796 | 8,401 | - | 7,693 |
"Other non-current assets" amounted to 8,401 thousand euro (605 thousand euro at December 31, 2017), presenting an increase of 7,796 thousand euro over the previous year and consist of:
| thousands of euro | Balance at 12 31 2017 |
Effect of non-recurring transactions |
Changes during the year |
Balance at 12 31 2018 |
|---|---|---|---|---|
| - Materials | 1,310 | (29) | (9) | 1,272 |
| - Material obsolescence provision | (605) | (15) | (620) | |
| Total materials | 705 | (29) | (24) | 652 |
| - Fuel | 74,084 | 16,462 | 90,546 | |
| - Others (include environmental certificates) | 10 | 38 | 48 | |
| Raw and ancillary materials and consumables |
74,799 | (29) | 16,476 | 91,246 |
| Third-party fuel | 3,767 | (276) | 3,491 | |
| Total inventory | 78,566 | (29) | 16,200 | 94,737 |
Inventories at December 31, 2018 amounted to 94,737 thousand euro (78,566 thousand euro at December 31, 2017); changes during the year, net of the negative effect of extraordinary transactions for 29 thousand euro, were positive for 16,200 thousand euro and mainly refer to the increase in inventories of natural gas. This item includes:
Overview of performance, financial conditions and net debt
1 Financial statements
2 Financial statements pursuant to Consob Resolution no. 17221 of March 12, 2010
General information on A2A S.p.A. Financial
statements Basis of
preparation
Changes in international accounting standards
Accounting standards and policies
Net debt
Notes to the income statement Note on
related party transactions Consob
Communication no. DEM/6064293 of July 28, 2006
Guarantees and commitments with third parties
Other information
4 Attachments
5 Independent Auditors' Report
| thousands of euro | Balance at 12 31 2017 |
Effect of non-recurring transactions |
Changes during the year |
Balance at 12 31 2018 |
|---|---|---|---|---|
| Trade receivables invoices issued | 262,343 | (154) | 85,872 | 348,061 |
| Trade receivables invoices to be issued | 303,916 | (83) | 80,181 | 384,014 |
| Bad debts provision | (14,599) | (284) | (14,883) | |
| Total trade receivables | 551,660 | (237) | 165,769 | 717,192 |
At December 31, 2018, trade receivables amounted to 717,192 thousand euro (551,660 thousand euro at December 31, 2017) and increased by 165,769 thousand euro, net of the effect of non-recurring transactions, negative for 237 thousand euro. These receivables include:
As of the balance sheet date, the bad debt provision calculated in compliance with the IFRS 9 standard amounted to 14,883 thousand euro, an increase of 284 thousand euro. This provision is considered adequate to cover the risks to which it relates.
The detailed changes in the provisions to adjust the values of receivables are outlined in the following table:
| thousands of euro | Balance at 12 31 2017 |
Effect of non-recurring transactions |
Accruals | Utilizations | Others changes |
Balance at 12 31 2018 |
|---|---|---|---|---|---|---|
| Bad debts provision | 14,599 | - | 849 | (643) | 78 | 14,883 |
It is noted that the first application of IFRS 9 led to the restatement of the opening bad debt provision at January 1, 2018, up 78 thousand euro. The balancing entry of this change is a shareholders' equity reserve.
The following is the aging of trade receivables:
| thousands of euro | Balance at 12 31 2018 |
Balance at 12 31 2017 |
|---|---|---|
| Trade receivables of which: | 717,192 | 551,660 |
| Current | 287,032 | 219,563 |
| Past due of which: | 61,029 | 42,780 |
| - Past due up to 30 days | 25,497 | 12,956 |
| - Past due from 31 to 180 days | 6,520 | 12,112 |
| - Past due from 181 to 365 days | 884 | 1,350 |
| - Past due over 365 days | 28,128 | 16,362 |
| Invoices to be issued | 384,014 | 303,916 |
| Bad debts provision | (14,883) | (14,599) |
| thousands of euro | Balance at Effect 12 31 2017 of non recurring |
Changes during the |
Balance at 12 31 2018 |
of which included in the NFP |
||
|---|---|---|---|---|---|---|
| transactions | year | 12 31 2017 | 12 31 2018 | |||
| Current derivatives | 96,172 | - | 66,871 | 163,043 | - | - |
| Other current assets of which: | 68,820 | - | 28,519 | 97,339 | - | - |
| - advances to suppliers | 19,619 | (2,210) | 17,409 | |||
| - receivables from employees | 215 | (11) | 204 | |||
| - tax receivables | 1,380 | 2,265 | 3,645 | |||
| - receivables related to future years | 1,522 | 6,540 | 8,062 | |||
| - receivables from subsidiaries for tax consolidation |
39,577 | 20,998 | 60,575 | |||
| - receivables from social security entities | 975 | (65) | 910 | |||
| - receivables for water derivation fees | 53 | (1) | 52 | |||
| - stamp office | 126 | (2) | 124 | |||
| - receivables for security deposits | 1,006 | 270 | 1,276 | |||
| - receivables from Ergosud | 2,175 | - | 2,175 | |||
| - other sundry receivables | 2,172 | 735 | 2,907 | |||
| Total other current assets | 164,992 | - | 95,390 | 260,382 | - | - |
"Other current assets" presented a balance of 260,382 thousand euro (164,992 thousand euro at December 31, 2017), an increase of 95,390 thousand euro with respect to the previous year.
"Current derivative instruments" amounting to 163,043 thousand euro (96,172 thousand euro at December 31, 2017) refer to the fair value valuation of commodity derivatives at the end of the year under review. The increase is due both to the increase in the fair value valuation of the year and to the change in the amounts covered.
Tax receivables, amounting to 3,645 thousand euro, mainly relate to tax receivables from the tax authorities for excise and withholding taxes.
Receivables from Ergosud, amounting to 2,175 thousand euro, unchanged over the previous year, refer to the receivable due for new entry plants (Scandale Plant), regarding portions of emission allowances as provided by ARERA Resolutions no. ARG/elt 194/10 and no. 117/10.
| thousands of euro | Balance at 12 31 2017 |
Effect Changes of non during the recurring year |
Balance at 12 31 2018 |
of which included in the NFP |
||
|---|---|---|---|---|---|---|
| transactions | 12 31 2017 | 12 31 2018 | ||||
| Financial assets measured at amortized cost (HTC) of which: |
||||||
| - third parties | 1,200 | - | - | 1,200 | 1,200 | 1,200 |
| - related parties | 877,425 | 56 | (217,304) | 660,177 | 877,425 | 660,177 |
| Total financial assets measured at amortized cost (HTC) |
878,625 | 56 | (217,304) | 661,377 | 878,625 | 661,377 |
| Total current financial assets | 878,625 | 56 | (217,304) | 661,377 | 878,625 | 661,377 |
"Current financial assets" refer to "Financial assets measured at amortized cost (HTC)" totalling 661,377 thousand euro and refer:
• for 1,200 thousand euro, to financial receivables from third parties;
Overview of performance, financial conditions and net debt
1 Financial statements
2 Financial statements pursuant to Consob Resolution no. 17221 of March 12, 2010
General information on A2A S.p.A. Financial statements Basis of
preparation
Changes in international accounting standards
Accounting standards and policies
Net debt
Notes to the income statement
Note on related party transactions
Consob Communication no. DEM/6064293 of July 28, 2006
Guarantees and commitments with third parties Other information
4 Attachments
5 Independent Auditors' Report
This item, net of the effect of non-recurring transactions, positive for 56 thousand euro, decreased by 217,304 thousand euro and refers to lower receivables accrued on the correspondence current accounts partly offset by higher receivables for new loans granted to subsidiaries.
| thousands of euro | Balance at 12 31 2017 |
Effect of non-recurring transactions |
Changes during the year |
Balance at 12 31 2018 |
|---|---|---|---|---|
| Current tax assets | 87,135 | - | (51,593) | 35,542 |
At December 31, 2018, this item amounted to 35,542 thousand euro (87,135 thousand euro at December 31, 2017) and refers to IRAP receivables (11,318 thousand euro), as well as to IRES receivables (23,599 thousand euro), relating to IRES for amounts requested for reimbursement on payments of previous years, and the remaining credit for Robin Tax (625 thousand euro) paid in previous years and that will be recovered in subsequent years.
| thousands of euro | Balance at 12 31 2017 |
Effect of non |
Changes during the |
Balance at 12 31 2018 |
of which included in the NFP |
|
|---|---|---|---|---|---|---|
| recurring transactions |
year | 12 31 2017 | 12 31 2018 | |||
| Cash and cash equivalents | 611,942 | - | (101,995) | 509,947 | 611,942 | 509,947 |
"Cash and cash equivalents" at December 31, 2018 amounted to 509,947 thousand euro (611,942 thousand euro at December 31, 2017), with a decrease of 101,995 thousand euro compared with the end of the previous year. Bank deposits include accrued interest not yet credited by the end of the year.
| thousands of euro | Balance at 12 31 2017 |
Effect of non-recurring transactions |
Changes during the year |
Balance at 12 31 2018 |
|---|---|---|---|---|
| Non-current assets held for sale | 224,186 | - | (115,226) | 108,960 |
"Non-current assets held for sale" at December 31, 2018 show a balance of 108,960 thousand euro and refer to the fair value of the investment in EPCG, 18.70% held by A2A S.p.A. (41.75% at December 31, 2017).
The decrease compared to December 31, 2017 is due to the collections in the year under review by virtue of a new agreement negotiated with the Government of Montenegro, and approved by the same on April 27, 2018, which provides for the execution of the put option exercised by A2A S.p.A. on July 3, 2017 in four tranches in the period between May 1, 2018 and July 31, 2019, with an acceleration compared to the terms set by the Shareholders' Agreement of August 29, 2016 (i.e. 7 tranches from May 1, 2018 to May 1, 2024).
Equity, which at December 31, 2018 amounted to 2,635,588 thousand euro (2,430,047 thousand euro at December 31, 2017), is set forth within the following table:
| thousands of euro | Balance at 12 31 2017 |
Effect of non-recurring transactions |
Changes during the year |
Balance at 12 31 2018 |
|---|---|---|---|---|
| Equity | ||||
| Share capital | 1,629,111 | - | - | 1,629,111 |
| (Treasury shares) | (53,661) | - | - | (53,661) |
| Reserves | 586,136 | - | 100,911 | 687,047 |
| Net result of the year | 268,461 | - | 104,630 | 373,091 |
| Total equity | 2,430,047 | - | 205,541 | 2,635,588 |
At December 31, 2018, the "Share capital" amounted to 1,629,111 thousand euro and is comprised of 3,132,905,277 ordinary shares with a unitary value of 0.52 euro each.
The "Treasury shares" amounted to 53,661 thousand euro, unchanged with respect to December 31, 2017 and consist of 23,721,421 own shares held by the company.
| thousands of euro | Balance at 12 31 2017 |
Effect of non-recurring transactions |
Changes during the year |
Balance at 12 31 2018 |
|---|---|---|---|---|
| Reserves | 586,136 | - | 100,911 | 687,047 |
| of which: | ||||
| Change in fair value of derivatives Cash flow hedges and fair value bonds |
(22,799) | - | 19,453 | (3,346) |
| Tax effect | 5,712 | - | (4,737) | 975 |
| Cash flow hedge reserves and fair value bonds |
(17,087) | - | 14,716 | (2,371) |
| Change in the IAS 19 Revised reserve - Employee Benefits |
(47,833) | - | (2,276) | (50,109) |
| Tax effect | 13,393 | - | 692 | 14,085 |
| IAS 19 Revised reserves - Employee benefits |
(34,440) | - | (1,584) | (36,024) |
| Change in the Available for sale reserves | (608) | - | - | (608) |
| Tax effect | 146 | - | - | 146 |
| Change in Available for sale | (462) | - | - | (462) |
"Reserves", which at December 31, 2018 amounted to 687,047 thousand euro (586,136 thousand euro at December 31, 2017), increased by 100,911 thousand euro mainly due to the distribution of the 2016 dividend. The total impact of the first-time application of IFRS 9 on shareholders' equity attributable, net of deferred taxes, was a negative 971 thousand euro and was mainly due to the restatement of the amortized cost on committed lines and the opening bad debt provision at January 1, 2018.
Overview of performance, financial conditions and net debt
1 Financial statements
2 Financial statements pursuant to Consob Resolution no. 17221 of March 12, 2010
General information on A2A S.p.A. Financial statements Basis of preparation Changes in international
accounting standards Accounting standards and
Net debt
Notes to the income statement Note on related party transactions Consob
Communication no. DEM/6064293 of July 28, 2006
Guarantees and commitments with third parties
Other information
4 Attachments
5 Independent Auditors' Report
This item includes the following unavailable reserves:
It should be noted that during 2018, dividends amounting to 179,711 thousand euro corresponding to 0.0578 euro per share were distributed, as approved by the shareholders' meeting on April 27, 2018.
This item was positive for 373,091 thousand euro and includes the net result for the reporting year.
Reserves and the profits that in case of distribution must be considered as IRES tax suspension amounted to 72,180 thousand euro.
| thousands of euro | Balance at 12 31 2017 |
Effect of non recurring transactions |
Changes during the year |
Balance at 12 31 2018 |
of which included in the NFP |
||
|---|---|---|---|---|---|---|---|
| 12 31 2017 | 12 31 2018 | ||||||
| Non-convertible bonds | 2,649,910 | - | (499,540) | 2,150,370 | 2,649,910 | 2,150,370 | |
| Payables to banks | 743,038 | - | (52,001) | 691,037 | 743,038 | 691,037 | |
| Total non-current financial liabilities | 3,392,948 | - | (551,541) | 2,841,407 | 3,392,948 | 2,841,407 |
"Non-current financial liabilities" amounted to 2,841,407 thousand euro (3,392,948 thousand euro at December 31, 2017), reflecting a decrease of 551,541 thousand euro.
"Non-convertible bonds" regard the following bonds, accounted for at amortized cost:
299,250 thousand euro, Private Placement maturing in December 2024 and coupon of 1.25%, the nominal value of which is equal to 300,000 thousand euro;
297,455 thousand euro, maturing in February 2025 and coupon of 1.75%, the nominal value of which is equal to 300,000 thousand euro;
The net decrease in the non-current component of "Non-convertible bonds", amounting to 499,540 thousand euro compared with December 31, 2017, is mainly due to the reclassification under "Current financial liabilities" of the bond maturing in 2019, net of the increase in the ECB exchange rate applied to the bond in yen.
Non-current "Payables to banks" amounted to 691,037 thousand euro, a decrease of 52,001 thousand euro compared to the previous year-end, due to the reclassification under current liabilities of the portions of capital maturing within the following year.
The following table shows the comparison, for each long-term debt category, between the book value and the fair value, including the portion falling due in the next 12 months. For listed debt instruments, the fair value is determined using stock prices, while for unlisted securities the fair value is determined using valuation models for each category of financial instrument and using market data relating to the closing date of the financial year, including the credit spreads of A2A S.p.A..
| thousands of euro | Nominal value |
Book value |
Current portion |
Non-current portion |
Fair Value |
|---|---|---|---|---|---|
| Bonds | 2,673,404 | 2,706,287 | 555,917 | 2,150,370 | 2,831,389 |
| Bank loans | 744,067 | 743,602 | 52,565 | 691,037 | 705,580 |
| Total | 3,417,471 | 3,449,889 | 608,482 | 2,841,407 | 3,536,969 |
At the end of the fiscal year, "Employee Benefits" amounted to 142,277 thousand euro (143,512 thousand euro as of December 31, 2017) with changes as follows during the period:
| thousands of euro | Balance at 12 31 2017 |
Effect of non-recurring transactions |
Provisions | Utilizations | Others changes |
Balance at 12 31 2018 |
|---|---|---|---|---|---|---|
| Employee leaving entitlement (TFR) | 28,006 | (26) | 5,462 | (1,206) | (4,732) | 27,504 |
| Employee benefits | 115,506 | (27) | - | (5,374) | 4,668 | 114,773 |
| Total employee benefits | 143,512 | (53) | 5,462 | (6,580) | (64) | 142,277 |
Changes during the year include 5,462 thousand euro in provisions for the year, 6,580 thousand euro in the decrease due to disbursements during the year, 53 thousand euro in the decrease due to the effect of extraordinary transactions during the year and 64 thousand euro in the net decrease due to actuarial valuations for the year, which include the increase of 277 thousand euro in the service cost and the interest cost for 1,988 thousand, the increase deriving from actuarial gains/losses for 2,277 thousand euro and other negative changes for 4,606 thousand euro.
Overview of performance, financial conditions and net debt
1 Financial statements
2 Financial statements pursuant to Consob Resolution no. 17221 of March 12, 2010
General information on A2A S.p.A.
Financial statements
Basis of
preparation
Changes in international accounting standards
Accounting standards and policies
Net debt
Notes to the income statement Note on related party transactions Consob Communication
no. DEM/6064293 of July 28, 2006
Guarantees and commitments with third parties Other information
4 Attachments
5 Independent Auditors' Report
| 2018 | 2017 | |
|---|---|---|
| Discount rate | from 0.1% to 1.6% | from 0.0% to 1.3% |
| Annual inflation rate | 1.5% | 1.5% |
| Annual seniority bonus increase rate | 2.0% | 2.0% |
| Annual additional months increase rate | 0.0% | 0.0% |
| Annual cost of electricity increase rate | 2.0% | 2.0% |
| Annual cost of gas increase rate | 0.0% | 0.0% |
| Annual salary increase rate | 1.0% | 1.0% |
| Annual TFR increase rate | 2.6% | 2.6% |
| Average annual increase rate of supplementary pensions | 1.1% | 1.1% |
| Annual turnover frequencies | 5.0% | from 4.0% to 5.0% |
| Annual TFR advance frequencies | 2.0% | from 2.0% to 2.5% |
Technical valuations were carried out on the basis of the following assumptions:
It is noted that:
As required by IAS 19, the sensitivity for post-employment employee benefit obligations is outlined below:
| thousands of euro | Turnover rate +1% |
Turnover rate -1% |
Inflation rate +0.25% |
Inflation rate | -0.25% | Actualization rate + 0.25% |
Actualization rate - 0.25% |
|
|---|---|---|---|---|---|---|---|---|
| TFR | 27,104 | 27,295 | 27,467 | 26,928 | 26,767 | 27,635 | ||
| thousands of euro | Actualization | rate + 0.25% |
Actualization rate - 0.25% |
Mortality table increased by 10% |
Mortality table decreased by 10% |
|||
| Premungas | 21,040 | 21,775 | 20,368 | 22,563 | ||||
| Electricity and gas discount | 87,397 | 90,444 | 90,547 | 85,470 | ||||
| Additional months | 3,203 | 3,369 | n.s. | n.s. |
| thousands of euro | Balance at 12 31 2017 |
Effect of non recurring transactions |
Provisions | Releases | Uses | Others changes |
Balance at 12 31 2018 |
|---|---|---|---|---|---|---|---|
| Tax provisions | 2,307 | - | 130 | (427) | (24) | - | 1,986 |
| Personnel lawsuits and disputes provisions |
20,743 | - | 200 | (4,253) | (2,424) | 375 | 14,641 |
| Other risk provisions | 141,848 | (127) | 7,628 | (1,160) | (1,519) | 17,007 | 163,677 |
| Provisions for risks, charges and liabilities for landfills |
164,898 | (127) | 7,958 | (5,840) | (3,967) | 17,382 | 180,304 |
"Tax Provisions", which amounted to 1,986 thousand euro, refer to provisions for pending or potential litigation with the tax authorities or territorial entities for levies and direct and indirect taxes. The changes in the year were related to the provisions for 130 thousand euro and releases for 427 thousand euro, mainly relating to the ICI/IMU dispute with some regional authorities and disputes with the tax authorities for VAT. Utilizations, for 24 thousand euro, refer to disbursements for the year resulting from the closure of some disputes in which the company was unsuccessful.
The "Personnel lawsuits and disputes provisions" amounted to 14,641 thousand euro and refer to lawsuits pending with social security institutions, for contributions not paid for 5,582 thousand euro, to lawsuits with third parties for 7,491 thousand euro and with employees for 1,568 thousand euro, to cover the liabilities that could arise from litigations in progress. Provisions for the year, for 200 thousand euro, mainly refer to disputes pending with third parties. Releases amounting to 4,253 thousand euro mainly refer to the disputes in progress with Social Security Institutions following the resolution of the dispute. Utilizations, for 2,424 thousand euro, mainly refer to the payment made following the resolution of the disputes with Social Security Institutions and with third parties. Other changes totalled 375 thousand euro.
"Other risk provisions", amounting to 163,677 thousand euro, relate to the provision concerning the burden of existing bonds present in the tolling contract with the company Ergosud S.p.A. for 82,001 thousand euro, to provisions relating to public water derivation fees for 42,987 thousand euro, to provisions for contractual charges for 14,601 thousand euro and other risk provisions for 24,088 thousand euro. Non-recurring transactions brought a negative effect of 127 thousand euro. Provisions for the year amounted to 7,628 thousand euro and mainly refer to allocations to provisions relating to public water derivation fees. Releases amounted to 1,160 thousand euro. Utilizations, amounting to 1,519 thousand euro mainly refer to outlays during the year for onerous contracts.
Overview of performance, financial conditions and net debt
1 Financial statements
2 Financial statements pursuant to Consob Resolution no. 17221 of March 12, 2010
General information on A2A S.p.A. Financial statements Basis of preparation Changes in
international accounting standards Accounting
standards and policies
Net debt
Notes to the income statement
Note on related party transactions
Consob Communication no. DEM/6064293 of July 28, 2006
Guarantees and commitments with third parties Other information
4 Attachments
5 Independent Auditors' Report
| 20) Other non-current liabilities | ||
|---|---|---|
| thousands of euro | Balance at 12 31 2017 |
Effect of non |
Changes during the |
Balance at 12 31 2018 |
of which included in the NFP |
|
|---|---|---|---|---|---|---|
| recurring transactions |
year | 12 31 2017 | 12 31 2018 | |||
| Other non-current liabilities | 10,462 | - | 202 | 10,664 | - | - |
| Non-current derivatives | 18,484 | - | (10,526) | 7,958 | 18,484 | 7,958 |
| Total other non-current liabilities | 28,946 | - | (10,324) | 18,622 | 18,484 | 7,958 |
"Other non-current liabilities" amounted to 18,622 thousand euro and are divided as follows:
| thousands of euro | Balance at 12 31 2017 |
Effect of non recurring |
Changes during the year |
Balance at 12 31 2018 |
of which included in the NFP |
|
|---|---|---|---|---|---|---|
| transactions | 12 31 2017 | 12 31 2018 | ||||
| Advances | 7 | - | 105 | 112 | ||
| Payables to suppliers | 613,095 | (14) | 64,751 | 677,832 | ||
| Trade payables to related parties: | 76,478 | - | 21,583 | 98,061 | ||
| - subsidiaries | 63,653 | - | 19,952 | 83,605 | ||
| - parent companies | 545 | - | - | 545 | ||
| - associates | 12,280 | - | 1,631 | 13,911 | ||
| Total trade payables | 689,580 | (14) | 86,439 | 776,005 | - | - |
| Payables to pension and social security institutions |
13,125 | - | 800 | 13,925 | ||
| Current derivatives | 86,520 | - | 69,022 | 155,542 | ||
| Other payables: | 142,434 | (34) | (61,391) | 81,009 | ||
| - payables for tax consolidation | 64,823 | - | (38,447) | 26,376 | ||
| - payables for tax transparency | 7,167 | - | - | 7,167 | ||
| - payables to personnel | 16,450 | (31) | 1,231 | 17,650 | ||
| - payables to Cassa per i Servizi Energetici e Ambientali |
3 | - | - | 3 | ||
| - tax payables | 39,774 | - | (25,633) | 14,141 | ||
| - payables for liabilities of competence of the following year |
497 | (3) | 38 | 532 | ||
| - payables for collections to be allocated | 5,948 | - | (1,874) | 4,074 | ||
| - payables to insurance companies | 1,598 | - | 341 | 1,939 | ||
| - payables to customers for work to be performed |
- | - | - | - | ||
| - payables to waterway municipalities | 1,183 | - | 25 | 1,208 | ||
| - others | 4,991 | - | 2,928 | 7,919 | ||
| Total other current liabilities | 242,079 | (34) | 8,431 | 250,476 | - | - |
| Total trade payables and other current liabilities |
931,659 | (48) | 94,870 | 1,026,481 | - | - |
"Trade payables and other current liabilities" amounted to 1,026,481 thousand euro (931,659 thousand euro at December 31, 2017), representing an overall increase of 94,870 thousand euro net of the effect of non-recurring transactions, negative for 48 thousand euro.
"Trade payables" amounted to 776,005 thousand euro and include both debt exposure to third-party suppliers (677,944 thousand euro) and trade payables to related parties (98,061 thousand euro).
"Payables to social security institutions" amounted to 13,925 thousand euro and relate to the company's debt position with social security and pension institutions, related to contributions of the month of December 2018 not yet paid.
"Current derivative instruments" amounted to 155,542 thousand euro and refer to the fair value valuation of commodity derivatives. The increase is due both to the increase in the fair value valuation of the year and to the change in the amounts covered.
"Other current liabilities" mainly refer to:
Overview of performance, financial conditions and net debt
1 Financial statements
2 Financial statements pursuant to Consob Resolution no. 17221 of March 12, 2010
General information on A2A S.p.A. Financial statements Basis of preparation
Changes in international accounting standards
Accounting standards and policies
Net debt
Notes to the income statement Note on
related party transactions
Consob Communication no. DEM/6064293 of July 28, 2006
Guarantees and commitments with third parties
Other information
4 Attachments
5 Independent Auditors' Report
| thousands of euro | Balance at 12 31 2017 |
Effect of non recurring |
Changes during the year |
Balance at 12 31 2018 |
of which included in the NFP |
|
|---|---|---|---|---|---|---|
| transactions | 12 31 2017 | 12 31 2018 | ||||
| Non-convertible bonds | 45,859 | - | 510,058 | 555,917 | 45,859 | 555,917 |
| Payables to banks | 47,121 | - | 5,444 | 52,565 | 47,121 | 52,565 |
| Other current financial liabilities | 2,349 | - | (2,349) | - | 2,349 | - |
| Financial payables to related parties | 414,818 | - | (3,388) | 411,430 | 414,818 | 411,430 |
| Total current financial liabilities | 510,147 | - | 509,765 | 1,019,912 | 510,147 | 1,019,912 |
"Current financial liabilities" amounted to 1,019,912 thousand euro, an increase of 509,765 thousand euro.
"Non-convertible bonds" show an increase of 510,058 thousand euro, due to the reclassification of the bond maturing in November 2019 and a coupon of 4.50%, with a nominal value of 510,703 thousand euro. At December 31, 2018, the calculation of interest coupons amounted to 45,859 thousand euro (unchanged from December 31, 2017).
Current "Payables to banks" increased by 5,444 thousand euro during the year, mainly due to the reclassification of the portion due within one year of a loan from the item "Non-current financial liabilities" net of the repayments of credit lines and portions of loans during the year under review.
"Other current financial liabilities" had no value at December 31, 2018 (2,349 thousand euro at December 31, 2017).
"Financial payables to related parties" amounted to 411,430 thousand euro and relate to intercompany current accounts on which rates are applied at market conditions, with variable Euribor base with specific spreads for companies.
| thousands of euro | Balance at 12 31 2017 |
Effect of non-recurring transactions |
Changes during the year |
Balance at 12 31 2018 |
|---|---|---|---|---|
| Tax liabilities | - | - | 28,894 | 28,894 |
At December 31, 2018, this item amounted to 28,894 thousand euro (no value at December 31, 2017) and refers to the payable for current IRES and IRAP.
The following table provides details of net debt:
| thousands of euro | Notes | 12 31 2018 | Effect of non-recurring transactions |
12 31 2017 |
|---|---|---|---|---|
| Bonds - non-current portion | 17 | 2,150,370 | - | 2,649,910 |
| Bank loans - non-current portion | 17 | 691,037 | - | 743,038 |
| Other non-current liabilities | 20 | 7,958 | - | 18,484 |
| Total medium/long-term debt | 2,849,365 | - | 3,411,432 | |
| Non-current financial assets with related parties | 3 | (608,173) | - | (72,120) |
| Other non-current financial assets and other non-current assets |
3-5 | (7,789) | - | (96) |
| Total medium/long-term financial receivables | (615,962) | - | (72,216) | |
| Total non-current net debt | 2,233,403 | - | 3,339,216 | |
| Bonds - current portion | 22 | 555,917 | - | 45,859 |
| Bank loans - current portion | 22 | 52,565 | - | 47,121 |
| Financial liabilities with third parties - current portion | 22 | - | - | 2,349 |
| Financial liabilities with related parties - current portion | 22 | 411,430 | - | 414,818 |
| Total short-term debt | 1,019,912 | - | 510,147 | |
| Other current assets | 8 | - | - | - |
| Financial assets with third parties - current portion | 9 | (1,200) | - | (1,200) |
| Financial assets with related parties - current portion | 9 | (660,177) | (56) | (877,425) |
| Total short-term financial receivables | (661,377) | (56) | (878,625) | |
| Cash and cash equivalents | 11 | (509,947) | - | (611,942) |
| Total current net debt | (151,412) | (56) | (980,420) | |
| Net financial debt | 2,081,991 | (56) | 2,358,796 |
Pursuant to IAS 7 "Cash Flow Statement", the following are the changes in financial assets and liabilities:
| thousands of euro | 12 31 2017 | Cash flow | Non-cash flow | 12 31 2018 | ||
|---|---|---|---|---|---|---|
| Effect of non recurring transactions |
Change in fair value |
Other changes |
||||
| Bonds | 2,695,769 | - | - | 7,547 | 2,971 | 2,706,287 |
| Financial payables | 1,207,326 | (47,131) | - | - | (5,163) | 1,155,032 |
| Other liabilities | 18,484 | - | - | (10,526) | - | 7,958 |
| Financial assets | (950,841) | (314,538) | (56) | - | (4,211) | (1,269,646) |
| Other assets | - | - | - | (7,693) | - | (7,693) |
| Net liabilities deriving from financing activities | 2,970,738 | (361,669) | (56) | (10,672) | (6,403) | 2,591,938 |
| Cash and cash equivalents | (611,942) | 101,995 | - | - | - | (509,947) |
| Net financial debt | 2,358,796 | (259,674) | (56) | (10,672) | (6,403) | 2,081,991 |
Overview of performance, financial conditions and net debt
1 Financial statements
2 Financial statements pursuant to Consob Resolution no. 17221 of March 12, 2010
General information on A2A S.p.A. Financial
statements Basis of
preparation Changes in
international accounting standards
Accounting standards and policies
Net debt Notes to the income statement
Note on related party transactions
Consob Communication no. DEM/6064293 of July 28, 2006
Guarantees and commitments
with third parties Other information
4 Attachments
5 Independent Auditors' Report
The income statement items of A2A S.p.A. at December 31, 2018 include the effects of the following extraordinary transactions:
Revenues in 2018 amounted to 3,825,628 thousand euro (3,089,311 thousand euro at December 31, 2017).
Details of the most important sources of revenues are provided below:
| Revenues thousands of euro |
12 31 2018 | 12 31 2017 | CHANGE |
|---|---|---|---|
| Revenues from the sale of goods | 3,578,015 | 2,885,105 | 692,910 |
| Revenues from services | 164,568 | 152,415 | 12,153 |
| Total revenues from the sale of goods and services | 3,742,583 | 3,037,520 | 705,063 |
| Other operating revenues | 83,045 | 51,791 | 31,254 |
| Total revenues | 3,825,628 | 3,089,311 | 736,317 |
Overview of performance, financial conditions and net debt
1 Financial statements
2 Financial statements pursuant to Consob Resolution no. 17221 of March 12, 2010
General information on A2A S.p.A. Financial
statements Basis of
preparation Changes in
international accounting standards
Accounting standards and policies
Notes to the balance sheet
Note on related party
transactions Consob Communication no. DEM/6064293
of July 28, 2006 Guarantees and
commitments with third parties Other information
4 Attachments
5 Independent Auditors' Report
| thousands of euro | 12 31 2018 | 12 31 2017 | CHANGE |
|---|---|---|---|
| Sales of electricity of which: | 2,295,143 | 1,938,607 | 356,536 |
| - third-party customers | 1,798,929 | 1,662,298 | 136,631 |
| - subsidiaries | 496,214 | 274,335 | 221,879 |
| - associates | - | 1,974 | (1,974) |
| Sales of gas and fuels of which: | 1,159,345 | 922,216 | 237,129 |
| - third-party customers | 648,998 | 539,913 | 109,085 |
| - subsidiaries | 506,089 | 382,194 | 123,895 |
| - associates | 4,258 | 109 | 4,149 |
| Sales of heat of which: | 375 | 285 | 90 |
| - third-party customers | - | - | - |
| - subsidiaries | 375 | 285 | 90 |
| Sales of materials and equipment of which: | 13,187 | 5,520 | 7,667 |
| - third-party customers | 7,375 | 1,151 | 6,224 |
| - subsidiaries | 5,773 | 4,323 | 1,450 |
| - associates | 39 | 46 | (7) |
| Sales of emission certificates and allowances of which: | 109,965 | 18,477 | 91,488 |
| - third-party customers and inventory change | 89,610 | 7,036 | 82,574 |
| - subsidiaries | 20,355 | 11,441 | 8,914 |
| Total revenues from the sale of goods | 3,578,015 | 2,885,105 | 692,910 |
| Services of which: | |||
| - third-party customers | 4,100 | 3,407 | 693 |
| - subsidiaries | 156,524 | 144,963 | 11,561 |
| - Municipalities of Milan and Brescia | 3,311 | 3,249 | 62 |
| - associates | 633 | 796 | (163) |
| Total revenues from services | 164,568 | 152,415 | 12,153 |
| Total revenues from the sale of goods and services | 3,742,583 | 3,037,520 | 705,063 |
| Other operating revenues of which: | |||
| Other revenues from subsidiaries | 23,925 | 7,971 | 15,954 |
| Other revenues from associates | 15 | 16 | (1) |
| Damage compensation | 837 | 607 | 230 |
| Contingent assets | 7,698 | 6,565 | 1,133 |
| Incentives for production from renewable sources (feed-in-tariff) |
47,589 | 34,137 | 13,452 |
| Gains on disposals of tangible assets | 631 | 66 | 565 |
| Other revenues | 2,350 | 2,429 | (79) |
| Total other operating revenues | 83,045 | 51,791 | 31,254 |
| Total revenues | 3,825,628 | 3,089,311 | 736,317 |
"Revenues from the sale of goods and services" amounted to 3,742,583 thousand euro (3,037,520 thousand euro in 2017).
Sales revenues amount to 3,578,015 thousand euro and mainly refer to the sale of electricity (2,295,143 thousand euro) to wholesalers and institutional operators (Gestore Mercato Elettrico S.p.A. and Terna S.p.A.), also through sales on the IPEX (Italian Power Exchange) markets as well as to subsidiaries and associates for a total of 8,088 million kWh (+44% compared to December 31, 2017), the sale of gas and fuels to third parties and to subsidiaries (1,159,345 thousand euro) resulting from the sale of 2,805 million cubic meters of natural gas (+21% compared with the previous year), the sale of heat, materials and equipment to third parties and subsidiaries (13,562 thousand euro), the increase of which compared with the end of the previous year is due mainly to the construction of a turn-key plant for the bio-drying of municipal solid waste in Spain, and the sale of environmental certificates to third parties and subsidiaries (109,965 thousand euro), the increase in which derives mainly from the sale of all the inventories of green certificates (approximately 63 GWh) still held in A2A S.p.A.'s portfolio, as well as higher revenues on CO2 mainly due to the effect of the increase in the sale price of the same in relation to the increase recorded in the reference scenario.
Revenues from services amount to 164,568 thousand euro and mainly relate to revenues from provisions to subsidiaries of administrative, fiscal, legal, managerial and technical services, and revenues from the Municipality of Milan for the video surveillance service.
"Other operating revenues", equal to 83,045 thousand euro (51,791 thousand euro in the previous year), refer to the recognition of incentives on net production from renewable sources (47,589 thousand euro) for the entire remaining period of right to Green Certificates after 2015 recognized by the Energy Services Operator, in implementation of the Ministerial Decree of July 6, 2012 as regards plants from renewable sources (entered into service by December 31, 2012 and that have acquired the right to benefit from Green Certificates); as well as rents from subsidiaries and associates, contingent assets recorded as a result of the difference of appropriations in previous years, reimbursements for damages and penalties received from customers, insurance and private entities.
"Operating expenses" totalled 3,515,874 thousand euro (2,787,877 thousand euro in 2017).
The main components of this item are as follows:
| Operating expenses thousands of euro |
12 31 2018 | 12 31 2017 | CHANGE |
|---|---|---|---|
| Expenses for raw materials and consumables | 2,983,280 | 2,297,983 | 685,297 |
| Expenses for services | 220,514 | 188,319 | 32,195 |
| Total expenses for raw materials and services | 3,203,794 | 2,486,302 | 717,492 |
| Other operating expenses | 312,080 | 301,575 | 10,505 |
| Total operating expenses | 3,515,874 | 2,787,877 | 727,997 |
Overview of performance, financial conditions and net debt
1 Financial statements
2 Financial statements pursuant to Consob Resolution no. 17221 of March 12, 2010
General information on A2A S.p.A. Financial statements
Basis of preparation
Changes in international accounting standards
Accounting standards and policies
Notes to the balance sheet
Note on
related party transactions Consob Communication no. DEM/6064293
of July 28, 2006 Guarantees and commitments
with third parties Other information
4 Attachments
5 Independent Auditors' Report
| thousands of euro | 12 31 2018 | 12 31 2017 | CHANGE |
|---|---|---|---|
| Purchases of power and fuel of which: | 2,884,211 | 2,264,696 | 619,515 |
| - third-party suppliers | 2,721,637 | 2,187,882 | 533,755 |
| - subsidiaries | 161,804 | 76,727 | 85,077 |
| - associates | 770 | 87 | 683 |
| Change in inventories of fuel | (16,480) | (10,363) | (6,117) |
| Purchases of water of which: | 184 | 220 | (36) |
| - third-party suppliers | 88 | 145 | (57) |
| - subsidiaries | 96 | 75 | 21 |
| Purchases of materials of which: | 11,782 | 7,227 | 4,555 |
| - third-party suppliers | 11,756 | 7,209 | 4,547 |
| - subsidiaries | 26 | 18 | 8 |
| Change in inventories of materials | 41 | 146 | (105) |
| Hedging gains on operating derivatives | (26,241) | (13,665) | (12,576) |
| Hedging losses on operating derivatives | 16,109 | 6,689 | 9,420 |
| Purchases of emission certificates and allowances of which: | 113,674 | 43,033 | 70,641 |
| - third-party suppliers | 112,966 | 42,879 | 70,087 |
| - subsidiaries | 708 | 154 | 554 |
| - associates | - | - | - |
| Total expenses for raw materials and consumables | 2,983,280 | 2,297,983 | 685,297 |
| Delivery and transmission costs of which: | 115,650 | 90,651 | 24,999 |
| - third-party suppliers | 113,051 | 87,590 | 25,461 |
| - subsidiaries | 2,599 | 3,061 | (462) |
| Maintenance and repairs | 30,062 | 27,503 | 2,559 |
| Services of which: | 74,802 | 70,165 | 4,637 |
| - third-party suppliers | 59,053 | 55,896 | 3,157 |
| - Municipalities of Milan and Brescia | - | - | - |
| - subsidiaries | 15,486 | 13,977 | 1,509 |
| - associates | 263 | 292 | (29) |
| Total expenses for services | 220,514 | 188,319 | 32,195 |
| Total expenses for raw materials and services | 3,203,794 | 2,486,302 | 717,492 |
| Leaseholds: | 231,159 | 227,493 | 3,666 |
| - third-party suppliers | 26,995 | 44,322 | (17,327) |
| - subsidiaries | 182,201 | 166,716 | 15,485 |
| - associates | 21,963 | 16,455 | 5,508 |
| Other operating expenses of which: | 80,921 | 74,082 | 6,839 |
| Other expenses from subsidiaries | 4,203 | 104 | 4,099 |
| Other expenses from associates | 58 | 76 | (18) |
| Water derivation concession fees | 35,811 | 35,499 | 312 |
| Damages and penalties | 811 | 808 | 3 |
| Contingent liabilities | 16,399 | 13,433 | 2,966 |
| Losses on disposal of tangible assets | 222 | 417 | (195) |
| Other operating expenses | 23,417 | 23,745 | (328) |
| Total other operating expenses | 312,080 | 301,575 | 10,505 |
| Total operating expenses | 3,515,874 | 2,787,877 | 727,997 |
The following table sets out details of the more significant components:
"Expenses for raw materials and services" amounted to 3,203,794 thousand euro (2,486,302 thousand euro in 2017).
Costs for raw materials and consumables amounted to 2,983,280 thousand euro and refer to costs for purchases of electricity and fuel (2,884,211 thousand euro) from third parties and subsidiaries for both electricity production and for resale to customers and wholesalers, the increase of which derives from both an increase in procurement unit prices and higher volumes of electricity and other fuels purchased; the change in inventories of fuels (-16,480 thousand euro), net of the positive effect of gains/losses from hedging derivatives (-10,132 thousand euro); the purchase of materials and water (12,007 thousand euro including the change in inventories); and the purchase of environmental certificates (113,674 thousand euro), the increase of which refers in particular to higher purchases of CO2 mainly due to the increase in the average procurement price as a result of as recorded in the reference scenario in the year.
Service costs amounted to 220,514 thousand euro and relate to the logistics costs for transport on the natural gas network (115,650 thousand euro), costs for maintenance and repairs (30,062 thousand euro) related to both the plants and information systems of the company, as well as costs for services from third parties and subsidiaries and associates (74,802 thousand euro) that include costs for administrative and technical professional services, costs for certification activities, gas storage costs, expenses for insurance, monitoring, banking and other services. The increase compared to the previous year is mainly due to the higher costs for the transport of natural gas due to the higher volumes intermediated compared to the previous year.
"Other operating expenses" amounted to 312,080 thousand euro (301,575 thousand euro in 2017). This item includes the use of third-party assets for 231,159 thousand euro mainly relating to the contracting of thermoelectric production plants "tolling agreement" owned by the subsidiaries A2A Energiefuture S.p.A. and A2A gencogas S.p.A., costs related to the use of part of a portion of the electricity capacity of Ergosud S.p.A. under the "tolling" contract and administration stipulated between the parties. Other costs amounted to 80,921 thousand euro and mainly refer to public water derivation fees, damages and penalties and contingent liabilities.
During the year, the Company paid 2,000 thousand euro in donations to the AEM and ASM Foundations.
The following table sets out the results arising from the trading portfolio; these figures relate to trading in electricity, gas and environmental certificates.
| Trading margin thousands of euro |
NOTES | 12 31 2018 | 12 31 2017 |
|---|---|---|---|
| Revenues | 25 | 1,405,722 | 1,497,038 |
| Operating expenses | 26 | (1,401,361) | (1,494,586) |
| Total trading margin | 4,361 | 2,452 |
Consistent with the previous year, trading activities were carried out mainly on a systematic basis, focusing on strategies of relative values between different energy commodities and on geographical and temporal differentials, minimizing the use of more expensive assets for energy transport and natural gas storage. Transactions with options on energy contracts and volatility trading were also particularly important, with a positive margin also thanks to a context of favourable and volatile market prices.
Overview of performance, financial conditions and net debt
1 Financial statements
2 Financial statements pursuant to Consob Resolution no. 17221 of March 12, 2010
General information on A2A S.p.A. Financial statements Basis of preparation Changes in international
accounting standards Accounting
standards and policies Notes to the
balance sheet Net debt
Note on related party transactions Consob
Communication no. DEM/6064293 of July 28, 2006
Guarantees and commitments with third parties
Other information
4 Attachments
5 Independent Auditors' Report
Net of capitalized expenses, labour costs at December 31, 2018, amounted to 134,536 thousand euro (127,819 thousand euro in the previous year).
"Labour costs" may be analysed as follows:
| Labour costs thousands of euro |
12 31 2018 | 12 31 2017 | CHANGE |
|---|---|---|---|
| Wages and salaries | 89,349 | 85,264 | 4,085 |
| Social security charges | 29,160 | 27,663 | 1,497 |
| Employee leaving entitlement (TFR) | 5,462 | 5,125 | 337 |
| Other costs | 13,529 | 11,126 | 2,403 |
| Total labour costs before capitalizations | 137,500 | 129,178 | 8,322 |
| Capitalized labour costs | (2,964) | (1,359) | (1,605) |
| Total labour costs | 134,536 | 127,819 | 6,717 |
T he table below shows the average number of employees during the year, broken down by category:
| 2018 | 2017 | CHANGE | |
|---|---|---|---|
| Managers | 98 | 92 | 6 |
| Supervisors | 277 | 259 | 18 |
| White-collar workers | 1,001 | 969 | 32 |
| Blue-collar workers | 169 | 167 | 2 |
| Total | 1,545 | 1,487 | 58 |
At December 31, 2018, A2A S.p.A. employees totalled 1,581, including the effects of non-recurring transactions for the year, while at December 31, 2017, they were equal to 1,500.
The item "Other labour costs" includes early retirement incentives for 8 thousand euro (-191 thousand euro at December 31, 2017).
The item also includes the remuneration paid by A2A S.p.A. to the members of the Board of Directors in the year for a total of 1,697 thousand euro; for further details, reference is made to the specific file "Remuneration Report - 2019".
Due to the effect of the dynamics explained above, "Gross operating margin" totalled 175,218 thousand euro (173,615 thousand euro in 2017).
"Depreciation, amortization, provisions and write-downs" equalled 90,452 thousand euro (87,733 thousand euro at December 31, 2017).
The following table provides details of the individual items:
| Depreciation, amortization, provisions and write-downs thousands of euro |
12 31 2018 | 12 31 2017 | CHANGE |
|---|---|---|---|
| Amortization of intangible assets | 10,420 | 8,299 | 2,121 |
| Depreciation of tangible assets | 72,869 | 72,961 | (92) |
| Other write-downs of fixed assets | 4,196 | - | 4,196 |
| Total depreciation, amortization and write-downs | 87,485 | 81,260 | 6,225 |
| Bad debt provision on receivables recognized as current assets | 849 | 5,750 | (4,901) |
| Provisions for risks | 2,118 | 723 | 1,395 |
| Total depreciation, amortization, provisions and write-downs |
90,452 | 87,733 | 2,719 |
In particular, "Depreciation and Amortization" totalled 83,289 thousand euro (81,260 thousand euro in 2017). This item includes, in addition to the effect of non-recurring operations, depreciation and amortization resulting from investments made during the year in question net of the depreciation and amortization following the conclusion of the process of depreciation of plant parts and disposals during the year. Depreciation is calculated on the basis of technical and economic rates considered representative of the remaining useful life of the related tangible assets.
At December 31, 2018, write-downs of fixed assets amounted to 4,196 thousand euro (no value at December 31, 2017) and refer to the write-down of a building owned by A2A S.p.A. relating to the Monfalcone thermoelectric plant following the results of the Impairment Test carried out by an independent external expert.
With regard to large-scale diversion hydroelectric concessions, reference should be made to note 1) Tangible assets for further information about the regulatory developments in the sector.
The "Bad debt provision" amounted to 849 thousand euro (5,750 thousand euro at December 31, 2017).
The balance of "Provisions for risks and charges" shows a net effect of 2,118 thousand euro (723 thousand euro at December 31, 2017) due to allocations of 7,958 thousand euro made during the year, offset by the 5,840 thousand euro of risk provisions made in previous years, released in the current year since the original disputes have ceased to exist. Provisions in the year included for 7,628 thousand euro provisions to "Other risk provisions" mainly related to public water derivation fees and contractual charges, for 200 thousand euro provisions to "Personnel lawsuits and disputes provision", for 130 thousand euro provisions to "Tax provisions"; releases mainly refer to "Personnel lawsuits and disputes provisions" relating to ongoing lawsuits with Social Security Institutions. For further details, reference is made to note 19) Provisions for risks, charges and liabilities for landfills.
The "Net Operating Result" is positive by 84,766 thousand euro (85,882 thousand euro at December 31, 2017).
At December 31, 2018, the item in question amounted to 5,724 thousand euro and includes the gain deriving from the sale of the investment held in the company Rudnik Uglja ad Pljevlja. At December 31, 2017, this item had a balance of 157 thousand euro and included the income deriving from the sale of the business segment relating to "Security Control Room and Inspection Service" to the subsidiary A2A Security S.c.p.a..
Overview of performance, financial conditions and net debt
1 Financial statements
2 Financial statements pursuant to Consob Resolution no. 17221 of March 12, 2010
General information on A2A S.p.A. Financial statements Basis of preparation Changes in international accounting standards Accounting standards and policies Notes to the
balance sheet Net debt
Note on related party transactions
Consob Communication no. DEM/6064293 of July 28, 2006
Guarantees and commitments with third parties Other information
4 Attachments
5 Independent Auditors' Report
Financial income exceeded financial expenses by 276,123 thousand euro (positive for 239,431 thousand euro at December 31, 2017). Details of the most significant items are shown in the table below:
| Financial income thousands of euro |
12 31 2018 | 12 31 2017 | CHANGE |
|---|---|---|---|
| Income on derivatives | - | 28 | (28) |
| Income from financial assets | 460,220 | 360,995 | 99,225 |
| Income from dividends: | 366,784 | 345,758 | 21,026 |
| - subsidiaries | 365,505 | 344,202 | 21,303 |
| - associates | 1,057 | 1,444 | (387) |
| - in other companies | 222 | 112 | 110 |
| Gains on financial assets | 76,311 | 495 | 75,816 |
| Income on receivables/securities recorded as non-current assets: |
- | - | - |
| - from others | - | - | - |
| Income on receivables/securities recorded as current assets: | 14,188 | 13,823 | 365 |
| - from subsidiaries | 13,753 | 11,253 | 2,500 |
| - from associates | - | 34 | (34) |
| - from parent companies | - | - | - |
| - from others: | 435 | 2,536 | (2,101) |
| a) on bank accounts | 191 | 153 | 38 |
| b) on other receivables | 244 | 2,383 | (2,139) |
| Foreign exchange gains | 2,937 | 919 | 2,018 |
| Total financial income | 460,220 | 361,023 | 99,197 |
"Financial income" totalled 460,220 thousand euro (361,023 thousand euro at December 31, 2017), and relate to income from financial assets.
Income from derivatives did not show any value at December 31, 2018, while at the end of the previous year, it amounted to 28 thousand euro and referred to the realized part of contracts on financial derivatives.
Income on financial assets amounted to 460,220 thousand euro (360,995 thousand euro at December 31, 2017) and concerned:
| Financial expenses thousands of euro |
12 31 2018 | 12 31 2017 | CHANGE |
|---|---|---|---|
| Expenses on financial assets held for trading | 80,908 | 1,459 | 79,449 |
| - Shareholdings write-downs/losses | 80,908 | 1,459 | 79,449 |
| Expenses on derivatives | 3,610 | 4,190 | (580) |
| Expenses on financial assets | 99,579 | 115,943 | (16,364) |
| - from subsidiaries | 42 | 40 | 2 |
| - from associates | - | - | - |
| - parent company | - | - | - |
| - others: | 99,537 | 115,903 | (16,366) |
| a) interest on bond loans | 90,624 | 91,043 | (419) |
| b) banks | 3,903 | 4,827 | (924) |
| c) discounting charges | 2,091 | 2,120 | (29) |
| d) sundry | 93 | 16,618 | (16,525) |
| e) foreign exchange losses | 2,826 | 1,295 | 1,531 |
| Total financial expenses | 184,097 | 121,592 | 62,505 |
"Financial expenses" amounted to 184,097 thousand euro (121,592 thousand euro in 2017) and referred to:
The nature and content of derivatives are described in the section "Other information".
Overview of performance, financial conditions and net debt
1 Financial statements
2 Financial statements pursuant to Consob Resolution no. 17221 of March 12, 2010
General information on A2A S.p.A. Financial statements Basis of preparation Changes in international accounting standards Accounting standards and policies Notes to the
balance sheet Net debt
Note on related party transactions Consob
Communication no. DEM/6064293 of July 28, 2006
Guarantees and commitments with third parties Other information
4 Attachments
5 Independent Auditors' Report
6 Report of the Board of Auditors
| Losses/gains for income taxes thousands of euro |
12 31 2018 | 12 31 2017 | CHANGE |
|---|---|---|---|
| Current IRES | 15,929 | (7,511) | 23,440 |
| Current IRAP | 2,622 | - | 2,622 |
| Effect of differences - taxes of previous years | 1,473 | (823) | 2,296 |
| Total current taxes | 20,024 | (8,334) | 28,358 |
| Deferred tax assets | 4,788 | 21,797 | (17,009) |
| Deferred tax liabilities | (10,640) | (11,285) | 645 |
| Total losses/gains for income taxes | 14,172 | 2,178 | 11,994 |
It is noted that for IRES purposes, the company filed for tax on a consolidated basis, together with its main subsidiaries, in accordance with arts. 117-129 of DPR 917/86.
To this end, a contract has been entered into with each of the subsidiaries to regulate the tax benefits and burdens transferred, with specific reference to current items.
The deferred tax assets and liabilities calculated when determining the subsidiaries' taxable income, again only for IRES purposes, are not transferred to the parent company, A2A S.p.A., but are recognized in the income statement of the individual subsidiary each time there is an effective divergence between net income calculated for tax reporting purposes and net income calculated for financial reporting purposes due to any temporary differences. The deferred tax assets and liabilities shown in the income statement of A2A are therefore calculated exclusively on the divergences between its income for taxable purposes and income for financial reporting purposes.
Current income tax (IRES) of A2A S.p.A. is calculated on its own taxable income net of the adjustments relating to the national tax consolidation filing, in accordance with appendix E of accounting standard OIC 25 of August 2014.
In compliance with accounting standard OIC 25, the "income/expense related to consolidation", which constitute the remuneration/counter-entry for the transfer to the parent company A2A of a tax loss or taxable income, are recognized in the balance sheet.
The total amount of IRAP is calculated at 5.57% of the net value of production, suitably adjusted for the items foreseen in the relevant tax legislation (see below for information on the rate).
The deferred tax assets and liabilities for IRAP purposes are booked to the income statement so as to show the total tax charge for the year, taking into account the tax effects of temporary differences. The recoverability of the "IRES deferred tax assets" recorded in the financial statements is considered probable, as the future plans provide for IRES taxable income sufficient for the absorption of the temporary differences that will be reversed; on the other hand, deferred tax assets and liabilities recorded for IRAP purposes are those considered adequate with respect to the best forecast of absorption from future taxable income.
No items have been excluded from the calculation of deferred taxation for IRES or IRAP purposes, with the exceptions highlighted above, and deferred tax liabilities and assets are recognized according to the balance sheet method.
At December 31, 2018, income taxes for the year (IRES and IRAP), amounted to 14,172 thousand euro (2,178 thousand euro at the end of the previous year) and were made up as follows:
1,394 thousand euro for non-recoverable foreign taxes;
1,473 thousand euro related to taxes of previous years;
The main permanent increases in IRES include write-downs of shareholding in the amount of 73,000 thousand euro, non-deductible extraordinary expenses in the amount of 4,622 thousand euro, as well as property taxes (IMU) in the amount of 10,403 thousand euro.
Reconciliation between the statutory tax rate and the effective tax rate for IRES and IRAP purposes are presented in the statements below.
| Pre-tax profit | 387,263,461 | |
|---|---|---|
| Theoretical tax expense | 92,943,231 | |
| Permanent differences | (325,377,436) | |
| Income before taxes adjusted for permanent differences | 61,886,025 | |
| Temporary differences deductible in subsequent years | 16,963,891 | |
| Temporary differences taxable in subsequent years | (67,045) | |
| Reversal of prior year temporary differences | 7,617,538 | |
| Taxable income | 86,400,409 | |
| Current taxes on income for the year | 20,736,098 | |
| Other income to be deducted from tax consolidation | (5,351,409) | |
| Taxes to be deducted to equity | (82,636) | |
| Other tax receivables to be deducted | (767,000) | |
| Other non-recoverable taxes to be deducted | 1,393,916 | |
| Total current income taxes for the year | 15,928,969 |
| Difference between production value and costs | 172,005,442 | |
|---|---|---|
| Costs not relevant for IRAP purposes | 125,575,425 | |
| Total | 46,430,017 | |
| Theoretical tax expense (5.57%) | 2,586,152 | |
| Temporary differences deductible in subsequent years | 14,271,400 | |
| Temporary differences taxable in subsequent years | - | |
| Reversal of prior year temporary differences | (13,624,543) | |
| Taxable income for IRAP purposes | 47,076,874 | |
| Current IRAP on income for the year | 2,622,182 | |
Overview of performance, financial conditions and net debt
1 Financial statements
2 Financial statements pursuant to Consob Resolution no. 17221 of March 12, 2010
General information on A2A S.p.A. Financial statements Basis of
preparation
Changes in international accounting standards
Accounting standards and policies
Notes to the balance sheet Net debt
Note on
related party transactions Consob
Communication no. DEM/6064293 of July 28, 2006
Guarantees and commitments
with third parties Other information
4 Attachments
5 Independent Auditors' Report
Details are provided below on the analytic situation of the deferred tax assets and liabilities which, as required by international accounting standards, also shows the changes in equity reserves.
| Case description amounts in euro |
Deferred tax liabilities A2A previous year |
Non recurring transactions 2018 |
Deferred tax liabilities previous year |
Adjustments | Uses in current year | ||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| Taxable amount |
Taxable amount |
Taxable amount |
Rate | Tax | Taxable Rate amount |
Tax | Taxable amount |
Rate | Tax | ||
| Measurement differences for tangible assets | 578,766,925 (23,606,297) 555,160,628 | 24.0% 133,238,551 | - 24.0% |
- 44,757,111 |
24.0% | 10,741,707 | |||||
| Adoption of the finance lease standard (IAS 17) | 19,636,091 | - | 19,636,091 | 24.0% | 4,712,662 | - 24.0% |
- 639,491 |
24.0% | 153,478 | ||
| Measurement differences of intangible assets | 12,090,445 | - | 12,090,445 | 24.0% | 2,901,707 | - 24.0% |
- | 24.0% | - | ||
| Deferred capital gains | 125,377 | - | 125,377 | 24.0% | 30,090 | - 24.0% |
- 31,344 |
- 24.0% |
7,523 | ||
| Employee leaving entitlement (TFR) | 5,108,781 | - | 5,108,781 | 24.0% | 1,226,107 | - 24.0% |
- | - 24.0% |
- | ||
| Other deferred tax liabilities | 22,105,695 | - | 22,105,695 | 24.0% | 5,305,367 | 1,360,702 24.0% |
326,568 | 372,235 | 24.0% | 89,336 | |
| Total | 637,833,315 (23,606,297) 614,227,018 | 147,414,484 | 1,360,702 | 326,568 45,800,181 | 10,992,043 |
| Case description amounts in euro |
Deferred tax assets A2A previous year |
Non recurring transactions 2018 |
Deferred tax assets previous year |
Adjustments | Uses in current year | |||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Taxable amount |
Taxable amount |
Taxable amount |
Rate | Tax | Taxable amount |
Rate | Tax | Taxable amount |
Rate | Tax | ||
| Taxed risk provisions | 284,643,268 | (127,063) 284,516,205 | 24.0% | 68,283,889 | (16,750) | 24.0% | (4,020) | 15,036,283 | 24.0% | 3,608,708 | ||
| Amortization, depreciation and write-downs | 302,360,346 (13,811,836) 288,548,510 | 24.0% | 69,251,642 | - | 24.0% | - | 21,862,810 | 24.0% | 5,247,074 | |||
| Application of the financial instrument standard (IAS 39) | 1,497,250 | - | 1,497,250 | 24.0% | 359,340 | - | 24.0% | - | - | 24.0% | - | |
| Bad debts provision | 11,317,016 | - | 11,317,016 | 24.0% | 2,716,084 | - | 24.0% | - | - | 24.0% | - | |
| Grants | 9,644,123 | - | 9,644,123 | 24.0% | 2,314,590 | - | 24.0% | - | - | 24.0% | - | |
| Goodwill | 198,729,915 | - 198,729,915 | 24.0% | 47,695,180 | - | 24.0% | - | - | 24.0% | - | ||
| Other deferred tax assets | 47,732,324 | - | 47,732,324 | 24.0% | 11,455,758 | 645,416 | 24.0% | 154,900 | 1,283,550 | 24.0% | 308,052 | |
| Total | 855,924,242 (13,938,899) 841,985,343 | 202,076,482 | 628,666 | 150,880 38,182,643 | 9,163,834 |
Overview of performance, financial conditions and net debt
1 Financial statements
2 Financial statements pursuant to Consob Resolution no. 17221 of March 12, 2010
General information on A2A S.p.A. Financial statements Basis of preparation Changes in international accounting standards Accounting standards and
policies Notes to the balance sheet
Net debt
Note on related party transactions Consob Communication
no. DEM/6064293 of July 28, 2006
Guarantees and commitments with third parties Other information
4 Attachments
5 Independent Auditors' Report
| Deferred tax liabilities Adjustments Uses in current year previous year |
Sub-total | Changes in tax rate | Increases for the year | Increases/uses to equity | Total deferred tax liabilities | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Rate Tax Taxable Rate Tax Taxable Rate Tax amount amount |
Taxable amount |
Rate | Tax | Taxable amount |
Rate | Tax | Taxable amount |
Rate | Tax | Taxable amount |
Rate | Tax | Taxable amount |
Rate | Tax |
| 24.0% 133,238,551 - 24.0% - 44,757,111 24.0% 10,741,707 |
510,403,517 | 24.0% 122,496,844 510,403,517 | 24.0% 122,496,844 | - | 24.0% | - | - | 24.0% | - 510,403,517 | 24.0% 122,496,844 | |||||
| 24.0% - 639,491 24.0% 153,478 |
18,996,600 | 24.0% | 4,559,184 | 18,996,600 | 24.0% | 4,559,184 | - | 24.0% | - | - | 24.0% | - | 18,996,600 | 24.0% | 4,559,184 |
| - 24.0% - |
12,090,445 | 24.0% | 2,901,707 | 12,090,445 | 24.0% | 2,901,707 | 67,045 | 24.0% | 16,091 | - | 24.0% | - | 12,157,490 | 24.0% | 2,917,798 |
| 31,344 24.0% 7,523 |
94,033 | 24.0% | 22,568 | 94,033 | 24.0% | 22,568 | - | 24.0% | - | - | 24.0% | - | 94,033 | 24.0% | 22,568 |
| - 24.0% - |
5,108,781 | 24.0% | 1,226,107 | 5,108,781 | 24.0% | 1,226,107 | - | 24.0% | - | - | 24.0% | - | 5,108,781 | 24.0% | 1,226,107 |
| 372,235 24.0% 89,336 |
23,094,162 | 24.0% | 5,542,599 | 23,094,162 | 24.0% | 5,542,599 | - | 24.0% | - | 8,782,179 | 24.0% | 2,107,723 | 31,876,341 | 24.0% | 7,650,322 |
| 326,568 45,800,181 10,992,043 |
569,787,539 | 136,749,009 569,787,539 | 136,749,009 | 67,045 | 16,091 | 8,782,179 | 2,107,723 578,636,763 | 138,872,823 |
| Rate Tax Taxable Rate Tax Taxable Rate Tax amount amount 24.0% 2,418,082 2,621,092 24.0% 629,062 282,159,607 24.0% 67,718,306 24.0% 1,514,052 - 24.0% - 272,994,248 24.0% 65,518,620 24.0% - - 24.0% - 1,497,250 24.0% 359,340 24.0% - - 24.0% - 11,317,016 24.0% 2,716,084 24.0% - - 24.0% - 9,644,123 24.0% 2,314,590 24.0% - - 24.0% - 198,729,915 24.0% 47,695,180 24.0% 139,200 (9,496,567) 24.0% (2,279,176) 38,177,623 24.0% 9,162,630 |
Sub-total | |
|---|---|---|
| Taxable Rate amount |
||
| 269,463,172 24.0% |
||
| 266,685,700 24.0% |
||
| 1,497,250 24.0% |
||
| 11,317,016 24.0% |
||
| 9,644,123 24.0% |
||
| 198,729,915 24.0% |
||
| 47,094,190 24.0% |
||
| 4,071,334 (6,875,475) (1,650,114) 814,519,782 195,484,748 |
804,431,366 |
| Case description amounts in euro |
Deferred tax liabilities A2A previous year |
Non recurring transactions 2018 |
Deferred tax liabilities previous year |
Adjustments | Uses in current year | |||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Taxable amount |
Taxable amount |
Taxable amount |
Rate | Tax | Taxable amount |
Rate | Tax | Taxable amount |
Rate | Tax | ||
| Measurement differences for tangible assets | 378,011,065 (12,628,297) 365,382,768 | 5.57% | 20,351,820 | (4,119,230) | 5.57% | (229,441) | 251,051 | 5.57% | 13,984 | |||
| Adoption of the finance lease standard (IAS 17) | 14,629,909 | - | 14,629,909 | 5.57% | 814,886 | - | 5.57% | - | - | 5.57% | - | |
| Measurement differences of intangible assets | 75,934 | - | 75,934 | 5.57% | 4,230 | - | 5.57% | - | - | 5.57% | - | |
| Other deferred tax liabilities | 12,109,066 | - | 12,109,066 | 5.57% | 674,475 | 4,907,147 | 5.57% | 273,328 | 371,741 | 5.57% | 20,706 | |
| Total | 404,825,974 (12,628,297) 392,197,677 | 21,845,411 | 787,917 | 43,887 | 622,792 | 34,690 |
| Case description amounts in euro |
Deferred tax assets A2A previous year |
Non recurring transactions 2018 |
Deferred tax assets previous year |
Adjustments | Uses in current year | |||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Taxable amount |
Taxable amount |
Taxable amount |
Rate | Tax | Taxable amount |
Rate | Tax | Taxable amount |
Rate | Tax | ||
| Taxed risk provisions | 274,178,286 | (95,817) 274,082,469 | 5.57% | 15,266,393 | 1,456,408 | 5.57% | 81,122 | 13,931,117 | 5.57% | 775,963 | ||
| Amortization, depreciation and write-downs | 230,265,082 | (6,515,257) 223,749,825 | 5.57% | 12,462,865 | (2,125,215) | 5.57% | (118,374) | 244,861 | 5.57% | 13,639 | ||
| Grants | 6,087,924 | - | 6,087,924 | 5.57% | 339,097 | - | 5.57% | - | - | 5.57% | - | |
| Goodwill | 49,744,604 | - | 49,744,604 | 5.57% | 2,770,774 | - | 5.57% | - | - | 5.57% | - | |
| Other deferred tax assets | 3,096,048 | - | 3,096,048 | 5.57% | 172,450 | 3,402,743 | 5.57% | 189,533 | 71,357 | 5.57% | 3,975 | |
| Total | 563,371,944 | (6,611,074) 556,760,870 | 31,011,580 | 2,733,936 | 152,280 | 14,247,335 | 793,577 |
1 Financial statements
2 Financial statements pursuant to Consob Resolution no. 17221 of March 12, 2010
General information on A2A S.p.A. Financial statements Basis of
preparation Changes in international accounting
standards Accounting standards and
policies Notes to the
balance sheet Net debt
Note on related party transactions
Consob Communication no. DEM/6064293 of July 28, 2006
Guarantees and commitments with third parties
Other information
4 Attachments
5 Independent Auditors' Report
| Uses in current year | Sub-total | Changes in tax rate | Increases for the year | Increases/uses to equity | Total deferred tax liabilities | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Taxable Rate Tax amount |
Taxable amount |
Rate | Tax | Taxable amount |
Rate | Tax | Taxable amount |
Rate | Tax | Taxable amount |
Rate | Tax | Taxable amount |
Rate | Tax |
| 251,051 5.57% 13,984 |
361,012,487 | 5.57% | 20,108,396 361,012,487 | 5.57% | 20,108,396 | - | 5.57% | - | - | 5.57% | - 361,012,487 | 5.57% | 20,108,396 | ||
| - 5.57% - |
14,629,909 | 5.57% | 814,886 | 14,629,909 | 5.57% | 814,886 | - | 5.57% | - | - | 5.57% | - | 14,629,909 | 5.57% | 814,886 |
| - 5.57% - |
75,934 | 5.57% | 4,230 | 75,934 | 5.57% | 4,230 | - | 5.57% | - | - | 5.57% | - | 75,934 | 5.57% | 4,230 |
| 371,741 5.57% 20,706 |
16,644,472 | 5.57% | 927,097 | 16,644,472 | 5.57% | 927,097 | - | 5.57% | - | 8,782,179 | 5.57% | 489,167 | 25,426,651 | 5.57% | 1,416,264 |
| 622,792 34,690 |
392,362,802 | 21,854,608 392,362,802 | 21,854,608 | - | - | 8,782,179 | 489,167 401,144,981 | 22,343,775 |
| Adjustments Uses in current year |
Sub-total | Changes in tax rate | Increases for the year | Increases/uses to equity | Total deferred tax assets | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Taxable Rate Tax Taxable Rate Tax amount amount |
Taxable amount |
Rate | Tax | Taxable amount |
Rate | Tax | Taxable amount |
Rate | Tax | Taxable amount |
Rate | Tax | Taxable amount |
Rate | Tax |
| 1,456,408 5.57% 81,122 13,931,117 5.57% 775,963 |
261,607,760 | 5.57% | 14,571,552 261,607,760 | 5.57% | 14,571,552 | 10,075,343 | 5.57% | 561,197 | 2,621,092 | 5.57% | 145,995 274,304,195 | 5.57% | 15,278,744 | ||
| 5.57% (118,374) 244,861 5.57% 13,639 |
221,379,749 | 5.57% | 12,330,852 221,379,749 | 5.57% | 12,330,852 | 4,196,057 | 5.57% | 233,720 | - | 5.57% | - 225,575,806 | 5.57% | 12,564,572 | ||
| - 5.57% - |
6,087,924 | 5.57% | 339,097 | 6,087,924 | 5.57% | 339,097 | - | 5.57% | - | - | 5.57% | - | 6,087,924 | 5.57% | 339,097 |
| - 5.57% - |
49,744,604 | 5.57% | 2,770,774 | 49,744,604 | 5.57% | 2,770,774 | - | 5.57% | - | - | 5.57% | - | 49,744,604 | 5.57% | 2,770,774 |
| 189,533 71,357 5.57% 3,975 |
6,427,434 | 5.57% | 358,008 | 6,427,434 | 5.57% | 358,008 | - | 5.57% | - | 7,547,521 | 5.57% | 420,397 | 13,974,955 | 5.57% | 778,405 |
| 14,247,335 793,577 |
545,247,471 | 30,370,284 545,247,471 | 30,370,284 14,271,400 | 794,917 | 10,168,613 | 566,392 569,687,484 | 31,731,593 |
The "Net result from discontinued operations" was positive for 20,650 thousand euro (negative for 54,831 thousand euro at December 31, 2017) and includes for 15,811 thousand euro the collection of dividends by the investee company EPCG and for 4,839 thousand euro the discounting proceeds to adjust the value of equity investment of EPCG at fair value following the renegotiation of the agreement with the Government of Montenegro, and approved by the same on April 27, 2018, which provides for the execution of the put option exercised by A2A S.p.A. on July 3, 2017 in four tranches in the period between May 1, 2018 and July 31, 2019, with an acceleration compared to the terms set by the Shareholders' Agreement of August 29, 2016 (i.e. 7 tranches from May 1, 2018 to May 1, 2024).
In the previous year, this item had a negative value of 54,831 thousand euro that was related for 29,017 thousand euro to the impairment and 25,814 thousand euro to the discounting expenses for the equity investment held in EPCG, so as to adjust the value to fair value.
The net income of the year amounted to 373,091 thousand euro (268,461 thousand euro at December 31, 2017).
"Related parties" are those indicated by the international accounting standard that concerns Related Party Disclosures (IAS 24 revised).
On October 5, 2007, the Municipalities of Milan and Brescia signed a Shareholders' Agreement to regulate the ownership structure of A2A S.p.A.; this gave the Municipalities joint control over the company.
Specifically, the merger effective January 1, 2008, regardless of the legal structure established, was considered a joint venture, whose joint control was exercised by the Municipalities of Milan and Brescia, each of which owned a share equal to 27.5%.
On June 13, 2014, the Shareholders' Meeting modified the company's governance system, passing from the original two-tier system, adopted in 2007, to a "traditional" system of management and control through the appointment of the Board of Directors.
In December 2014, the Municipalities of Milan and Brescia sold a total shareholding of 0.51% of A2A S.p.A., while in the first two months of 2015, the Municipalities of Milan and Brescia sold an additional shareholding of 4.5% of A2A S.p.A..
On October 4, 2016, the Municipalities of Milan and Brescia renewed for another three years, with effect from January 1, 2017, the Shareholders' Agreement signed on December 30, 2013, concerning 1,566,452,642 ordinary shares representing 50% plus two shares of the share capital of A2A S.p.A.. On May 20, 2016, the two Municipalities had proceeded to sign an appendix to the Agreement, which envisaged reducing from six months to three months the term of the agreement, during which it is possible to terminate the same.
On October 26, 2016, the Municipality of Milan received from the Municipality of Brescia the proposal, approved by the Council of said Municipality on October 25, 2016, to partially amend the shareholders' agreement relating to A2A S.p.A. existing between the two Municipalities. In particular, said proposal requires the commitment of the two Municipalities to maintain syndicated and bound, in the new agreement, a number of shares held by them in equal measure, equal to 42% of the share capital of A2A S.p.A.. On November 4, 2016, the Council of the Municipality of Milan, after having favourably examined the proposal of the Municipality of Brescia of a partial amendment to the shareholders' agreement, submitted to the Municipal Council the proposal of the new shareholders' agreement for the final determinations of competence.
On January 23, 2017, the Milan City Council approved the new Shareholders' Agreement between the Municipality of Milan and the Municipality of Brescia regarding the shareholding in A2A S.p.A. and has undertaken the commitment not to proceed with the disposal of any shares owned by the Municipality of Milan.
At the date of approval of these separate financial statements at December 31, 2018, the two shareholders held a shareholding of 50% plus two shares that enables the two municipalities to maintain control over the company.
The A2A Group companies and the Municipalities of Milan and Brescia routinely entertain commercial relationships related to the supply of electricity, gas, heat, and potable water, management of public lighting systems and street lights, management of water purification and sewers, garbage collection and street sweeping and video surveillance.
Similarly, the A2A Group companies entertain commercial relationships with the companies controlled by the Municipalities of Milan and Brescia, for example, Metropolitana Milanese S.p.A., ATM S.p.A., Brescia Mobilità S.p.A., Brescia Trasporti S.p.A. and Centrale del Latte di Brescia S.p.A., supplying them with electrical energy, gas, heat, water purification and sewer service at market rates appropriate to the supply conditions and providing the services required. Note that these companies are considered related parties in the preparation of the financial statement schedules pursuant to Consob Resolution 17221 of March 12, 2010.
Overview of performance, financial conditions and net debt
1 Financial statements
2 Financial statements pursuant to Consob Resolution no. 17221 of March 12, 2010
General information on A2A S.p.A. Financial
statements Basis of
preparation
Changes in international accounting standards
Accounting standards and policies
Notes to the balance sheet
Notes to the
Consob Communication no. DEM/6064293 of July 28, 2006
Guarantees and commitments with third parties Other information
4 Attachments
5 Independent Auditors' Report
The relationships between the Municipalities of Milan and Brescia and the A2A Group, in relation to granting the services associated with public lighting, street lights, management and supply of electricity, gas, heat, and water purification and sewer service are regulated by special conventions and specific contracts.
The relationships between the companies controlled by the Municipalities of Milan and Brescia, which refer to the supply of electricity, are at arm's length conditions.
On April 12, 2017, Amsa S.p.A., a subsidiary of A2A S.p.A., signed a contract with the Municipality of Milan for the management of environmental protection services for the period January 1, 2017 - February 8, 2021.
The parent company A2A S.p.A., operates like a centralized treasury for the majority of the subsidiaries.
Relations between the companies are regulated through current accounts between the parent company and the subsidiaries, on which rates are applied, at market conditions, based on variable Euribor, with specific spreads for companies. For the financial year 2018, A2A S.p.A. and its subsidiaries have adopted the VAT procedure of the Group.
Note that for IRES purposes, A2A S.p.A. files for tax on a consolidated basis, together with its main subsidiaries, in accordance with arts. 117-129 of DPR 917/86. To this end, with each of the subsidiaries joining, a special contract was drawn up to regulate the tax advantages/disadvantages transferred, with specific reference to the current entries. These contracts also govern the transfer of any excess of ROL as set forth by prevailing legislation.
The parent company provides the subsidiaries and affiliates with administrative, fiscal, legal, management and technical services in order to optimize the resources available in the company and to use the existing expertise in terms of economic convenience. These services are governed by specific service contracts stipulated annually. A2A S.p.A. also makes office space and operating areas at its own premises available to subsidiaries and associates, as well as associated services. These are provided at market conditions.
The companies A2A gencogas S.p.A. and A2A Energiefuture S.p.A., for a monthly fee related to the actual availability of the thermoelectric plants, provide to the Parent Company the power generation service.
Telecommunication services are provided by the subsidiary A2A Smart City S.p.A..
As of July 1, 2018, related-party transactions with companies of the ACSM-AGAM Group are reported as related parties.
Finally, note that pursuant to the Consob communication issued on September 24, 2010, bearing the provisions regarding related party transactions in accordance with Consob Resolution no. 17221 of March 12, 2010, as amended, on November 11, 2010, the Group had approved the procedure for related party transactions which took effect on January 1, 2011, and which aims to ensure the transparency and substantial fairness of the related party transactions executed by A2A S.p.A. directly, or through subsidiaries, identified in accordance with the IAS 24 revised accounting standard. The Board of Directors of June 20, 2016 resolved, with the approval of the Risk Control Committee, the review of the procedure "Regulation of transactions with Related Parties". The review of the procedure particularly involves the reduction, introduced optionally, of the threshold for transactions with subsidiaries of the Municipalities of Milan and Brescia, regarding which to provide for the application of the Procedure. Finally, the procedure was updated on June 22, 2017, following Consob Resolution no. 19925 of March 22, 2017.
Below are the tables with detail of the related party transactions, in accordance with the Consob Resolution no. 17221 of March 12, 2010:
| Balance | Total | Of which with related parties | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| sheet thousands of euro |
12 31 2018 | Subsi diary compa nies |
Associa ted compa nies |
Munici pality of Milan |
Subsidia ries Munici pality of Milan |
Munici pality of Brescia |
Subsidia ries Municipa lity of Brescia |
Related parties indivi duals |
Total related parties |
% effect on the balance sheet item |
||
| TOTAL ASSETS OF WHICH: | 7,893,485 5,251,256 | 120,253 | 3,254 | - | 232 | 139 | - 5,375,134 | 68.1% | ||||
| Non-current assets | 5,505,348 4,308,680 | 2,077 | - | - | - | 139 | - 4,310,896 | 78.3% | ||||
| Shareholdings | 3,702,584 3,700,507 | 2,077 | - | - | - | - | - 3,702,584 | 100.0% | ||||
| Other non-current financial assets |
609,166 | 608,173 | - | - | - | - | 139 | - | 608,312 | 99.9% | ||
| Current assets | 2,279,177 | 942,576 | 9,216 | 3,254 | - | 232 | - | - | 955,278 | 41.9% | ||
| Trade receivables | 717,192 | 222,022 | 8,966 | 3,254 | - | 232 | - | - | 234,474 | 32.7% | ||
| Other current assets | 260,382 | 60,627 | - | - | - | - | - | - | 60,627 | 23.3% | ||
| Current financial assets | 661,377 | 659,927 | 250 | - | - | - | - | - | 660,177 | 99.8% | ||
| Non-current assets held for sale | 108,960 | - | 108,960 | - | - | - | - | - | 108,960 | 100.0% | ||
| TOTAL LIABILITIES OF WHICH: | 5,257,897 | 519,543 | 106,438 | 545 | 548 | - | - | 80 | 627,154 | 11.9% | ||
| Non-current liabilities | 3,182,610 | - | 83,001 | - | - | - | - | - | 83,001 | 2.6% | ||
| Provisions for risks, charges and liabilities for landfills |
180,304 | - | 83,001 | - | - | - | - | - | 83,001 | 46.0% | ||
| Current liabilities | 2,075,287 | 519,543 | 23,437 | 545 | 548 | - | - | 80 | 544,153 | 26.2% | ||
| Trade payables | 776,005 | 83,605 | 13,911 | 545 | 548 | - | - | - | 98,609 | 12.7% | ||
| Other current liabilities | 250,476 | 26,867 | 7,167 | - | - | - | - | 80 | 34,114 | 13.6% | ||
| Current financial liabilities | 1,019,912 | 409,071 | 2,359 | - | - | - | - | - | 411,430 | 40.3% | ||
| Income | Total | Of which with related parties | ||||||||||
| statement thousands of euro |
12 31 2018 | Subsi diary compa nies |
Associa ted compa nies |
Munici pality of Milan |
Subsidia ries Munici pality of Milan |
Munici pality of Brescia |
Subsidia ries Municipa lity of Brescia |
Related parties indivi duals |
Total related parties |
% effect on the balance sheet item |
||
| REVENUES | 3,825,628 1,209,255 | 4,945 | 3,224 | 44 | 87 | - | - 1,217,555 | 31.8% | ||||
| Revenues from the sale of goods and services |
3,742,583 1,185,330 | 4,930 | 3,224 | 44 | 87 | - | - 1,193,615 | 31.9% | ||||
| Other operating revenues | 83,045 | 23,925 | 15 | - | - | - | - | - | 23,940 | 28.8% | ||
| OPERATING EXPENSES | 3,515,874 | 367,123 | 23,054 | - | 297 | - | 2 | 290 | 390,766 | 11.1% | ||
| Expenses for raw materials and services |
3,203,794 | 180,719 | 1,033 | - | 297 | - | 2 | 290 | 182,341 | 5.7% | ||
| Other operating expenses | 312,080 | 186,404 | 22,021 | - | - | - | - | - | 208,425 | 66.8% | ||
| LABOUR COSTS | 134,536 | - | - | - | - | - | - | 1,697 | 1,697 | 1.3% | ||
| RESULT FROM NON-RECURRING TRANSACTIONS |
5,724 | - | 5,724 | - | - | - | - | - | 5,724 | 100.0% | ||
| FINANCIAL BALANCE | 276,123 | 374,518 | 1,056 | - | - | - | - | - | 375,574 | n.s. | ||
| Financial income | 460,220 | 455,467 | 1,057 | - | - | - | - | - | 456,524 | 99.2% | ||
| Financial expenses | 184,097 | 80,949 | 1 | - | - | - | - | - | 80,950 | 44.0% | ||
| Net result from discontinued operations |
20,650 | - | 20,650 | - | - | - | - | - | 20,650 | 100.0% |
Section 2 of this file provides complete schedules as required under Consob Resolution no. 17221 of March 12, 2010.
* * * With regard to the compensation paid to the corporate governance bodies, reference shall be made to the document "Remuneration Report – 2019" available on the website www.a2a.eu.
Overview of performance, financial conditions and net debt
1 Financial statements
2 Financial statements pursuant to Consob Resolution no. 17221 of March 12, 2010
3 Notes General information on A2A S.p.A. Financial statements Basis of preparation Changes in international accounting standards Accounting standards and policies Notes to the balance sheet Net debt Notes to the income statement
Consob Communication no. DEM/6064293 of July 28, 2006
Guarantees and commitments with third parties
Other information
4 Attachments
5 Independent Auditors' Report
6 Report of the Board of Auditors
The year in question has seen the following non-recurring transactions:
Below is the table with the effects of the non-recurring transactions described above.
| Detail of non-recurrering transactions amounts in euro |
NOTES | A2A S.p.A. transfer of "e-mobility" unit to A2A Energy Solutions S.r.l. |
A2A S.p.A. transfer of "RAMO IDRO" unit to A2A IDRO4 S.r.l. |
EFFECT NON-RECURRING TRANSACTIONS |
|---|---|---|---|---|
| 01 01 2018 | 04 01 2018 | |||
| ASSETS | ||||
| NON-CURRENT ASSETS | ||||
| Tangible assets | 1 | (706,178) | (23,786,734) | (24,492,912) |
| Intangible assets | 2 | - | ||
| Shareholdings | 3 | 575,897 | 21,168,828 | 21,744,725 |
| Other non-current financial assets | 3 | - | ||
| Deferred tax assets | 4 | (9,580) | 2,739,713 | 2,730,133 |
| Other non-current assets | 5 | - | ||
| TOTAL NON-CURRENT ASSETS | (139,861) | 121,807 | (18,054) | |
| CURRENT ASSETS | ||||
| Inventories | 6 | (28,689) | (28,689) | |
| Trade receivables | 7 | (237,678) | (237,678) | |
| Other current assets | 8 | - | ||
| Current financial assets | 9 | 56,092 | 56,092 | |
| Current tax assets | 10 | - | ||
| Cash and cash equivalents | 11 | - | ||
| TOTAL CURRENT ASSETS | 56,092 | (266,367) | (210,275) | |
| NON-CURRENT ASSETS HELD FOR SALE | 12 | - | ||
| TOTAL ASSETS | (83,769) | (144,560) | (228,329) | |
| EQUITY AND LIABILITIES | ||||
| EQUITY | ||||
| Share capital | 13 | - | ||
| (Treasury shares) | 14 | - | ||
| Reserves | 15 | - | ||
| Result of the year | 16 | - | ||
| EQUITY | - | - | - | |
| LIABILITIES | ||||
| NON-CURRENT LIABILITIES | ||||
| Non-current financial liabilities | 17 | - | ||
| Employee benefits | 18 | (53,022) | (53,022) | |
| Provisions for risks, charges and liabilities for landfills |
19 | (127,063) | (127,063) | |
| Other non-current liabilities | 20 | - | ||
| TOTAL NON-CURRENT LIABILITIES | (53,022) | (127,063) | (180,085) | |
| CURRENT LIABILITIES | ||||
| Trade payables | 21 | (14,088) | (14,088) | |
| Other current liabilities | 21 | (30,747) | (3,409) | (34,156) |
| Current financial liabilities | 22 | - | ||
| Tax payables | 23 | - | ||
| TOTAL CURRENT LIABILITIES | (30,747) | (17,497) | (48,244) | |
| TOTAL LIABILITIES | (83,769) | (144,560) | (228,329) | |
| LIABILITIES DIRECTLY ASSOCIATED WITH NON-CURRENT ASSETS HELD FOR SALE |
- | |||
| TOTAL EQUITY AND LIABILITIES | (83,769) | (144,560) | (228,329) |
Overview of performance, financial conditions and net debt
1 Financial statements
2 Financial statements pursuant to Consob Resolution no. 17221 of March 12, 2010
General information on A2A S.p.A. Financial statements Basis of preparation Changes in international accounting standards Accounting standards and policies Notes to the balance sheet Net debt Notes to the income statement Note on related party transactions Consob Communication no. DEM/6064293 of July 28, 2006 Guarantees and commitments with third parties Other information
4 Attachments
5 Independent Auditors' Report
| thousands of euro | 2018 | 2017 |
|---|---|---|
| Guarantees received | 233,772 | 209,523 |
| Guarantees provided | 187,099 | 221,939 |
Guarantees received amounted to 233,772 thousand euro (209,523 thousand euro at December 31, 2017) and include 79,509 million euro for sureties and security deposits issued by subcontractors to guarantee the proper execution of the work assigned and 154,263 thousand euro for sureties and security deposits received from customers to guarantee the regularity of payments.
Guarantees provided amounted to 187,099 thousand euro (221,939 thousand euro at December 31, 2017), of which for obligations undertaken in the loan agreements of 5,350 thousand euro. Said guarantees include bank sureties for 150,115 thousand euro, insurance for 528 thousand euro and parent company guarantees related to associated companies for 36,456 thousand euro.
Reference should be made to the specific section of this Report on Operations for a description of subsequent events.
At December 31, 2018, A2A S.p.A. held 23,721,421 treasury shares, unchanged compared to December 31, 2017, equal to 0.757% of the share capital consisting of 3,132,905,277 shares.
At December 31, 2018, no treasury shares were held through subsidiaries, finance companies or nominees.
"Non-current assets held for sale" at December 31, 2018 showed a balance of 108,960 thousand euro (224,186 thousand euro at December 31, 2017) and refer to the fair value of the investment in EPCG, 18.70% held by A2A S.p.A. (41.75% at December 31, 2017), since this was a discontinued operation in compliance with IFRS 5 following management's decision of July 3, 2017 to exercise the put option on the entire share package. The decrease compared to December 31, 2017 is due to the collections in the year under review by virtue of a new agreement negotiated with the Government of Montenegro, and approved by the same on April 27, 2018, which provides for the execution of the put option exercised by A2A S.p.A. on July 3, 2017 in four tranches in the period between May 1, 2018 and July 31, 2019, with an acceleration compared to the terms set by the Shareholders' Agreement of August 29, 2016 (i.e. 7 tranches from May 1, 2018 to May 1, 2024).
The information given in the following table, annexed to the explanatory notes to the financial statements, is provided in compliance with art. 1, paragraphs 125 et seq. L. 124/17, which is the subject of this year's first application, despite the well-founded belief that, having regard to their rationale (and location), the purpose of the rules in question is to highlight only the "economic advantages" that the public administration attributes to certain subjects and not in general terms and that, therefore, the rules themselves concern only "advantages" granted ad hoc (and not by virtue of general rules) to specific subjects.
Notwithstanding the above, the information below is the result of an effort to interpret the regulatory data, which is not clear both in its subjective and objective perimeter. This lack of clarity has already been highlighted by the competent ministries themselves, who have also considered it necessary to seek an opinion from the Council of State, in order first to settle the same time period as the obligations provided for in the aforementioned rules.
Overview of performance, financial conditions and net debt
1 Financial statements
2 Financial statements pursuant to Consob Resolution no. 17221 of March 12, 2010
General information on A2A S.p.A. Financial
statements Basis of
preparation
Changes in international accounting standards
Accounting standards and policies
Notes to the balance sheet Net debt
Notes to the income statement
Note on related party transactions
Consob Communication no. DEM/6064293 of July 28, 2006
Other information
4 Attachments
5 Independent Auditors' Report
| RECEIVING PARTY |
DISBURSING PARTY |
TYPE | UNIT OF MEASUREMENT |
ENTITY |
|---|---|---|---|---|
| A2A S.p.A. | GSE | Former Green Certificates | euro | 47,589,429 |
| A2A S.p.A. | GSE | Green Certificates | MWh | 180,948 |
| A2A S.p.A. | GSE | Guarantees of origin | MWh | 4,617,893 |
| A2A S.p.A. | GSE | Withdrawal regime | euro | 243,001 |
| A2A S.p.A. | GSE | All-inclusive rate | euro | 377,684 |
| A2A S.p.A. | Lombardy Region | 2002 T 12 - Interventions for the network management of services and for the Electronic Government in the PA expiry 06/30/2025 |
euro | 15,043 |
| A2A S.p.A. | Lombardy Region | 2000 B 203 - House of Energy expiry 06/30/2023 |
euro | 271,914 |
| A2A S.p.A. | CDP- MPS | Decree Law 74/2012-Decree Law 95/2012 Granting of subsidized loans to subjects damaged by the earthquake of May 2012 |
euro | 181,911 |
Despite the above conviction, the data in the table has been indicated solely on the basis of the exegesis of the bare literal data of the rules, since to date there have been no interpretative aids from the ministerial side, as desired by several parties. The information contained in the above table is therefore the result of a mere reading of the standard and the explanations received from some trade associations.
Again in the context of the vagueness referred to above, it seemed reasonable and proportionate at times to refer, as an analogical criterion of interpretation, to the State aid scheme, thus excluding from the scope of the disclosure, as set out in the annexed table, measures which certainly do not qualify as such.
The only forms of contribution that appear in the table are those that, in this instance of first-time application of the rules, seemed reasonable (art. 3 Cost.) and proportionate (art. 5 Tfue) to classify as subsidies, contributions and/or advantages, it being understood that other information is (also in the wake of the principle pursuant to art. 18 L. 241/1990) available elsewhere, including the State Aid Register.
Therefore, the amounts that can be classified as consideration for services or other forms that do not result in the giving of a good or a quantity of money or other negotiable title and that therefore cannot be considered as having been received (such as, for example, tax relief) have not been indicated: also in order to avoid offering irrelevant data, according to the criterion stigmatized in paragraph 127 of the same Article 1 Law 124/17, which precisely prescribes "to avoid the accumulation of irrelevant information".
It should also be noted that the companies of the A2A Group operate (for the most part) in regulated sectors. Therefore, some sums are recognized by public bodies, but not as subsidies/contributions, but as recognition of the activities they provide or as forms of compensation for costs incurred to meet specific regulatory obligations(1). Also all these forms of payment have not been indicated in the annexed table: also in compliance both with the principles of proportionality and reasonableness and with the interpretation criteria that the company has identified (see above).
The rules in question do not even clarify on what basis (whether on a cash basis or on an accrual basis) information should be collected. Given the absence of indications, also in relation to this profile, the company opts for the accrual basis, considering that this is the basis for the entire financial statements to which this document refers.
1 This is the case, for example, with the capacity payment mechanism and the scheme to support essential plants in the electricity generation sector or the tariff contribution for the fulfilment of energy efficiency obligations by electricity and gas distributors.
From another point of view, it should be noted - also within the framework mentioned above - that certain contributions/benefits/incentives indicated in the table are then (sometimes pro-rata) transferred to other parties on the basis of precise contractual relationships. In this case, it was considered that the company that materially receives the contribution/benefit/incentive is required to disclose, without subsequent events (precisely of a contractual nature).
It is to be hoped that, even in view of the very serious penalties provided for, the provisions in question will be the subject of regulatory measures that will make it possible to understand their exact scope.
As already explained in the section of this Report entitled "Changes in International Financial Reporting Standards," in 2018, the Company completed the analyses required to adopt the standard as of January 1, 2019.
The company decided to apply the standard retroactively without restating the comparative data and accounting for the cumulative effect of the initial application of the standard as from January 1, 2019, recognising, within the Statement of Financial Position, the assets consisting of the right to use leased assets and the lease liabilities at the present value of the remaining payments due.
It should be noted that the discount rate used to determine the present values of assets and liabilities deriving from lease contracts is that corresponding to the average rate of financing of the A2A Group.
It should be noted that, as a practical expedient, the company has made use of the option provided for in paragraph 6 of the standard not to apply the provisions of paragraphs 22 to 49 of the standard to the following categories:
The analyses carried out have identified the impacts on the economic and financial situations shown in the table below.
| thousands of euro | 01/01/2019 |
|---|---|
| Assets | |
| Tangible assets | 11,642.0 |
| Deferred assets | (86.8) |
| Liabilities | |
| Deferred tax provision | 0.1 |
| Financial payables | 11,554.9 |
| Net impact on equity | 0.2 |
| thousands of euro | 01/01/2019 |
|---|---|
| Depreciation and amortisation | 3,617.9 |
| Operating lease costs (included in administrative expenses) | (3,575.3) |
| Operating income | (42.6) |
| Financial expenses | (28.8) |
| Pre-tax | (71.4) |
| Current taxes | 22.5 |
| Net result for the year | (48.9) |
Overview of performance, financial conditions and net debt
1 Financial statements
2 Financial statements pursuant to Consob Resolution no. 17221 of March 12, 2010
General information on A2A S.p.A.
Financial statements
Basis of preparation
Changes in international accounting standards
Accounting standards and policies
Notes to the balance sheet
Net debt Notes to the
income statement
Note on related party transactions
Consob Communication no. DEM/6064293 of July 28, 2006
Guarantees and commitments
with third parties
Other information
4 Attachments
5 Independent Auditors' Report
The parent company, A2A S.p.A., provides centralized risk management for Group companies.
The A2A Group operates in the electricity, natural gas and district heating industry and is exposed to various financial risks in performing its activity:
The commodity price risk, related to the volatility of energy commodity prices (gas, electricity, fuel oil, coal, etc.) and prices of environmental securities (EUA/ETS emission rights, white certificates, etc.), consists of the possible negative effects that a change in the market price of one or more commodities may have on the cash flows and income prospects of the company, including the exchange rate risk related to the same commodities.
Interest rate risk is the risk of additional financial costs as the result of an unfavourable change in interest rates.
Currency risk not related to commodities is the risk of higher costs or lower revenues because of an unfavourable change in exchange rates between currencies.
Liquidity risk is the risk that financial resources will not be sufficient to meet established financial and business obligations in a timely manner.
Credit risk is the exposure to potential losses deriving from non-performance of commitments by commercial, trading and financial counterparties.
Equity risk is the possibility of incurring losses due to an unfavourable change in the price of shares.
Default and covenant non-compliance risk represent the possibility that loan agreements or bond regulations to which one or more Group companies are party contain provisions allowing the counterparties, banks or bondholders, to ask the debtor for immediate reimbursement of the amounts lent if certain events take place.
Details on the risks to which A2A S.p.A. is exposed are provided below.
A2A S.p.A. is exposed to price risk, including the related exchange rate risk, on all of the energy commodities that it handles, namely electricity, natural gas, heat, coal, fuel oil, and environmental certificates; the financial performance of production, purchasing and sales activities is affected by the related price fluctuations. These fluctuations act both directly and indirectly, through formulas and indexing in the pricing structure.
To stabilize cash flows and to assure the Group's economic and financial stability, A2A S.p.A. has an Energy Risk Policy that sets out clear guidelines to manage and control the above risks, based on guidance by the Committee of Chief Risk Officers Organizational Independence and Governance Working Group ("CCRO") and the Group on Risk Management of Euroelectric. Reference was also made to the Accords of the Basel Committee on bank supervision and the requirements laid down in international accounting standards on how to recognize the volatility of commodity price and financial derivatives in the income statement and balance sheet.
In the A2A Group, assessment of this kind of risk is centralized at the holding company, which has established a Group Risk Management Organizational Unit as part of the Planning, Finance and Control Organizational Unit. This unit has the task to manage and monitor market and commodity risks, to create and evaluate structured products, to propose financial energy risk hedging strategies, and to support senior management in defining the Group's energy risk management policies.
Each year, the Board of Directors of A2A S.p.A. sets the Group's commodity risk limits approving the PaR and VaR proposed (prepared in the Risk Committee) in conjunction with approval of the Budget/ Business Plan; Group Risk Management supervises the situation to ensure compliance with these limits and proposes to senior management the hedging strategies designed to bring risk within the set limits, if exceeded.
The activities that are subject to risk management include all of the positions on the physical market for energy products, both purchasing/production and sales, and all of the positions in the energy derivatives market taken by Group companies.
For the purpose of monitoring risks, industrial and trading portfolios have been separated and are managed in different ways. The industrial portfolio consists of the physical and financial contracts directly relating to the Group's industrial operations, namely where the objective is to enhance production capacity also through the wholesaling and retailing of gas, electricity and heat.
The trading portfolio comprises all contracts, both physical and financial, entered into to supplement the profits made from the industrial activities, i.e. all contracts that are ancillary though not strictly necessary to the industrial activity.
In order to identify trading activity, the A2A Group follows the Capital Adequacy Directive and the definition of assets held for trading provided by International Accounting Standard (IFRS) 9: namely assets held for the purpose of short-term profit taking on market prices or margins, without being for hedging purposes, and designed to create a high-turnover portfolio.
Given that they exist for different purposes, the two portfolios have been segregated and are monitored separately with specific tools and limits. More specifically, the trading portfolio is subject to particular risk control and management procedures as laid down in Deal Life Cycle documents.
Senior management is systematically updated on changes in the Group's commodity risk by the Group Risk Management Unit, which controls the Group's net exposure. This is calculated centrally on the entire asset and contract portfolio and monitors the overall level of economic risk assumed by the industrial and trading portfolios (Profit at Risk - PaR, Value at Risk - VaR, Stop Loss).
The hedging of price risk by means of derivatives focuses on protecting against the volatility of energy prices on the power exchange (IPEX-EEX), stabilizing electricity price margins on the wholesale market with particular attention being paid to fixed price energy sales and purchases and stabilizing price differences deriving from various indexing mechanisms for the pricing of gas and electricity. To that end, hedging contracts were executed during the year on electricity purchase and sale agreements and on contracts to hedge the fee for the use of electricity transport capacity between the areas of the IPEX market (CCC contracts); hedging contracts were concluded with leading banks on contracts for the purchase of coal so as to protect sales margins and at the same time keep the risk profile to within the limits set by the Group's energy risk policy.
As part of the optimization of the portfolio of greenhouse gas emission allowances (see Directive 2003/87/EC), A2A S.p.A. has stipulated Future contracts on the ICE ECX (European Climate Exchange) price. These are considered hedging transactions from an accounting point of view in the event of demonstrable surplus/deficit quotas.
The fair value at December 31, 2018 was 10,164 thousand euro (1,382 thousand euro at December 31, 2017).
Again with a view to optimising the Industrial Portfolio, A2A S.p.A. entered into Future contracts on the ICE ECX (European Climate Exchange) stock exchange price. These do not qualify as hedging transactions from an accounting point of view as they fail to meet the requirement set out in the accounting standards.
The fair value at December 31, 2018 was 16 thousand euro (-86 thousand euro at December 31, 2017).
Overview of performance, financial conditions and net debt
1 Financial statements
2 Financial statements pursuant to Consob Resolution no. 17221 of March 12, 2010
General information on A2A S.p.A. Financial
statements Basis of
preparation Changes in
international accounting standards
Accounting standards and policies
Notes to the balance sheet Net debt
Notes to the income statement
Note on related party transactions
Consob Communication no. DEM/6064293 of July 28, 2006
Guarantees and commitments
with third parties Other information
4 Attachments
5 Independent Auditors' Report
As part of its trading activity, A2A S.p.A. has taken out Future contracts on major European energy stock exchanges (EEX, ICE, Powernext) and forward contracts on the price of electricity with delivery in Italy and neighboring countries such as France, Germany and Switzerland. A2A S.p.A. has also stipulated Future, Forward and Option contracts on the ICE ECX (European Climate Exchange) stock exchange price. Also as part of trading activities, both Future and Forward contracts were also stipulated for the market price of gas (ICE-Endex CEGH).
The fair value at December 31, 2018 was 2,679 thousand euro (8,357 thousand euro at December 31, 2017).
PaR(2) or Profit at Risk, is used to assess the impact that fluctuations in the market price of the underlying have on the financial derivatives taken out by A2A S.p.A. that are attributable to the industrial portfolio. It is the change in the value of a financial instruments portfolio within set probability assumptions as the result of a shift in the market indices. The PaR is calculated using the Montecarlo Method (at least 10,000 trials) and a 99% confidence level. It simulates scenarios for each relevant price driver depending on the volatility and correlations associated with each one, using as the central level the forward market curves at the balance sheet date, if available. By means of this method, after having obtained a distribution of probability associated with changes in the result of outstanding financial contracts, it is possible to extrapolate the maximum change expected over a time horizon given by the accounting period at a set level of probability. Based on this methodology, over the time horizon of the accounting period and in the event of extreme market movements and at a 99% confidence level, the expected maximum change in financial derivatives outstanding at December 31, 2018 was 75,530 thousand euro (28,839 thousand euro at December 31, 2017).
The following are the results of the simulation with the related maximum variances:
| thousands of euro | 12 31 2018 | 12 31 2017 | |||||
|---|---|---|---|---|---|---|---|
| Profit at Risk (PaR) | Worst case | Best case | Worst case | Best case | |||
| Confidence level 99% | (75,530) | 89,251 | (28,839) | 35,046 |
This means that with a 99% probability, A2A S.p.A. expects not to have changes in fair value exceeding 75,530 thousand euro of its entire portfolio of financial instruments at December 31, 2018 due to commodity price fluctuations in the 12 months following. If there are any negative changes in the fair value of derivatives, these would be compensated by changes in the underlying as the result of changes in market prices.
VaR (Value at Risk)(3) is used to assess the impact that fluctuations in the market price of the underlying have on the financial derivatives taken out by A2A S.p.A. that are attributable to the trading portfolio. It is the negative change in the value of a financial instruments portfolio within set probability assumptions as the result of an unfavourable shift in the market indices. VaR is calculated using the RiskMetrics method with a holding period of 3 days and a confidence level of 99%. Alternative methods are used for contracts where it is not possible to perform a daily estimate of VaR such as stress test analysis
Under this method, in the case of extreme market movements, with a confidence level of 99% and a holding period of 3 days, the maximum estimated loss on the derivatives in question was 251 thousand euro at December 31, 2018 (314 thousand euro at December 31, 2017).
In order to ensure closer monitoring of activities, VaR and Stop Loss limits are also set, understood as the sum of VaR, P&L Realized and P&L Unrealized.
2 Profit at Risk: statistical measurement of the maximum potential negative deviation of the margin of an asset portfolio in case of unfavourable market changes over a given time horizon and with a defined confidence interval.
3 Value at Risk: statistical measurement of the maximum potential drop in the fair value of an asset portfolio in the event of unfavourable movements in the market with a given time horizon and confidence level.
The following are the results of the assessments:
| thousands of euro | 12 31 2018 | 12 31 2017 | ||
|---|---|---|---|---|
| Value at Risk (VaR) | VaR | Stop loss | VaR | Stop loss |
| Confidence level 99%, holding period 3 days |
(251) | (251) | (314) | (314) |
The volatility of financial expenses associated to the performance of interest rates is monitored and mitigated through a policy of interest rate risk management aimed at identifying a balanced mix of fixed-rate and floating rate loans and the use of derivatives that limit the effects of fluctuations in interest rates.
The book value of bank borrowings and other financing may be analyzed as follows at December 31, 2018:
| millions of euro | DECEMBER 31, 2018 | DECEMBER 31, 2017 | ||||||
|---|---|---|---|---|---|---|---|---|
| Without derivatives |
With derivatives |
% with derivatives |
Without derivatives |
With derivatives |
% with derivatives |
|||
| Fixed rate | 2,643 | 2,852 | 83% | 2,696 | 2,810 | 81% | ||
| Floating rate | 807 | 598 | 17% | 793 | 679 | 19% | ||
| Total | 3,450 | 3,450 | 100% | 3,489 | 3,489 | 100% |
At December 31, 2018, the following are the hedging instruments for interest rate risk:
millions of euro
| HEDGING INSTRUMENT |
HEDGED ASSET | DECEMBER 31, 2018 | DECEMBER 31, 2017 | |||
|---|---|---|---|---|---|---|
| Fair value | Notional | Fair value | Notional | |||
| Collar | Floating rate loan | (8.0) | 95.2 | (10.6) | 114.3 | |
| Total | (8.0) | 95.2 | (10.6) | 114.3 |
With reference to the accounting treatment, hedging derivatives for interest rate risk can be classified as follows:
millions of euro
| ACCOUNTING TREATMENT |
DERIVATIVES | NOTIONAL | FAIR VALUE ASSETS | NOTIONAL | FAIR VALUE LIABILITIES | ||||
|---|---|---|---|---|---|---|---|---|---|
| at 12/31/2018 |
at 12/31/2017 |
at 12/31/2018 |
at 12/31/2017 |
at 12/31/2018 |
at 12/31/2017 |
at 12/31/2018 |
at 12/31/2017 |
||
| Cash flow hedge | Collar | - | - | - | - | 95.2 | 114.3 | (8.0) | (10.6) |
| Total | - | - | 95.2 | 114.3 | (8.0) | (10.6) |
The table below illustrates the underlying of outstanding derivatives at December 31, 2018:
| Loan | Derivative | Accounting |
|---|---|---|
| A2A S.p.A. loan with BEI: expiring in | Collar to fully cover the loan and | The loan is measured at amortized |
| November 2023, residual balance at December 31, 2018 amounting |
the same maturity, with a floor on Euribor rate 2.99% and 4.65% |
cost. The collar is a cash flow hedge, |
| to 95.2 million euro, at floating rate interest. |
cap. At December 31, 2018, the fair value was negative for 8.0 million |
with 100% recognized in a specific equity reserve. |
| euro. |
Overview of performance, financial conditions and net debt
1 Financial statements
2 Financial statements pursuant to Consob Resolution no. 17221 of March 12, 2010
General information on A2A S.p.A. Financial statements Basis of preparation Changes in international accounting standards Accounting
standards and policies
Notes to the balance sheet Net debt
Notes to the income statement
Note on related party transactions
Consob Communication no. DEM/6064293 of July 28, 2006
Guarantees and commitments
with third parties
Other information
4 Attachments
5 Independent Auditors' Report
In order to allow a broader understanding of the risks of changes in the interest rates to which the company is subject, a sensitivity analysis of financial expenses was conducted as interest rates varied, applying to financial indebtedness and derivative financial contracts in place a retrospective variation upwards and downwards of 50 basis points of the reference Euribor interest rates. The following table shows the results of this analysis:
| millions of euro | YEAR 2018 | ||
|---|---|---|---|
| -50 bps | +50 bps | ||
| Increase (decrease) in net financial expenses | (1.8) | 1.8 |
A sensitivity analysis is provided relating to possible changes in the fair value of derivatives (excluding cross currency swaps) on shifting the forward rate curve by +50 bps and -50 bps:
| millions of euro | 12 31 2018 (base case: -8.0) |
12 31 2017 (base case: -10.6) |
|||
|---|---|---|---|---|---|
| -50 bps | +50 bps | -50 bps | +50 bps | ||
| Change in fair value of derivatives | (1.2) | 1.2 | (1.9) | 1.8 | |
| (of which cash flow hedges) | (1.2) | 1.2 | (1.9) | 1.8 | |
| (of which fair value hedges) | - | - | - | - |
This sensitivity analysis is calculated to determine the effect of the change of the forward interest rate curve of the fair value of derivatives ignoring any impact of the adjustment due to counterparty risk – "Bilateral Credit Value Adjustment" (bCVA) – introduced in the calculation of fair value in accordance with international accounting standard IFRS13.
In relation to exchange rate risk other than that included in the price of commodities, the hedging instrument at December 31, 2018 is as follows:
millions of euro
| HEDGING INSTRUMENT | HEDGED ASSET | DECEMBER 31, 2018 | DECEMBER 31, 2017 | |||
|---|---|---|---|---|---|---|
| Fair value | Notional (*) |
Fair value | Notional (*) |
|||
| Cross Currency IRS | Fixed rate loan in foreign currency |
7.7 | 111.2 | (7.9) | 103.7 |
(*) the notional of the CCS is valued at the year-end ECB exchange rate.
The accounting treatment of the derivatives indicated above is as follows:
millions of euro
| ACCOUNTING TREATMENT |
DERIVATIVES | NOTIONAL | FAIR VALUE ASSETS | NOTIONAL | FAIR VALUE LIABILITIES | ||||
|---|---|---|---|---|---|---|---|---|---|
| at 12/31/2018 |
at 12/31/2017 |
at 12/31/2018 |
at 12/31/2017 |
at 12/31/2018 |
at 12/31/2017 |
at 12/31/2018 |
at 12/31/2017 |
||
| Cash flow hedge | CCIRS | 111.2 | - | 7.7 | - | - | 103.7 | - | (7.9) |
In particular, the underlying of the Cross Currency IRS derivative refers to the bond at fixed rate of 14 billion yen with maturity 2036 bullet issued in 2006.
A cross currency swap contract was stipulated for the entire duration of this loan, which converts the principal and interest payments from yen into euro.
At December 31, 2018, the fair value of the hedge was positive for 7.7 million euro. This fair value would improve by 19.8 million euro in the event of a 10% decline in the forward curve of the euro/ yen exchange rate (appreciation of the yen) and would worsen by 16.2 million euro in the event of a 10% rise in the forward curve of the euro/yen exchange rate (depreciation of the yen). This sensitivity analysis was performed with the aim of calculating the effect of changes in the forward curve of the euro/yen exchange rate on the fair value ignoring any impact on the adjustment due to the bCVA.
Liquidity risk is the risk that the company, despite being solvent, is unable to meet its obligations in a timely manner or that it is able to do so under unfavourable economic conditions.
The profile of the gross debt maturities of A2A is as follows:
| thousands of euro | Accounting balance |
Portions maturing |
Portions maturing |
Portions maturing by | ||||
|---|---|---|---|---|---|---|---|---|
| 12 31 2018 | within 12 months |
after 12 months |
12 31 2020 | 12 31 2021 | 12 31 2022 | 12 31 2023 | After | |
| Bonds | 2,706,287 | 555,917 | 2,150,370 | - | 350,114 | 498,141 | 299,249 | 1,002,866 |
| Bank loans | 743,602 | 52,565 | 691,037 | 107,504 | 79,827 | 79,836 | 79,884 | 343,986 |
| TOTAL | 3,449,889 | 608,482 | 2,841,407 | 107,504 | 429,941 | 577,977 | 379,133 | 1,346,852 |
The risk management policy is realized through (i) a debt management strategy diversified by funding sources and maturities, and (ii) maintenance of financial resources sufficient to meet scheduled and unexpected commitments over a given time horizon.
At December 31, 2018, the company had a total of 1,170 million euro, as follows: (i) revolving committed credit lines for 540 million euro, of which 140 maturing in 2021 and 400 in 2023, unused; (ii) unused long-term financing for a total of 120 million euro; (iii) cash and cash equivalents totalling 510 million euro.
A2A also maintains a Bond Issue Program (Euro Medium Term Note Programme) of 4 billion euro, of which 1,438 million euro still available.
The following table analyses the worst case for financial liabilities (including trade payables) in which all of the flows shown are undiscounted future nominal cash flows determined on the basis of residual contractual maturities for both principal and interest; they also include the undiscounted nominal flows of derivative contracts on interest rates.
| 12 31 2018 millions of euro | 1-3 MONTHS |
4-12 MONTHS |
AFTER 12 MONTHS |
|---|---|---|---|
| Bonds | 45 | 553 | 2,475 |
| Payables and other financial liabilities | 2 | 55 | 731 |
| Total financial flows | 47 | 608 | 3,206 |
| Payables to suppliers | 204 | 1 | - |
| Total trade payables | 204 | 1 | - |
| 12 31 2017 millions of euro | 1-3 MONTHS |
4-12 MONTHS |
AFTER 12 MONTHS |
|---|---|---|---|
| Bonds | 45 | 43 | 3,066 |
| Payables and other financial liabilities | 6 | 48 | 800 |
| Total financial flows | 51 | 91 | 3,866 |
| Payables to suppliers | 163 | 4 | 1 |
| Total trade payables | 163 | 4 | 1 |
Overview of performance, financial conditions and net debt
1 Financial statements
2 Financial statements pursuant to Consob Resolution no. 17221 of March 12, 2010
General information on A2A S.p.A. Financial
statements
Basis of preparation
Changes in international accounting standards
Accounting standards and
policies Notes to the balance sheet
Net debt
Notes to the income statement
Note on related party transactions
Consob Communication no. DEM/6064293 of July 28, 2006
Guarantees and
commitments with third parties
Other information
4 Attachments
5 Independent Auditors' Report
Credit risk relates to the possibility that a counterparty may be in default, or fail to respect its commitment in the manner and timing provided by contract. This type of risk is managed by the Group through specific procedures (Credit Policy, Energy Risk Management procedure) and appropriate mitigation actions.
This risk is overseen by both the Credit Management function allocated centrally (and the corresponding functions of the operating companies) and the Group Risk Management Organizational Unit responsible for supporting the Group companies. Risk mitigation is through the prior assessment of the creditworthiness of the counterparty and the constant verification of compliance with exposure limit as well as through the request for adequate guarantees.
The credit terms granted to customers as a whole have a variety of deadlines, in accordance with applicable law and market practice. In cases of delayed payment, default interest is charged as explicitly prescribed by the underlying supply contracts or by current law (application of the default rate as per Legislative Decree 231/2002).
Trade receivables are recognized on the balance sheet net of any write-downs. It is felt that the amount shown provides and accurate representation of the fair value of the trade receivables portfolio.
For the aging of trade receivables, reference is made to note 7) Trade receivables.
A2A S.p.A. was not exposed to equity risk at December 31, 2018.
At December 31, 2018, A2A S.p.A. held 23,721,421 treasury shares, representing 0.757% of the share capital consisting of 3,132,905,277 shares.
As prescribed by IAS/IFRS, treasury shares do not constitute an equity risk as their purchase cost is deducted from equity, and even if they are sold any gain or loss on the purchase cost does not have any effect on income statement.
Bonds (book value at December 31, 2018 equal to 2,706 million euro), loans (book value at December 31, 2018 equal to 744 million euro) and revolving committed bank lines present Terms and Conditions in line with the market for each type of instrument. In particular, they envisage: (i) negative pledge clauses under which A2A S.p.A. undertakes not to pledge, with exceptions, guarantees on its assets or 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 direct subsidiaries.
Bonds include (i) 2,562 million euro nominal (book value at December 31, 2018 2,593 million euro) issued as part of the EMTN Programme, which provide to investors a Change of Control Put in the event of a change of control of the company resulting in a rating downgrade at sub-investment grade level in the following 180 days (if within said 180 days, the company's rating should return to investment grade, the option may not be exercised); (ii) 111 million euro nominal (book value at December 31, 2018 113 million euro) relating to the private bond in yen with maturity 2036 with a Put right clause in favour of the investor in the event that the rating is lower than BBB- or equivalent level (sub-investment grade).
The loans stipulated with the European Investment Bank, with book value of 689 million euro contain a Credit Rating clause (if rating below BBB- or equivalent level to sub-investment grade), and a change of control clause of A2A S.p.A., with the right for the bank to invoke, upon notice to the company containing indication of the reasons, the early repayment of the loan.
With reference to the bank lines revolving committed available, the line for 400 million euro with maturity August 2023 and the bilateral line for 100 million euro with maturity February 2021, include a Change of Control clause which in the event of a change of control of the company causing a Material Adverse Effect allows the banks to request the facility to be extinguished and early repayment of any amounts drawn.
At December 31, 2018, there was no situation of non-compliance with the covenants of A2A S.p.A..
Tests were performed to determine whether these transactions qualify for hedge accounting in accordance with International Accounting Standard IFRS 9. In particular:
The use of derivatives in the A2A Group is governed by a coordinated set of procedures (Energy Risk Policy, Deal Life Cycle) which are based on industry best practices and designed to limit the risk of the Group being exposed to commodity price fluctuations, based on a cash flow hedging strategy.
The derivatives are measured at fair value based on the forward market curve at the balance sheet date, if the asset underlying the derivative is traded on markets with a forward pricing structure. In the absence of a forward market curve, fair value is measured on the basis of internal estimates using models that refer to industry best practices.
A2A S.p.A. uses "continuous-time" discounting to measure fair value. As a discount factor, it uses the interest rate for risk-free assets, identified in the Euro Overnight Index Average (EONIA) rate and represented in its forward structure by the Overnight Index Swap (OIS) curve. The fair value of the cash flow hedges has been classified on the basis of the underlying derivative contracts in accordance with IFRS 9.
In compliance with the provisions of IFRS 13, the fair value of an over-the-counter (OTC) financial instrument is determined taking into account the non-performance risk. To quantify the fair value adjustment attributable to this risk, A2A S.p.A. has, in line with best market practices, developed a proprietary model called the "bilateral Credit Value Adjustment" (bCVA), which takes into account changes in the creditworthiness of the counterpart as well as the changes in its own creditworthiness.
The bCVA has two addends, calculated by considering the possibility that both counterparties go bankrupt, known as the Credit Value Adjustment (CVA) and the Debit Value Adjustment (DVA):
The bCVA is therefore calculated with reference to the exposure, measured on the basis of the market value of the derivative at the time of the default, the probability of default (PD) and the loss given default (LGD). This latter item, which represents the non- recoverable portion of the receivable in the case of default, is measured on the basis of the IRB Foundation Methodology as stated in the Basel 2 accords, whereas the PD is measured on the basis of the rating of the counterparties (internal rating based where not available) and the historic probability of default associated with this and published annually by Standard & Poor's.
Applying the above method did not result in significant changes in fair value measurements.
Overview of performance, financial conditions and net debt
1 Financial statements
2 Financial statements pursuant to Consob Resolution no. 17221 of March 12, 2010
General information on A2A S.p.A. Financial
statements Basis of
preparation
Changes in international accounting standards
Accounting standards and policies
Notes to the balance sheet
Net debt Notes to the income statement
Note on related party transactions
Consob Communication no. DEM/6064293 of July 28, 2006
Guarantees and commitments
with third parties Other information
4 Attachments
5 Independent Auditors' Report
The following analyses show the outstanding amounts of derivative contracts stipulated and not expired at the balance sheet date, by maturity.
| thousands of euro | Notional value (a) expiring within 1 year |
Notional value (a) expiring within 1 and 5 years |
Notional value (a) expiring |
Balance sheet |
Progressive effect to income |
||
|---|---|---|---|---|---|---|---|
| to be received |
to be paid |
to be received |
to be paid |
over 5 years | value (b) |
statement at 12 31 2018 (c) |
|
| Interest rate risk management | |||||||
| - cash flow hedges as per IFRS 9 | 19,047 | 76,191 | (7,958) | ||||
| - not considered hedges as per IFRS 9 | |||||||
| Total derivatives on interest rates | - | 19,047 | - | 76,191 | - | (7,958) | - |
| Exchange rate risk management | |||||||
| - considered hedges as per IFRS 9 on commercial transactions on financial transactions |
111,244 | 7,693 | |||||
| - not considered hedges as per IFRS 9 on commercial transactions on financial transactions |
|||||||
| Total exchange rate derivatives | - | - | - | - | 111,244 | 7,693 | - |
(a) Represents the sum of the notional value of the elementary contracts that derive from any dismantling of complex contracts.
(b) Represents the net receivable (+) or payable (-) recognized in the balance sheet following the measurement of derivatives at fair value.
(c) Represents the adjustment of derivatives to fair value recognized progressively over time in the income statement from the stipulation of the contract to the present day.
The following is an analysis of the commodity derivative contracts outstanding at the balance sheet date set up for the purpose of managing the risk of the fluctuations in the market prices of commodities.
| Notional Value thousands of euro |
Unit of measurement of the notional value |
Notional value expiring within 1 year |
Notional value expiring within 2 years |
Notional value expiring within 5 years |
Balance sheet value (*) thousands of euro |
Progressive effect to income statement (**) thousands of euro |
|
|---|---|---|---|---|---|---|---|
| Energy product price risk management | |||||||
| A. Cash flow hedges as per IFRS 9, including: |
10,163.7 | - | |||||
| - Electricity | 306,554.4 | TWh | 8.4 | 1.1 | 1,431.7 | ||
| - Oil | Bbl | ||||||
| - Coal | 32,892.3 | Tons | 360,358 | (2,460.1) | |||
| - Natural Gas | 10,427.7 | TWh | 0.417 | (1,302.5) | |||
| - Natural Gas | Millions of cubic metres |
||||||
| - Exchange rate | Millions of dollars |
||||||
| - CO2 Emission rights | 48,574.6 | Tons | 2,464,000 | 12,494.6 | |||
| B. considered fair value hedges as per IFRS 9 |
- | - | |||||
| C. not considered hedges as per IFRS 9 of which: |
(2,663.1) | (10,933.8) | |||||
| C.1 hedge margin | 16.3 | 102.7 | |||||
| - Electricity | TWh | 86.4 | |||||
| - Oil | Bbl | ||||||
| - Natural Gas | MWh | ||||||
| - Natural Gas | Millions of cubic metres |
||||||
| - CO2 Emission rights | 1,266,8 | Tons | 50,000 | 16.3 | 16.3 | ||
| - Exchange rate | Millions of dollars |
||||||
| C.2 trading transactions | (2,679.4) | (11,036.5) | |||||
| - Electricity | 1,309,728.5 | TWh | 19.5 | 2.8 | (5,432.8) | (13,134.7) | |
| - Natural Gas | 1,666,355.2 | TWh | 59.6 | 10.4 | 3,083.0 | 2,427.7 | |
| - CO2 Emission rights | 21,984.4 | Tons | 717,000 | 340,000 | (329.5) | (329.5) | |
| - Environmental Certificates | MWh | ||||||
| - Environmental Certificates | Tep | ||||||
| Total | 7,500.6 | (10,933.8) |
Overview of performance, financial conditions and net debt
1 Financial statements
2 Financial statements pursuant to Consob Resolution no. 17221 of March 12, 2010
General information on A2A S.p.A. Financial statements Basis of preparation Changes in international accounting standards Accounting standards and policies Notes to the balance sheet Net debt Notes to the income statement Note on related party transactions Consob
Communication no. DEM/6064293 of July 28, 2006
Guarantees and commitments
with third parties
Other information
4 Attachments
5 Independent Auditors' Report
6 Report of the Board of Auditors
(*) Represents the net receivable (+) or payable (-) recognized in the balance sheet following the measurement of derivatives at fair value.
(**) Represents the adjustment of derivatives to fair value recognized progressively over time in the Income Statement from stipulation of the contract until the current date.
At December 31, 2018, there are no derivatives on shareholdings like in the previous year.
The following table shows the balance sheet figures at December 31, 2018, for derivative transactions.
| thousands of euro | NOTES | TOTAL |
|---|---|---|
| ASSETS | ||
| NON-CURRENT ASSETS | 7,693 | |
| Other non-current assets - Derivatives | 5 | 7,693 |
| CURRENT ASSETS | 163,043 | |
| Other current assets - Derivatives | 8 | 163,043 |
| TOTAL ASSETS | 170,736 | |
| LIABILITIES | ||
| NON-CURRENT LIABILITIES | 7,958 | |
| Other non-current liabilities - Derivatives | 20 | 7,958 |
| CURRENT LIABILITIES | 155,542 | |
| Trade payables and other current liabilities - Derivatives | 21 | 155,542 |
| TOTAL LIABILITIES | 163,500 |
The following table sets out the income statement figures at December 31, 2018 arising from the management of derivatives.
| thousands of euro | Notes | Realised during the year |
Change in fair value during the year |
Amounts recognized in the income statement |
|---|---|---|---|---|
| REVENUES | 25 | |||
| Revenues from the sale of goods | ||||
| Energy product price risk management and exchange rate risk management on commodities |
||||
| - considered hedges as per IFRS 9 | 38,653 | - | 38,653 | |
| - not considered hedges as per IFRS 9 | 57,892 | 97,549 | 155,441 | |
| Total revenues from the sale of goods | 96,545 | 97,549 | 194,094 | |
| OPERATING EXPENSES | 26 | |||
| Expenses for raw materials and services | ||||
| Energy product price risk management and exchange rate risk management on commodities |
||||
| - considered hedges as per IFRS 9 | 10,158 | - | 10,158 | |
| - not considered hedges as per IFRS 9 | (19,948) | (108,483) | (128,431) | |
| Total costs for raw materials and services | (9,790) | (108,483) | (118,273) | |
| Total recognized in Gross operating income (*) | 86,755 | (10,934) | 75,821 | |
| FINANCIAL BALANCE | 32 | |||
| Financial income | ||||
| Interest rate risk management and equity risk management | ||||
| Expenses on derivatives | ||||
| - considered hedges as per IFRS 9 | - | - | - | |
| - not considered hedges as per IFRS 9 | - | - | - | |
| Total | - | - | - | |
| Total financial income | - | - | - | |
| Financial expenses | ||||
| Interest rate risk management and equity risk management | ||||
| Expenses on derivatives | ||||
| - considered hedges as per IFRS 9 | (3,610) | - | (3,610) | |
| - not considered hedges as per IFRS 9 | - | - | - | |
| Total | (3,610) | - | (3,610) | |
| Total financial expenses | (3,610) | - | (3,610) | |
| TOTAL RECOGNIZED IN FINANCIAL BALANCE | (3,610) | - | (3,610) |
(*) The figures do not include the effect of the net presentation of the negotiation margin of trading activities.
Overview of performance, financial conditions and net debt
1 Financial statements
2 Financial statements pursuant to Consob Resolution no. 17221 of March 12, 2010
3 Notes General information on A2A S.p.A. Financial statements Basis of preparation Changes in international accounting standards Accounting standards and policies Notes to the balance sheet Net debt Notes to the income statement Note on related party transactions Consob Communication no. DEM/6064293 of July 28, 2006
Guarantees and commitments with third parties
Other information
4 Attachments
5 Independent Auditors' Report
To complete the analyses required by IFRS 7 and IFRS 13, the following table sets out the various types of financial instrument that are to be found in the various balance sheet items, with an indication of the accounting policies used and, in the case of financial instruments measured at fair value, an indication of where changes are recognized (income statement or equity). The last column of the table shows the fair value of the instrument at December 31, 2018, where applicable.
| thousands of euro | Criteria to measure the reported amount of financial instruments | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Notes | Financial instruments measured at fair value with changes recognized in: |
Financial instruments measured at |
Book value at 12 31 2018 |
Fair value at 12 31 2018 (*) |
||||||
| Income statement |
Balance sheet | amortized cost |
||||||||
| (1) | (2) | (3) | (4) | |||||||
| ASSETS | ||||||||||
| Other non-current financial assets | ||||||||||
| Financial assets measured at fair value of which: | ||||||||||
| -unlisted | 897 | 897 | n.a. | |||||||
| -listed | - | - | ||||||||
| Financial assets held to maturity | 96 | 96 | 96 | |||||||
| Other non-current financial assets | 608,173 | 608,173 | 608,173 | |||||||
| Total other non-current financial assets | 3 | 609,166 | ||||||||
| Other non-current assets | 5 | 7,693 | 709 | 8,402 | 8,402 | |||||
| Trade receivables | 7 | 717,192 | 717,192 | 717,192 | ||||||
| Other current assets | 8 | 145,105 | 17,938 | 97,339 | 260,382 | 260,382 | ||||
| Current financial assets | 9 | 661,377 | 661,377 | 661,377 | ||||||
| Cash and cash equivalents | 11 | 509,947 | 509,947 | 509,947 | ||||||
| Assets held for sale | 12 | 108,960 | 108,960 | 108,960 | ||||||
| LIABILITIES | ||||||||||
| Financial liabilities | ||||||||||
| Non-current bonds | 17 | 110,851 | 2,039,519 | 2,150,370 | 2,150,370 | |||||
| Current bonds (**) | 22 | 555,917 | 555,917 | 555,917 | ||||||
| Other non-current and current financial liabilities | 17 and 22 |
1,155,032 | 1,155,032 | 1,155,032 | ||||||
| Other non-current liabilities | 20 | 7,958 | 10,664 | 18,622 | 18,622 | |||||
| Trade payables | 21 | 776,005 | 776,005 | 776,005 | ||||||
| Other current liabilities | 21 | 147,768 | 7,774 | 94,934 | 250,476 | 250,476 |
(*) The fair value has not been calculated for receivables and payables not related to derivative contracts and loans as the corresponding carrying amount is a good approximation to this.
(**) Including accrued interest.
(1) Financial assets and liabilities measured at fair value with the changes in fair value recognized in the Income statement.
(2) Cash flow hedges.
(3) Financial assets available for sale measured at fair value with profit/loss recognized in equity.
(4) Loans and receivables and financial liabilities measured at amortized cost.
IFRS 7 and IFRS 13 require that fair value classification of financial instruments to be based on the quality of the input source used to calculate the fair value.
In particular, IFRS 7 and IFRS 13 set out three levels of fair value:
An analysis of the assets and liabilities included in the three fair value levels is set out in the following fair value hierarchy table.
| thousands of euro | NOTES | LEVEL 1 | LEVEL 2 | LEVEL 3 | TOTAL |
|---|---|---|---|---|---|
| Assets measured at fair value | 3 | 897 | 897 | ||
| Other non-current assets | 5 | 7,693 | 7,693 | ||
| Other current assets | 8 | 162,847 | 196 | 163,043 | |
| TOTAL ASSETS | 162,847 | 8,590 | 196 | 171,633 | |
| Non-current financial liabilities | 17 | 110,851 | 110,851 | ||
| Other non-current liabilities | 20 | 7,958 | 7,958 | ||
| Other current liabilities | 21 | 152,558 | 2,460 | 524 | 155,542 |
| TOTAL LIABILITIES | 263,409 | 10,418 | 524 | 274,351 |
1 Financial statements
2 Financial statements pursuant to Consob Resolution no. 17221 of March 12, 2010
General information on A2A S.p.A. Financial statements
Basis of preparation
Changes in international accounting standards
Accounting standards and policies
Notes to the balance sheet Net debt
Notes to the income statement
Note on related party transactions
Consob Communication no. DEM/6064293 of July 28, 2006
Guarantees and commitments
with third parties
Other information
4 Attachments
5 Independent Auditors' Report
The national regulations governing hydroelectric concessions were originally dictated by the Royal Decree December 11, 1933, no. 1775, which was based on the granting of concessions by the State in a long-term logic, also in order to allow the concessionaires to amortize the significant investments necessary for the construction of the plants. With a view to transferring the concessions and the ownership of the relative works to the State, Article 25 of the R.D. 1775/1933 cit. provided that:
This regulatory framework was subsequently superseded first by electricity sector nationalization Law no. 1643/1962, which resulted in Enel taking over the majority(4) of hydroelectric concessions with the relative recognition of an unlimited duration, and then by the liberalisation of the electricity market as a result of Legislative Decree no. 79/1999 (implementing Directive 96/92/EC), which introduced with art. 12 (and subsequent amendments) the principles of:
These regulations were subsequently amended by art. 37, paragraphs 4 and following, of Decree Law 83/2012 converted by Law 134/2012(5) that partially amended Legislative Decree no. 79/1999. The requirements, parameters and deadlines for carrying out the competitive procedure should have been set out in a specific ministerial decree (Tender MD) that was never issued. The time limit for the invitation to tender for the reallocation of the concession was set at 5 years before the concession expired.
Pending the reallocation of concessions, Legislative Decree 79/1999 (article 12, paragraph 8bis) provides that the outgoing concession holder is to continue to operate the concession under the same conditions as those laid down in the regulations and specifications in force.
In this stalemate, some Regions have enacted laws aimed at regulating the "temporary continuation of operations" for expired concessions, also providing for the imposition of an additional fee.
The recent Conversion Law no. 12/2019 of Decree Law December 14, 2018, no. 135 (Simplification DL) with article 11-quater has led to a significant boost to regionalization for regulations on large-scale derivation hydroelectric concessions.
In fact, the Regions have the power to regulate the procedures and criteria for the allocation of concessions by means of their own laws, the process for which must be completed by 2023 with the entrustment of economic operators through tenders or public/private companies or through forms of partnership. The duration of the new concessions will be between 20 and 40 years, with the possibility of extending the maximum period by a further 10 years depending on the complexity of the project proposal and the amount of investment.
With specific regional measure (after consultation with ARERA), the following will be defined:
• a State fee to be paid on a six-monthly basis to the Regions, comprising a fixed component linked
4 With the exception of derivations in the ownership of self-producers, municipal companies and local authorities.
5 On September 26, 2013, as part of infringement procedure no. 2011/2026, the European Commission sent Italy a letter of formal notice contesting the non-compatibility of part of article 37 of Law 134/2012 with EU legislation. The procedure is still in progress.
to the average nominal power of the concession and a variable calculated as a percentage of normalized revenues;
• the possible obligation for the concessionaires to supply annually and free of charge 220 kWh per kW of concession power for at least 50% destined to public services of the provincial territories involved in the derivation.
For concessions expired or expiring on December 31, 2023, which are temporarily continued, an additional fee is also charged.
In terms of compensation to outgoing operators, the rule prescribes:
The large-scale derivation hydroelectric concessions held by A2A S.p.A. located in Valtellina (with a nominal concession capacity of approximately 200 MW) have for the most part expired: with respect to these concessions, the Lombardy Region with Presidential Decree no. X/7693 of January 12, 2018 allowed the temporary continuation of the year until December 31, 2020, providing for the payment of an additional fee challenged by the company(6), except for a shorter term due to the reallocation. Other A2A S.p.A. concessions (plants in Mese, Udine and Calabria with a total nominal concession capacity of 345 MW), originally owned by Enel, expire in 2029.
Adequate provisions are provided where necessary for the disputes and litigation described below. It is noted that if there is no explicit reference to the presence of a provision, the company assessed the corresponding risk as possible without appropriating provisions in the financial statements.
In the 90s, the purchase by BAS S.p.A. of the investment in HISA was made thanks to the services of a local consultant, Consult Latina.
Given the non-uniqueness of the contractual text and the non-acquisition of 100% of the investment in HISA, BAS S.p.A. did not pay to Consult Latina the fee requested because it considered the contractual provision as not applicable and therefore the formulated payment request as unjustified. In 1998, Consult Latina established a lawsuit to obtain payment of the fee.
A2A S.p.A. took over the litigation after the incorporation of BAS S.p.A. in 2005 and repeatedly conferred upon the lawyers the mandate to reach a settlement also expressing a willingness to increase previous offers to cover the litigation costs as well as to listen to and weigh even incremental requests.
The Court convened the parties in multiple council chambers from December 18, 2014 and until October 07, 2017 to verify the conditions of a settlement or transaction. On August 8, 2018 the Court of Buenos Aires approved the text of the settlement (homologation), which was notified by A2A S.p.A. to the address elected at Studio Legale Garrido on August 10, 2018. In accordance with the settlement agreement that does not contain any recognition of the debt, A2A S.p.A. made the agreed payment of USD 1,350,000 and required Consult Latina to release the Redengas shares from any lien or pledge. The court has certified that the transaction has been completed.
Over time, Redengas, a subsidiary of HISA whose shares have been foreclosed by Consult Latina in guarantee for the payment by A2A S.p.A., has rooted actions to demand the removal of such encumbrances, even foretelling due compensation against A2A S.p.A. and Consult Latina; to date, no damages have been claimed in any action yet. Any damages ascertained in favour of Redengas would result in additional encumbrance for A2A S.p.A..
The Group made the payment of the transaction with the risk provision previously set aside.
Overview of performance, financial conditions and net debt
1 Financial statements
2 Financial statements pursuant to Consob Resolution no. 17221 of March 12, 2010
General information on A2A S.p.A. Financial
statements Basis of
preparation Changes in
international accounting standards
Accounting standards and policies
Notes to the balance sheet
Net debt Notes to the
income statement Note on related party
transactions Consob Communication no. DEM/6064293
of July 28, 2006 Guarantees and
commitments with third parties
Other information
4 Attachments
5 Independent Auditors' Report
6 For further information, reference should be made to the section entitled "Update of the main legal and tax disputes still pending".
On May 27, 2011, Consorzio Eurosviluppo Industriale S.c.a.r.l. served a writ on Ergosud S.p.A. and A2A S.p.A. with the following claims: (i) compensation for damages, of both a contractual and extracontractual nature, jointly, or alternatively exclusively and separately, in the amount of 35,411,997 euro (of which 1,065,529 euro as the residual portion of their share of the expenses); (ii) compensation for damages for the stoppage at the worksite and the failure to return the areas of pertinence to the Consortium.
In the filing of appearance Ergosud S.p.A. and A2A S.p.A. called for the request to be rejected in full because it is unfounded in its merit and in its substance, and pointed out: (i) the lack of the right of the Consortium to institute proceedings as it is in a state of bankruptcy, (ii) the lack of the right of the Consortium to institute proceedings for the damages allegedly suffered by Fin Podella at the item "anticipation of program contract" for 6,153,437 euro and the damages allegedly suffered by Conservificio Laratta S.r.l. for 359,000 euro.
S.F.C. S.A. filed a notice of joinder on November 8, 2011 pursuant to article 105 of the Civil Procedure Code (which allows a third party to make a new, different request to the original judge, extending the argument) and called that Ergosud S.p.A. alone should be ordered to pay damages, in part similar to those claimed by the Consortium, quantified in 27,467,031 euro.
The judge found the bankruptcy of S.F.C. S. A. was legitimate and therefore set the end of the proceedings and the hearing for December 19, 2012, declaring the need to execute an expert opinion, setting May 23, 2013 as the date for the hearing to appoint the court's expert witness. At that hearing the judge, changed in the meantime, confirmed the questions already formulated on December 19, 2012 and appointed the court experts Messrs. Pompili and Caroli, setting a term for the parties to appoint their own consultants. A2A S.p.A. and Ergosud S.p.A. appointed as their experts Mr. Massardo and Mr. Gioffrè, persons who over the years have already drawn up reports on the matters to which the questions refer. After adjournments requested by the experts, on July 31, 2014, the CTU was filed with the Court. The hearing for the expert's examination was held after adjournment on April 01, 2015 and the hearing for clarification of conclusions has been scheduled for November 30, 2016. At this hearing, filing of the award issued by the Arbitration Court of Milan was admitted in March 2016, and the terms were set for the final statements and replication before arriving to the sentence. The hearing to clarify conclusions was then fixed again and postponed several times and was finally held October 31, 2018. The parties have lodged their pleadings within the time allowed and the judgment is therefore pending. The Group has not allocated any provisions as it does not deem as probable the risk related to this lawsuit.
This investigation was initiated with a report filed in March 2011 by the management of the A2A Group against A2A employees and third party businessmen suspected of being responsible for fraud carried out to the harm of the company itself, who - for the payment of conspicuous sums of money - were responsible for illegal trafficking, the falsification of forms identifying the waste and certificates of analysis, in relation to the supply of biomasses and the certification of their calorific value. More specifically, biomass quantities were recorded on entry at figures higher than the real ones, with the relative calorific values also being increased.
This implies damage to the A2A Group and in particular to A2A Trading S.r.l. (now A2A S.p.A.). The current risk considered possible is for the higher costs incurred for undelivered biomass and higher costs incurred for counterfeiting (others) of the calorific capacity of the biomass delivered and not delivered. This is in addition to the increased use of coal instead of biomasses could have as a consequence an increase in the environmental costs relating to the second half of 2009 and the whole of 2010, as well the need to reimburse the additional income or Green Certificates recognized with respect to the real income. The company could have submitted, without fault and with reference to the years 2009 and 2010, generating statements of environmental rights greater than those actually produced.
To date, the GSE, as it blocked the issuing of licenses for subsequent years, did not address return requests for previous annuities of competence of the A2A Group (second half of 2009 – full-year 2010). If the GSE were to take action against the A2A Group, it will evaluate the appropriate actions, including damages, considering also the amount withheld from third-party suppliers. A2A Trading S.r.l. (now A2A S.p.A.) filed a request with the GSE, in accordance with the procedures and modalities required, to obtain Green Certificates relating to 2011 in which the calculation has been made on the basis of the real quantities of biomasses delivered to the power station and, in agreement with the Public Prosecutor, by taking into account a possible false (not of A2A) increase of 20% in the calorific values of such. Despite the fact that the GSE has acknowledged to A2A Trading S.r.l. (now A2A S.p.A.) the correctness of the calculations made for 2011, as of today the above-mentioned 2011 Green Certificates have not yet been issued.
In criminal proceedings, some sentencing measures have been adopted in the context of alternative rites to some of the defendants, with recognition of minimum compensation and recasts of expenses in favour of A2A.
The proceeding passed, for local jurisdiction, before the Court of Gorizia.
The dispute is ongoing. At the hearing of February 22, 2018, some texts were heard and the trial was postponed to the hearing of March 22, 2018 for the hearing of further texts. The preliminary hearings of April 19, May 17 and June 21 followed and the case was postponed, again for incumbent instructors, to July 5, 2018. Subsequently, the trial was postponed to October 25, 2018 to hear three defendants' technical advisors. The investigation continues; on January 17, 2019, January 31, 2019 and February 21, 2019, as many trial hearings were held; the trial was postponed until March 7, 2019 for the prosecution of the Public Prosecutor and, if there is time, for the conclusions of the civil parties.
The Group has not allocated any provision as it considers being the aggrieved party in the proceedings and that the economic effects at the end of the proceedings will be neutral.
In March 2013, Pessina Costruzioni initiated arbitration proceedings against A2A to declare the failure to comply with the shareholder agreements of Asm Novara and to sue A2A for damages. On June 30, 2015, the Arbitration Board, with the dissenting opinion of the arbitrator appointed by A2A filed its award that deems A2A responsible for violation of the shareholders' agreement signed on August 4, 2007 and, consequently, the order to pay damages of 37,968,938.95 euro plus legal fees and arbitration expenses. The company challenged the Award pursuant to art. 829 CPC before the Milan Court of Appeal.
On November 23, 2016, the Court of Appeals of Milan filed the Sentence 4337/16 declaring the grounds for appeal of the award filed inadmissible and unfounded, with the consequent absorption of incidental claims.
In the terms, A2A appealed to the Cassation appealing against the chapter of the sentence that rejected the first plea for invalidity of the award and the chapter that individually rejected chapters 5, 6 and 7 relating to the liquidation of the damage equitably. Pessina Costruzioni appeared in court rejecting all the grounds and requesting confirmation of the sentence.
On May 11, 2016, following invalidity of the effectiveness suspension of the award ordered by the Court of Appeal and the outcome of enforcement actions, A2A paid to Pessina Costruzioni 38,524,290.56 euro.
With Regional Law no. 22/2011, Lombardy essentially doubled the fee for hydroelectric use of public water, thereby infringing the principles of gradualism and reasonableness in the determination of fees, already recognized by the case law, and also violating the principle of equal competition between operators in the national territory.
Faced with the payment requests made by the Region for the years 2012 and 2013, Edipower S.p.A. (now A2A S.p.A.) therefore paid the fee considering solely the increase arising from the planned inflation rate as compared to the previous year. As a consequence, for 2012 and 2013 the Region issued injunctions for the payment of the amount not paid by the company; Edipower S.p.A. (now A2A S.p.A.) appealed against these injunctions before the Regional Court of Public Waters ("TRAP") of Milan, proposing the exception of unconstitutionality of the regional provision.
The same conduct was adopted by Edipower S.p.A. (now A2A S.p.A.) for the annuities of the 2014, 2015 and 2016 fees.
However, given the consolidation of unfavourable law and contrary to the thesis of Edipower S.p.A. (now A2A S.p.A.) (ref. sent. TSAP no. 138/2016 and sent. Const. Court no. 158/2016), there was the extinction of almost all the appeals established by Edipower S.p.A. (now A2A S.p.A.) and payment the Overview of performance, financial conditions and net debt
1 Financial statements
2 Financial statements pursuant to Consob Resolution no. 17221 of March 12, 2010
General information on A2A S.p.A. Financial statements
Basis of preparation
Changes in international accounting
standards Accounting
standards and policies
Notes to the balance sheet Net debt
Notes to the income statement
Note on related party transactions
Consob Communication no. DEM/6064293 of July 28, 2006
Guarantees and commitments with third parties
Other information
4 Attachments
5 Independent Auditors' Report
amount originally ordered, in order to avoid the increase of legal interest and the risk of condemnation to significant legal fees, as happened to other operators, while keeping intact its right to recover any amounts overpaid. Against this background, the injunctions for payment of October 2016 relating to the years 2014-2015 have not been opposed by Edipower S.p.A. (now A2A S.p.A.), which undertook to pay, with reserve of repetition in the event of a favourable judicial outcome, the quantum state fee not yet paid. The only judgement ("pilot") still pending before the TRAP Milan is related to the state property fee for 2013 related to the Liro Auction.
Despite the progress of disputes relating to the same issues rooted in other operators, the Company has considered the possibility of insisting in relation to the aforementioned "pilot" judgment.
The same issue also concerns the large-scale derivations in Lombardy of A2A, which, since the outset, in view of its specific circumstances, fully pays, but with reservation of repetition, the fee demanded by the Region and then sues for excess repetition. In December 2016, the only case pending for A2A before the TRAP Milan on the "doubling" of the state fee was also concluded, with partial loss of A2A in this respect.
In addition, the D.G.R. (Regional Council Resolution) of Lombardy no. 5130-2016 ordered, by implementing paragraph 5 of art. 53-bis of Regional Law 26/2003 introduced by Regional Law 19/2010, the subjection of the Lombardy hydroelectric concessions already expired to an "additional fee" established "provisionally" at 20 €/kW of nominal power of concession, subject to the request for settlement at the outcome of the assessments underway by the regional offices regarding the profitability of expired concessions. It is noted that said additional fee is imposed retroactively from the original expiry of each concession, and therefore for Grosotto, Lovero and Stazzona from January 1, 2011, for Premadio 1 from July 29, 2013 and for Grosio from November 15, 2016.
A2A, which has always challenged even in court the legitimacy - in the first place constitutional of the aforementioned paragraph 5, challenged, like other operators, the D.G.R. 5130-2016 before the Superior Court of Public Waters as well as D.G.R. 7693-2018 and consequent provisions, which reiterated the forecast of the application of an additional fee up to 2020 and, where envisaged, the revocation of the exemption of part of the state fee.
For disputes relating to public water derivation fees, at today's date, the Company set aside risk provisions for the total amount of 43 million euro equal to the entire claim of the counterparties.
On March 24, 2015, Carlo Tassara S.p.A. notified A2A, Electricité de France (EDF) and Edison a summons requesting the Court of Milan to condemn A2A and EDF to compensation for damages allegedly suffered by Carlo Tassara, in its capacity as minority shareholder of Edison, in relation to the mandatory tender offer launched by EDF on Edison shares consequently to the transaction by which, in 2012, A2A sold its indirect shareholding in Edison to EDF and simultaneously acquired 70% of the capital of Edipower from Edison and Alpiq.
Until 2012, in fact, A2A and EDF held joint control of Edison S.p.A. Edison, in turn, held 50% of Edipower S.p.A. (the remaining capital of Edipower was held 20% by Alpiq, 20% by A2A and the remaining 10% by Iren).
In the 2012 transaction, A2A sold its indirect shareholding in Edison to EDF and simultaneously acquired 70% of the capital of Edipower from Edison and Alpiq.
In the summons notified, Carlo Tassara complained that, in the transaction, EDF and A2A agreed on a mutual "discount" on the price paid by EDF for the purchase of Edison shares, on the one hand, and on the price paid by A2A for the purchase of 70% of Edipower, on the other. This discount was expected to be the result of abusive conduct by EDF and A2A as shareholders of Edison and the violation, among other things, of the regulations on transactions with related parties. This - according to Carlo Tassara - was expected to allow maintaining artificially low the price of the Edison shares paid to A2A and consequently the tender offer price paid to minorities of Edison (which by law was expected to be equal to that paid to A2A).
However, in 2012, A2A and EDF had voluntarily subjected the Transaction to the prior examination of Consob precisely in order to confirm the correctness of the tender offer price. Following extensive examinations, Consob had deemed that a compensatory mechanism could be detected in the transaction as a whole (i.e. between the sale of Edipower on the one hand and the sale of Edison shares on the other) and that therefore the tender offer price was to be increased from 0.84 euro to 0.89 euro per share.
In light of said decision, the parties had increased the sale price of the shareholding in Edison based on the price of 0.89 euro per share, for a total increase of around 84 million euro. EDF launched the tender offer at 0.89 euro per share.
Carlo Tassara resorted to Consob in order to further increase the price of the tender offer, but Consob rejected the request.
In addition, pending the tender offer, Carlo Tassara challenged before the TAR the tender offer document and the related resolution of approval by Consob requesting suspensions thereof for reasons of urgency. However, the TAR postponed the decision on the suspension to a date following the closing of the tender offer and, as a result of this, Carlo Tassara adhered to the tender offer and waived the cautionary request.
The writ of summons did not quantify the damage allegedly suffered by Carlo Tassara as a result of such transactions. However, with brief on February 20, 2017, Carlo Tassara requested that the court have an expert witness to calculate them (specifying that it be quantified in the alleged difference between the tender offer price and the market value that the Edison shares had previously). Carlo Tassara also filed an appraisal in which such damages were quantified in a total amount between 197 and 232 million euro, amount to calculate the compensation due from each of the companies that will be considered responsible by the judge.
After several postponements justified also by modifications of the judge, on October 17, 2018, the judge rejected the requests for investigation of the plaintiffs, setting March 19, 2019 as the hearing for clarification of conclusions. The Group, having fulfilled the requirements of the regulations in force, does not consider likely the risk for which it has not allocated any provisions.
In May 2017, the AGCM initiated a preliminary investigation against A2A S.p.A. and A2A Energia S.p.A. for the investigation of alleged conduct in violation of art. 102 TFEU, within the framework of which it ordered the conduct of inspections without notice. Similar proceedings were simultaneously initiated against two other major operators in the sector.
With regard to A2A, the complaint concerns alleged conduct aimed at acquiring free markets of customers served in protected market, which were implemented thanks to the availability of commercially sensitive information and data that the operator could have available as vertically integrated into a Group that operates in the sale under protected market and electrical distribution, as well as boasting specific characteristics (reliability/safety), also deriving from the nature of an integrated operator.
As indicated in the initiation measure, it was a question of conduct that cannot be replicated by nonintegrated competitors and that would hinder the full development of the free market, also in view of the end of "price protection". Furthermore, since the existence of an effect on trade between Member States is established, the proceedings deal with the case as an infringement of the EU competition law (article 102 TFEU).
The company defended itself on the merits, both at hearings and with briefs, highlighting that it did not use data deriving from the exercise of the service under protected market nor distribution, for promotional purposes for the development of its free market activities.
The deadline for the conclusion of all the proceedings initiated, including those against the other two operators, was extended several times until December 31, 2018, and on January 8, 2019, the measure of the AGCM was finally received, which - noting the defensive arguments set out - found that there were no elements for the application of a sanction against A2A. However, the situation will continue to be monitored, in the event that the positive measure for A2A may be challenged before the Administrative Judge by any of the reporting parties.
* * *
Overview of performance, financial conditions and net debt
1 Financial statements
2 Financial statements pursuant to Consob Resolution no. 17221 of March 12, 2010
General information on A2A S.p.A. Financial statements Basis of
preparation
Changes in international accounting standards
Accounting standards and policies
Notes to the balance sheet Net debt
Notes to the income statement
Note on related party transactions
Consob Communication no. DEM/6064293 of July 28, 2006
Guarantees and commitments
with third parties Other information
4 Attachments
5 Independent Auditors' Report
The following information is provided in connection with the main litigation of a fiscal nature.
On April 04, 2016, the Provincial Directorate I of Milan - Regional Office of Milan 1 - notified the invitation to appear to provide clarifications on a business transfer in the company Chi.na.co. S.r.l. and the subsequent sale of the investment held in it under control for registration tax purposes. The invitation was followed by a contradictory with the Office and subsequent notification by the latter of the notice of liquidation to the acquiring counterparty, which filed an appeal on September 28, 2016. The Provincial Tax Commission of Milan rejected the appeal with sentence filed on July 07, 2017. The company proposed an appeal on February 13, 2018. The Milan Regional Administrative Court rejected the appeal. The company is evaluating the decision of the Court of Cassation. The risks provision recognized for 1.4 million euro was fully used for the payment of the amounts requested with the liquidation notice.
In early 2006, the Italian Finance Police – Lombardy Regional Unit, Milan – carried out a tax audit of AMSA Holding S.p.A. (now A2A S.p.A.) for VAT purposes for tax years 2001 to 2005.
The audit ended with the issue of a final report contesting the legitimacy of the ordinary VAT rate, in place of the special rate applied by suppliers for waste disposal and plant maintenance, as well as the subsequent deduction made after the invoices issued for these services were duly paid.
The report was followed by formal notices of assessment from the Tax Revenue Office (Milan 3 Office) for each year audited; appeals were then filed with the Provincial Tax Commission within the term provided by law.
The appeals for 2001 and for 2004 and 2005 were discussed on January 25, 2010 and on February 17, 2010 respectively, with a favourable outcome for the company in all cases. The Tax Revenue Office appealed against the verdict of the first court. The Regional Tax Commission rejected this appeal for all three years, 2001, 2004 and 2005.
For 2011, the Tax Revenue Office filed an appeal with the Supreme Court against which AMSA Holding S.p.A. (now A2A S.p.A.), filed a cross-appeal on November 9, 2012. At the hearing on December 12, 2018, the Company requested that the case be suspended in order to assess the facilitated settlement of the dispute.
The outcomes of the 2002 and 2003 disputes were also favourable for the company but the Tax Revenue Office filed an appeal against both sentences. The appeal for 2002 was discussed on November 30, 2010, and by way of a sentence lodged on February 2, 2011 the Milan Regional Tax Commission overturned the sentence of the first court, upholding the Tax Revenue Office's appeal on almost all counts with the exception of the hazardous waste category. The Company filed an appeal with the Supreme Court for 2002. The hearing was held on December 12, 2018 and, to date, no decision has been filed. For 2003 the appeal made by the Tax Revenue Office was discussed on November 07, 2011 before the Regional Tax Commission which rejected it with a sentence filed on November 11, 2011. The Tax Revenue Office has not appealed to the Supreme Court for 2003, 2004 and 2005 and the sentence has become final, thereby closing the litigation.
At December 31, 2018, A2A S.p.A. had a surplus of environmental certificates.
In accordance with Article 2427, paragraph 16-bis, of the Italian civil code, it is hereby reported that the company paid EY S.p.A. total fees for the legally required auditing of the annual accounts and for other services provided during the year in the amount of 300 thousand euro.
The registered office of the company is in Brescia in Via Lamarmora 230.
A2A S.p.A. acquired the shareholding in EPCG by means of the international tender held in 2009, and under the so-called "EPCG Agreement" dated September 3, 2009, it acquired the right to manage the company, appointing - until June 30, 2017 - the Executive Director (CEO) and Executive Manager.
As part of the management of EPCG by A2A S.p.A., also in order to meet the specific indicators provided by the EPCG Agreement, with effect from 2010, A2A S.p.A. and, as of 2011, Unareti S.p.A. (formerly A2A Reti Elettriche S.p.A.), have provided in favour of EPCG services designed to improve the organization and performance of EPCG. Within the broader set of services provided, consulting services were also included provided for the benefit of EPCG by specialized companies outside the A2A Group, the costs of which were first invoiced to A2A S.p.A. as part of more complex and organic consulting services provided in favour of the entire A2A Group and subsequently by A2A S.p.A. charged to EPCG for the activities carried out in favour of the same.
In view of the synergistic importance of intra-group services requested by EPCG to A2A, EPCG applied for and obtained, by the State Commission for the Control of Public Procurement Procedures, a formal exemption - dated September 6, 2010 - by which the non-necessity is enshrined for EPCG to apply the procedures provided by law on Public Procurement in order to purchase services from A2A S.p.A., A2A Reti Elettriche and certain other (identified by name) companies controlled by A2A S.p.A..
From a different perspective, service contracts between EPCG and A2A S.p.A. - which, while benefiting from the aforementioned exemption, would have needed the approval of the EPCG Board of Directors - were not explicitly approved by the Board, which nonetheless approved the budget of each annuity that includes the aforementioned costs. Therefore, the service contracts related to the years 2010, 2011 and 2012 were signed by the CEO pro tempore of EPCG. Pursuant to said contracts, A2A S.p.A. invoiced with regard to the aforementioned annuities a total of 7.75 million euro to EPCG, which has only paid a portion of 4.34 million euro.
For the years 2013, 2014, 2015, 2016 and for the first half of 2017, in the absence of a specific agreement between the shareholders regarding the formalization of a specific service contract, A2A did not proceed with invoicing, although a broad set of services was indeed provided to EPCG also in said years, and A2A incurred the related charges.
Also, certain consulting services are disputed, related to the period 2011 and 2012 and amounting to about 2 million euro, acquired by EPCG directly from external consulting firms of the A2A Group.
At the beginning of 2014, the local "Party of People with Disabilities and Pensioners" proposed a parliamentary interpellation and filed a complaint to the Special Attorney in relation to service contracts entered into by EPCG with A2A and external consulting firms of the A2A Group. Subsequently, in November 2014, the Montenegrin police sent EPCG a request for documents and data that was fully acknowledged by the management of EPCG in the following month. Two further requests for additional information and documentation were then subjected to EPCG directly by the Special Attorney in August 2015 and February 2016, and in both cases the management of EPCG responded comprehensively to the requests of the investigators.
Until said moment, therefore, EPCG had registered only requests for documentation to which it promptly replied, and EPCG as well as A2A had therefore not - until April 15, 2016 - deemed that said requests could result in actions such to configure a risk if not remote - personal or capital - at the expense of its employees and/or the companies.
On April 15, 2016, the former Italian CFO appointed by A2A in EPCG, who resigned from said office only a few days before for reasons completely unrelated to the issue under consideration, was arrested by the Montenegrin police on order of the Special Attorney. Investigative measures are still covered by investigation confidentiality. On the basis of what is currently known, the accusation concerns a hypothesis of abuse of office in the management of service contracts stipulated by the same EPCG, and also concerns two other Italian managers seconded by A2A in EPCG in the period 2010-2012, as well as the former pro-tempore Co-General Manager of A2A, who signed the service contracts. On May 6, 2016, the former CFO was released on payment of a bail deposit and withdrawal of the passport. On December 7, 2016, the passport was returned and the CFO returned to Italy. Given the fact that in Montenegro there is a law on liability of legal persons for offences committed by their managers in their own interest, the company also monitored the possibility of extension of the investigation to A2A S.p.A.. At June 30, 2017, this event did not occur, but in the following weeks it emerged from press reports in Montenegro, and lastly with the notification in Podgorica on July 25, 2017, in the hands of the defendant appointed for this purpose by A2A, that the shares held by A2A in EPCG have been the subject of a precautionary measure of seizure. This precautionary measure was judicially challenged by A2A S.p.A., obtaining complete revocation on September 29, 2017. From the precautionary measure, there was also evidence that the proceedings in question were extended to A2A on July 3, 2017. Subsequently, following a civil/commercial agreement signed by A2A on October 23, 2017 with EPCG, and the resolution adopted by the latter on November 17, 2017 to not constitute as injured party in the criminal proceedings, as there was no damage, the Special State Prosecutor ordered Overview of performance, financial conditions and net debt
1 Financial statements
2 Financial statements pursuant to Consob Resolution no. 17221 of March 12, 2010
General information on A2A S.p.A. Financial statements
Basis of preparation
Changes in international accounting standards
Accounting standards and policies
Notes to the balance sheet Net debt
Notes to the income statement
Note on related party transactions
Consob Communication no. DEM/6064293 of July 28, 2006
Guarantees and commitments with third parties
Other information
4 Attachments
5 Independent Auditors' Report
the withdrawal of the accusations on December 28, 2017 and therefore the filing of the proceedings against A2A S.p.A. as well as against the three Montenegro officials, originally investigated like the Italian managers. The proceedings against individuals to be investigated is pending to move to the trial phase.
Based on the assessments made, the foregoing and the information available to date, A2A believes that the risk of potential penalties applicable and/or claims for compensation or indemnity actions, can be assessed as remote. Considering the state of the proceedings and for the same reasons outlined herewith, it is also impossible to quantify in certain terms the amount of said indemnities or penalties, direct or indirect.
Only approximately, and as broad reference, it is in fact possible to indicate that the amount of the penalties contemplated by the Montenegrin law on the liability of legal persons could theoretically – in the extreme variability of the local law with an unclear discipline – be significantly greater (from 2 to 100 times the amount of the alleged damage, as stated in the precautionary measure), even though it is appropriate to consider that there is no sound case-law on the matter and that the proceeding against A2A can be filed.
In view of the above, the company - in accordance with IAS 37 - considered it correct to handle the case in question providing adequate information and not allocating specific risks provision.
4 Attachments
| Tangible assets thousands of euro |
BALANCE AT 12 31 2017 | EFFECT NON-RECURRING | |||||||
|---|---|---|---|---|---|---|---|---|---|
| GROSS VALUE |
ACCUMULATED DEPRECIATION |
PROVISION WRITE DOWN |
RESIDUAL VALUE |
GROSS VALUE |
ACCUMULATED DEPRECIATION |
PROVISION WRITE DOWN |
RESIDUAL VALUE |
||
| Land | 42,784 | (2,594) | (6,950) | 33,240 | (1,067) | 315 | (752) | ||
| Buildings | 475,678 | (203,511) | (31,385) | 240,782 | (2,942) | 984 | 626 | (1,332) | |
| Plant and machinery | 2,233,952 | (1,093,849) | (327,638) | 812,465 | (51,243) | 17,016 | 12,543 | (21,684) | |
| Industrial and commercial equipment | 18,574 | (17,176) | 1,398 | ||||||
| Other assets | 47,056 | (33,819) | 13,237 | (1,915) | 1,209 | (706) | |||
| Construction in progress and advances | 17,500 | 17,500 | (19) | (19) | |||||
| Leasehold improvements | 626 | (613) | 13 | ||||||
| Total tangible assets | 2,836,170 | (1,351,562) | (365,973) | 1,118,635 | (57,186) | 19,209 | 13,484 | (24,493) |
| Tangible assets thousands of euro |
BALANCE AT 12 31 2016 | EFFECT NON-RECURRING TRANSACTIONS |
||||||
|---|---|---|---|---|---|---|---|---|
| GROSS VALUE |
ACCUMULATED DEPRECIATION |
PROVISION WRITE DOWN |
RESIDUAL VALUE |
GROSS VALUE |
ACCUMULATED DEPRECIATION |
RESIDUAL VALUE |
||
| Land | 42,387 | (2,745) | (6,950) | 32,692 | ||||
| Buildings | 472,474 | (192,525) | (31,385) | 248,564 | ||||
| Plant and machinery | 2,224,778 | (1,035,371) | (327,637) | 861,770 | ||||
| Industrial and commercial equipment | 18,186 | (16,849) | (1) | 1,336 | ||||
| Other assets | 32,236 | (30,433) | 1,803 | (11) | 13 | 2 | ||
| Construction in progress and advances | 18,440 | 18,440 | (316) | (316) | ||||
| Leasehold improvements | 33,579 | (5,064) | 28,515 | (32,952) | 4,453 | (28,499) | ||
| Total tangible assets | 2,842,080 | (1,282,987) | (365,973) | 1,193,120 | (33,279) | 4,466 | (28,813) |
Overview of performance, financial conditions and net debt
1 Financial statements
2 Financial statements pursuant to Consob Resolution no. 17221 of March 12, 2010
3 Notes
Statement of changes in tangible
Statement of changes in intangible assets 3/a. Statement
of changes in investments in subsidiaries
3/b. Statement of changes in investments in affiliates
3/c. Statement of changes in investments in other companies
4/a. List of investments in subsidiaries
4/b. List of investments in affiliates
Key data of the financial statements of the main subsidiaries and affiliates prepared according to IAS/ IFRS (pursuant to art. 2429.4 of the Italian Civil Code)
Key data of the financial statements of the main subsidiaries and affiliates prepared according to ITALIAN GAAP (pursuant to art. 2429.4 of the Italian Civil Code) Certification of the financial statements pursuant to article 154-bis, paragraph 5 of Legislative Decree no. 58/98
5 Independent Auditors' Report
| EFFECT NON-RECURRING | CHANGES DURING THE YEAR | BALANCE AT 12 31 2018 | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| PROVISION RESIDUAL VALUE |
ACQUISITIONS CHANGES | IN CATEGORY |
ASSET VALUE |
RECLASSIFICATIONS ACCUMULATED DEPRECIATION |
OTHER CHANGES |
ASSET VALUE |
DISPOSALS ACCUMULATED DEPRECIATION |
WRITE DEPRECIA DOWNS TION |
TOTAL CHANGES FOR THE YEAR |
GROSS VALUE |
ACCUMULATED DEPRECIATION |
PROVISION WRITE DOWN |
RESIDUAL VALUE |
|
| (752) | 12 | 232 | (58) | 186 | 41,903 | (2,594) | (6,635) | 32,674 | ||||||
| (1,332) | 1,145 | 1,515 | 310 | (310) | (1) | (4,196) (12,925) (14,462) | 471,509 | (215,762) | (30,759) | 224,988 | ||||
| (21,684) | 3,854 | 15,428 | (376) | 312 | (55,567) (36,349) 2,201,615 | (1,132,088) | (315,095) | 754,432 | ||||||
| 409 | (321) | 88 | 18,983 | (17,497) | - | 1,486 | ||||||||
| (706) | 3,150 | 17 | (1,318) | 1,318 | (4,053) | (886) | 46,990 | (35,345) | - | 11,645 | ||||
| (19) | 13,452 (16,998) | (223) | (3,769) | 13,712 | - | - | 13,712 | |||||||
| (310) | 310 | (3) | (3) | 316 | (306) | - | 10 | |||||||
| (24,493) | 22,022 | 194 | - | - | (224) (1,752) | 1,630 | (4,196) (72,869) (55,195) 2,795,028 | (1,403,592) (352,489) 1,038,947 |
| CHANGES DURING THE YEAR | BALANCE AT 12 31 2017 | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| ACQUISITIONS CHANGES | RECLASSI | OTHER | DISPOSALS | DEPRECIA | TOTAL | GROSS | ACCUMULATED | PROVISION | RESIDUAL | ||
| IN CATEGORY |
FICATIONS NET OF THE PROVISION |
CHANGES NET OF THE PROVISION |
GROSS VALUE |
ACCUMULATED DEPRECIATION |
TION | CHANGES FOR THE YEAR |
VALUE | DEPRECIATION | WRITE DOWN |
VALUE | |
| 93 | 821 | (517) | 151 | 548 | 42,784 | (2,594) | (6,950) | 33,240 | |||
| 1,168 | 1,816 | 102 | (82) | 23 | (10,809) | (7,782) | 475,678 | (203,511) | (31,385) | 240,782 | |
| 953 | 8,219 | 1 | (569) | 569 | (58,478) | (49,305) | 2,233,952 | (1,093,849) | (327,638) | 812,465 | |
| 390 | (328) | 62 | 18,574 | (17,176) | - | 1,398 | |||||
| 6,076 | 146 | 8,553 | (3,343) | 11,432 | 47,056 | (33,819) | - | 13,237 | |||
| 16,073 | (16,565) | (132) | (624) | 17,500 | - | - | 17,500 | ||||
| (3) | (3) | 626 | (613) | - | 13 | ||||||
| 24,753 | (6,384) | 8,553 | 792 | (1,168) | 743 | (72,961) | (45,672) | 2,836,170 | (1,351,562) | (365,973) | 1,118,635 |
| Intangible assets thousands of euro |
BALANCE AT 12 31 2017 | |||
|---|---|---|---|---|
| GROSS VALUE |
ACCUMULATED DEPRECIATION |
RESIDUAL VALUE |
||
| Industrial patents and intellectual property rights | 111,945 | (105,065) | 6,880 | |
| Concessions, licences, trademarks and similar rights | 40,866 | (33,094) | 7,772 | |
| Goodwill | 38,687 | 38,687 | ||
| Assets in progress | 12,426 | 12,426 | ||
| Other intangible assets | 30,649 | (1,214) | 29,435 | |
| Total intangible assets | 234,573 | (139,373) | 95,200 |
| Intangible assets thousands of euro |
BALANCE AT 12 31 2016 | EFFECT NON-RECURRING TRANSACTIONS |
||||||
|---|---|---|---|---|---|---|---|---|
| GROSS VALUE |
ACCUMULATED DEPRECIATION |
RESIDUAL VALUE |
GROSS VALUE |
ACCUMULATED DEPRECIATION |
RESIDUAL VALUE |
|||
| Industrial patents and intellectual property rights | 108,042 | (101,088) | 6,954 | |||||
| Concessions, licences, trademarks and similar rights | 39,337 | (29,058) | 10,279 | (396) | 219 | (177) | ||
| Goodwill | 37,480 | 37,480 | 1,207 | 1,207 | ||||
| Assets in progress | 2,906 | 2,906 | ||||||
| Other intangible assets | 59,371 | (1,204) | 58,167 | |||||
| Total intangible assets | 247,136 | (131,350) | 115,786 | 811 | 219 | 1,030 |
Overview of performance, financial conditions and net debt
1 Financial statements
2 Financial statements pursuant to Consob Resolution no. 17221 of March 12, 2010
3 Notes
Statement of changes in tangible assets
Statement
intangible assets 3/a. Statement of changes in investments in
subsidiaries 3/b. Statement of changes in investments in affiliates
3/c. Statement of changes in investments in other companies
4/a. List of investments in subsidiaries
4/b. List of investments in affiliates
Key data of the financial statements of the main subsidiaries and affiliates prepared according to IAS/ IFRS (pursuant to art. 2429.4 of the Italian Civil Code)
Key data of the financial statements of the main subsidiaries and affiliates prepared according to ITALIAN GAAP (pursuant to art. 2429.4 of the Italian Civil Code) Certification of the financial statements pursuant to article 154-bis, paragraph 5 of Legislative Decree no. 58/98
5 Independent Auditors' Report
| CHANGES DURING THE YEAR | BALANCE AT 12 31 2018 | ||||||
|---|---|---|---|---|---|---|---|
| ACQUISITIONS | CHANGES IN CATEGORY |
OTHER CHANGES |
DEPRECIATION | TOTAL CHANGES FOR THE YEAR |
GROSS VALUE |
ACCUMULATED DEPRECIATION |
RESIDUAL VALUE |
| 3,036 | 2,407 | (287) | (4,462) | 694 | 117,101 | (109,527) | 7,574 |
| 4,741 | 10,474 | (15) | (5,947) | 9,253 | 56,066 | (39,041) | 17,025 |
| - | 38,687 | - | 38,687 | ||||
| 14,775 | (13,075) | 1,700 | 14,126 | - | 14,126 | ||
| (26,586) | (11) | (26,597) | 4,063 | (1,225) | 2,838 | ||
| 22,552 | (194) | (26,888) | (10,420) | (14,950) | 230,043 | (149,793) | 80,250 |
| EFFECT NON-RECURRING BALANCE AT 12 31 2016 TRANSACTIONS |
BALANCE AT 12 31 2017 | |||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| RESIDUAL GROSS RESIDUAL ACCUMULATED ACCUMULATED |
ACQUISITIONS | CHANGES | RECLASSIFICATIONS | DEPRECIATION | TOTAL | GROSS | ACCUMULATED | RESIDUAL | ||||||
| VALUE VALUE VALUE DEPRECIATION DEPRECIATION |
IN CATEGORY |
GROSS VALUE |
ACCUMULATED DEPRECIATION |
CHANGES | CHANGES FOR THE YEAR |
VALUE | DEPRECIATION | VALUE | ||||||
| 6,954 | 2,729 | 1,174 | (3,977) | (74) | 111,945 | (105,065) | 6,880 | |||||||
| (396) 219 (177) |
1,849 | 8,686 | (8,610) | 57 | (4,312) | (2,330) | 40,866 | (33,094) | 7,772 | |||||
| 1,207 | - | 38,687 | - | 38,687 | ||||||||||
| 12,996 | (3,476) | 9,520 | 12,426 | - | 12,426 | |||||||||
| 43 | (28,765) | (10) | (28,732) | 30,649 | (1,214) | 29,435 | ||||||||
| 1,030 | 17,617 | 6,384 | (8,610) | 57 | (28,765) | (8,299) | (21,616) | 234,573 | (139,373) | 95,200 |
| Shareholdings | BALANCE AT | CHANGES IN 2018 | ||||||
|---|---|---|---|---|---|---|---|---|
| thousands of euro | FINANCIAL STATEMENTS 12 31 2017 |
INCREASES | DECREASES | EFFECT REVALUATIONS NON-RECURRING WRITE-DOWNS TRANSACTIONS |
||||
| FINANCIAL ASSETS | ||||||||
| Subsidiaries: | ||||||||
| Unareti S.p.A. | 1,381,881 | |||||||
| A2A Ambiente S.p.A. | 634,894 | |||||||
| A2A Calore & Servizi S.r.l. | 334,617 | (3,990) | ||||||
| A2A Ciclo Idrico S.p.A. | 167,000 | |||||||
| A2A gencogas S.p.A. | 510,317 | |||||||
| A2A Energiefuture S.p.A. | 262,730 | (73,000) | ||||||
| A2A Energia S.p.A. | 98,743 | |||||||
| Retragas S.r.l. | 30,105 | |||||||
| Aspem S.p.A. | 26,508 | |||||||
| A2A Smart City S.p.A. | 9,222 | |||||||
| Proaris S.r.l. | 3,557 | |||||||
| Camuna Energia S.r.l. | 740 | |||||||
| Ecofert S.r.l. in liquidation | 271 | (271) | ||||||
| Plurigas S.p.A. in liquidation | 560 | |||||||
| SEASM S.r.l. | 469 | |||||||
| Linea Group Holding S.p.A. | 109,379 | |||||||
| A2A Illuminazione Pubblica S.r.l. | 28,600 | |||||||
| A2A Montenegro d.o.o. | 102 | |||||||
| Azienda Servizi Valtrompia S.p.A. | 10,758 | |||||||
| A2A Security S.c.p.a. | 23 | |||||||
| A2A Energy Solution S.r.l. | 10 | 4,565 | ||||||
| A2A IDRO4 S.r.l. | 10 | 21,169 | ||||||
| A2A Rinnovabili S.p.A. | 50 | |||||||
| A2A Alfa S.r.l. | - | |||||||
| A2Abroad S.p.A. | - | 300 | ||||||
| ACSM-AGAM S.p.A. | - | 19,788 | ||||||
| Total subsidiaries | 3,610,546 | 20,088 | (271) | 21,744 (73,000) |
||||
| Equity investments held for sale | ||||||||
| Elektroprivreda Cnre Gore AD (EPCG) | 224,186 | (118,358) | 3,132 |
Overview of performance, financial conditions and net debt
1 Financial statements
2 Financial statements pursuant to Consob Resolution no. 17221 of March 12, 2010
3 Notes
of changes in intangible assets 3/a. Statement of changes in
3/b. Statement
of changes in investments in affiliates 3/c. Statement of changes in
investments in other companies 4/a. List of
investments in subsidiaries 4/b. List of
investments in affiliates
Key data of the financial statements of the main subsidiaries and affiliates prepared according to IAS/ IFRS (pursuant to art. 2429.4 of the Italian Civil Code)
Key data of the financial statements of the main subsidiaries and affiliates prepared according to ITALIAN GAAP (pursuant to art. 2429.4 of the Italian Civil Code) Certification of the financial statements pursuant to article 154-bis, paragraph 5 of Legislative Decree no. 58/98
5 Independent Auditors' Report
| CHANGES IN 2018 | BALANCE AT FINANCIAL |
SHARE OF EQUITY | |||||
|---|---|---|---|---|---|---|---|
| REVALUATIONS WRITE-DOWNS |
VALUATIONS FROM EXCHANGE/ LOSSES |
OTHERS CHANGES |
RECLASSIFICATIONS | STATEMENTS 12 31 2018 |
% HELD |
EQUITY AT 12 31 2018 |
PRO RATA AMOUNT |
| 1,381,881 | 100.00% | 1,478,693 | 1,478,693 | ||||
| 634,894 | 100.00% | 494,876 | 494,876 | ||||
| 330,627 | 100.00% | 356,782 | 356,782 | ||||
| 167,000 | 100.00% | 197,330 | 197,330 | ||||
| 510,317 | 100.00% | 547,396 | 547,396 | ||||
| 189,730 | 100.00% | 193,722 | 193,722 | ||||
| (1,704) | 97,039 | 100.00% | 197,645 | 197,645 | |||
| 30,105 | 87.27% | 40,749 | |||||
| (26,508) | - | ||||||
| 9,222 | 87.00% | 18,515 | |||||
| 3,557 | 60.00% | 6,006 | |||||
| 740 | 74.50% | 883 | |||||
| - | |||||||
| 560 | 70.00% | 2,213 | |||||
| 469 | 67.00% | 853 | |||||
| 109,379 | 51.00% | 209,350 | |||||
| 28,600 | 100.00% | 47,556 | |||||
| 102 | 100.00% | 163 | |||||
| 10,758 | 74.55% | 20,764 | |||||
| 23 | 47.60% | 150 | |||||
| 4,575 | 100.00% | 27,758 | |||||
| 82 | (21,261) | - | |||||
| 50 | 100.00% | 428 | |||||
| - | 70.00% | 100 | |||||
| 300 | 100.00% | 295 | |||||
| 85,263 | 85,528 | 190,579 | 41.34% | 440,823 | |||
| 85,263 | 82 | 36,055 | 3,700,507 | 4,283,050 | 182,236 3,905,323 |
||
| 108,960 | 18.70% |
| Shareholdings | BALANCE AT FINANCIAL |
CHANGES IN 2018 | |||
|---|---|---|---|---|---|
| thousands of euro | STATEMENTS 12 31 2017 |
INCREASES | DECREASES | EFFECT NON-RECURRING TRANSACTIONS |
|
| FINANCIAL ASSETS | |||||
| Affiliates: | |||||
| ACSM-AGAM S.p.A. | 34,051 | ||||
| Rudnik Uglja Ad Pljevlja | 7,067 | (7,067) | |||
| Sviluppo Turistico Lago d'Iseo S.p.A. (*) | 735 | ||||
| SET S.p.A. (*) | 466 | ||||
| Serio Energia S.r.l. (*) | 400 | ||||
| Ge.S.I. S.r.l. (*) | 466 | ||||
| Visano Società Trattamento Reflui S.c.a.r.l. (*) | 10 | ||||
| Ergon Energia S.r.l. in liquidation | - | ||||
| Centrale Termoelettrica del Mincio S.r.l. in liquidation |
1 | (1) | |||
| Total affiliates | 43,196 | - | (7,068) | - |
(*) Figures in the financial statements at 31 December 2017
Overview of performance, financial conditions and net debt
1 Financial statements
2 Financial statements pursuant to Consob Resolution no. 17221 of March 12, 2010
3 Notes
of changes in intangible assets 3/a. Statement of changes in investments in
subsidiaries 3/b. Statement of changes in
of changes in investments in other companies 4/a. List of investments in subsidiaries 4/b. List of
investments in affiliates
Key data of the financial statements of the main subsidiaries and affiliates prepared according to IAS/ IFRS (pursuant to art. 2429.4 of the Italian Civil Code)
Key data of the financial statements of the main subsidiaries and affiliates prepared according to ITALIAN GAAP (pursuant to art. 2429.4 of the Italian Civil Code) Certification of the financial statements pursuant to article 154-bis, paragraph 5 of Legislative Decree no. 58/98
5 Independent Auditors' Report
| CHANGES IN 2018 | BALANCE AT | SHARE OF EQUITY | |||||
|---|---|---|---|---|---|---|---|
| REVALUATIONS WRITE-DOWNS |
FTA IFRS9 |
OTHERS CHANGES |
FINANCIAL STATEMENTS 12 31 2018 |
% HELD |
EQUITY AT 12 31 2018 |
PRO RATA AMOUNT |
|
| (34,051) | - | ||||||
| - | |||||||
| 735 | 24.29% | 3,054 | 742 | ||||
| 466 | 49.00% | 1,608 | 788 | ||||
| 400 | 40.00% | 1,845 | 738 | ||||
| 466 | 47.00% | 4,822 | 2,266 | ||||
| 10 | 40.00% | 26 | 10 | ||||
| - | 50.00% | (161) | (81) | ||||
| - | |||||||
| - | - | (34,051) | 2,077 | 11,194 | 4,463 |
| Company name thousands of euro |
SHAREHOLDING % |
SHAREHOLDER | CARRYING AMOUNT AT 12 31 2018 |
|---|---|---|---|
| Available-for-sale financial assets | |||
| Immobiliare-Fiera di Brescia S.p.A. | 1.21% | A2A S.p.A. | 280 |
| Others: | |||
| AQM S.r.l. | 7.52% | A2A S.p.A. | |
| AvioValtellina S.p.A. | 0.18% | A2A S.p.A. | |
| Banca di Credito Cooperativo dell'Oglio e del Serio s.c. | n.s. | A2A S.p.A. | |
| Brescia Mobilità S.p.A. | 0.25% | A2A S.p.A. | |
| L.E.A.P. S.c.a.r.l. | 8.57% | A2A S.p.A. | |
| Consorzio Milano Sistema in liquidation | 10.00% | A2A S.p.A. | |
| E.M.I.T. S.r.l. in liquidation | 10.00% | A2A S.p.A. | |
| Isfor 2000 S.c.p.a. | 4.94% | A2A S.p.A. | |
| Stradivaria S.p.A. | n.s. | A2A S.p.A. | |
| DI.T.N.E. S.c.a.r.l. | 1.82% | A2A S.p.A. | |
| Total other financial assets | 617 | ||
| Total available-for-sale financial assets | 897 |
Note: A2A S.p.A. took part in the setting up of Società Cooperativa Polo dell'innovazione della Valtellina, subscribing 5 shares having a nominal value of 50 euro.
| Company name thousands of euro |
REGISTERED OFFICE | CURRENCY | SHARE CAPITAL AT 12 31 2018 |
|---|---|---|---|
| Subsidiaries: | |||
| Unareti S.p.A. | Brescia | Euro | 965,250 |
| A2A Ambiente S.p.A. | Brescia | Euro | 220,000 |
| A2A Calore & Servizi S.r.l. | Brescia | Euro | 150,000 |
| A2A Ciclo Idrico S.p.A. | Brescia | Euro | 70,000 |
| A2A gencogas S.p.A. | Gissi (Ch) | Euro | 450,000 |
| A2A Energia S.p.A. | Milan | Euro | 2,000 |
| Retragas S.r.l. | Brescia | Euro | 34,495 |
| A2A Smart City S.p.A. | Brescia | Euro | 3,448 |
| Proaris S.r.l. | Milan | Euro | 1,875 |
| Camuna Energia S.r.l. | Cedegolo (Bs) | Euro | 900 |
| SEASM S.r.l. | Brescia | Euro | 700 |
| Plurigas S.p.A. in liquidation | Milan | Euro | 800 |
| A2A Montenegro d.o.o. | Podgorica (Montenegro) | Euro | 100 |
| A2A Energiefuture S.p.A. | Milan | Euro | 50,000 |
| Linea Group Holding S.p.A. | Brescia | Euro | 189,494 |
| A2A Illuminazione Pubblica S.r.l. | Brescia | Euro | 28,600 |
| Azienda Servizi Valtrompia S.p.A. | Gardone Val Trompia (Bs) | Euro | 8,939 |
| A2A Security S.c.p.a. | Milan | Euro | 50 |
| A2A Energy Solution S.r.l. | Milan | Euro | 4,000 |
| A2A Rinnovabili S.p.A. | Trento | Euro | 50 |
| ACSM-AGAM S.p.A. | Monza | Euro | 197,344 |
| A2A Alfa S.r.l. | Milan | Euro | 100 |
| A2Abroad S.p.A. | Milan | Euro | 300 |
Overview of performance, financial conditions and net debt
1 Financial statements
2 Financial statements pursuant to Consob Resolution no. 17221 of March 12, 2010
3 Notes
Statement of changes in tangible assets
Statement of changes in intangible assets 3/a. Statement
of changes in investments in subsidiaries
3/b. Statement of changes in investments in affiliates
3/c. Statement of changes in investments in other companies
4/a. List of
4/b. List of investments in affiliates
Key data of the financial statements of the main subsidiaries and affiliates prepared according to IAS/ IFRS (pursuant to art. 2429.4 of the Italian Civil Code)
Key data of the financial statements of the main subsidiaries and affiliates prepared according to ITALIAN GAAP (pursuant to art. 2429.4 of the Italian Civil Code) Certification of the financial statements pursuant to article 154-bis, paragraph 5 of Legislative Decree no. 58/98
5 Independent Auditors' Report
| DELTA (A-B) |
BALANCE AT FINANCIAL STATEMENTS (B) |
PRO RATA AMOUNT (A) |
% HELD |
RESULT AT 12 31 2018 |
EQUITY AT 12 31 2018 |
|---|---|---|---|---|---|
| 96,812 | 1,381,881 | 1,478,693 | 100.00% | 103,137 | 1,478,693 |
| (140,018) | 634,894 | 494,876 | 100.00% | 82,628 | 494,876 |
| 26,155 | 330,627 | 356,782 | 100.00% | 24,944 | 356,782 |
| 30,330 | 167,000 | 197,330 | 100.00% | 18,299 | 197,330 |
| 37,079 | 510,317 | 547,396 | 100.00% | 4,789 | 547,396 |
| 100,606 | 97,039 | 197,645 | 100.00% | 85,348 | 197,645 |
| 5,457 | 30,105 | 35,562 | 87.27% | 1,804 | 40,749 |
| 6,886 | 9,222 | 16,108 | 87.00% | 3,835 | 18,515 |
| 3,557 | 3,604 | 60.00% | 102 | 6,006 | |
| 740 | 658 | 74.50% | (181) | 883 | |
| 469 | 572 | 67.00% | 67 | 853 | |
| 560 | 1,549 | 70.00% | 9 | 2,213 | |
| 102 | 163 | 100.00% | 4 | 163 | |
| 3,992 | 189,730 | 193,722 | 100.00% | (79,878) | 193,722 |
| (2,610) | 109,379 | 106,769 | 51.00% | 13,120 | 209,350 |
| 18,956 | 28,600 | 47,556 | 100.00% | 9,967 | 47,556 |
| 4,722 | 10,758 | 15,480 | 74.55% | 980 | 20,764 |
| 23 | 71 | 47.60% | 83 | 150 | |
| 23,183 | 4,575 | 27,758 | 100.00% | 23,206 | 27,758 |
| 50 | 428 | 100.00% | 172 | 428 | |
| (8,343) | 190,579 | 182,236 | 41.34% | 5,527 | 440,823 |
| - | 70 | 70.00% | (35) | 100 | |
| 300 | 295 | 100.00% | (5) | 295 |
| Company name thousands of euro |
REGISTERED OFFICE | CURRENCY | SHARE CAPITAL AT 12 31 2018 |
|---|---|---|---|
| Sviluppo Turistico Lago d'Iseo S.p.A. (*) | Iseo (Bs) | Euro | 1,616 |
| SET S.p.A. (*) | Toscolano Maderno (Bs) | Euro | 104 |
| Serio Energia S.r.l. (*) | Concordia sulla Secchia (Mo) | Euro | 1,000 |
| Ge.S.I. S.r.l. (*) | Brescia | Euro | 1,000 |
| Visano Società Trattamento Reflui S.c.a.r.l. (*) | Brescia | Euro | 25 |
| Ergon Energia S.r.l. in liquidation | Milan | Euro | 600 |
(*) Figures in the financial statements at December 31, 2017
Overview of performance, financial conditions and net debt
1 Financial statements
2 Financial statements pursuant to Consob Resolution no. 17221 of March 12, 2010
3 Notes
assets 2. Statement of changes in intangible assets
3/a. Statement of changes in investments in subsidiaries
3/b. Statement of changes in investments in affiliates
3/c. Statement of changes in investments in other companies
4/a. List of investments in subsidiaries
Key data of the financial statements of the main subsidiaries and affiliates prepared according to IAS/ IFRS (pursuant to art. 2429.4 of the Italian Civil Code)
Key data of the financial statements of the main subsidiaries and affiliates prepared according to ITALIAN GAAP (pursuant to art. 2429.4 of the Italian Civil Code) Certification of the financial statements pursuant to article
154-bis, paragraph 5 of Legislative Decree no. 58/98
5 Independent Auditors' Report
| BALANCE AT DELTA FINANCIAL STATEMENTS (A-B) (B) |
PRO RATA AMOUNT (A) |
% HELD |
RESULT AT 12 31 2018 |
EQUITY AT 12 31 2018 |
|---|---|---|---|---|
| 735 | 742 | 24.29% | 20 | 3,054 |
| 466 | 788 | 49.00% | 99 | 1,608 |
| 400 | 738 | 40.00% | 269 | 1,845 |
| 466 1,800 |
2,266 | 47.00% | 586 | 4,822 |
| 10 | 10 | 40.00% | (11) | 26 |
| - | (81) | 50.00% | 23 | (161) |
| SUBSIDIARIES | A2A gencogas S.p.A. |
A2A Energiefuture S.p.A. |
A2A Ambiente S.p.A. |
A2A Smart City S.p.A. |
Retragas S.r.l. | SEASM S.r.l. | ||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Share capital: | Euro | 450,000,000 Euro | 50,000,000 Euro | 220,000,000 Euro | 3,448,276 Euro | 34,494,650 Euro | 700,000 | |||||
| % held: | A2A S.p.A. | 100.00% A2A S.p.A. | 100.00% A2A S.p.A. | 100.00% A2A S.p.A. Linea Group |
87.00% Holding S.p.A. 13.00% |
A2A S.p.A. | 87.27% Unareti S.p.A. 4.33% |
A2A S.p.A. | 67.00% | |||
| Description thousands of euro |
12 31 18 | 12 31 17 | 12 31 18 | 12 31 17 | 12 31 18 | 12 31 17 | 12 31 18 | 12 31 17 | 12 31 18 | 12 31 17 | 12 31 18 | 12 31 17 |
| Revenues | 152,048 | 170,585 | 196,150 | 227,465 | 429,353 | 373,826 | 53,241 | 30,351 | 8,300 | 7,196 | 357 | 357 |
| Gross operating income | 70,175 | 89,305 | 40,464 | 37,538 | 174,026 | 147,664 | 10,639 | 7,354 | 4,943 | 4,323 | 295 | 293 |
| Net operating income | 19,895 | 37,381 | (109,072) | 3,504 | 123,082 | 101,477 | 5,908 | 5,005 | 2,594 | 2,136 | 129 | 127 |
| Result before taxes | 13,162 | 33,540 | (109,606) | 2,945 | 122,953 | 131,927 | 5,650 | 4,939 | 2,594 | 2,135 | 95 | 79 |
| Result of the year | 4,789 | 20,723 | (79,878) | 711 | 82,628 | 102,185 | 3,835 | 3,594 | 1,804 | 1,475 | 67 | 56 |
| Assets | 970,895 1,006,987 | 337,759 | 428,520 | 892,836 | 899,074 | 73,439 | 42,672 | 44,140 | 42,949 | 1,589 | 1,736 | |
| Liabilities | 423,499 | 464,391 | 144,037 | 154,448 | 397,960 | 389,365 | 54,924 | 29,038 | 3,391 | 2,605 | 736 | 950 |
| Equity | 547,396 | 542,596 | 193,722 | 274,072 | 494,876 | 509,709 | 18,515 | 13,634 | 40,749 | 40,344 | 853 | 786 |
| Net financial position | (260,997) | (299,465) | 80,056 | 55,759 | 308,745 | 255,596 | (24,045) | (11,858) | 14,002 | 12,442 | (706) | (921) |
| AFFILIATES | Ge.S.I. S.r.l. | Ergon Energia S.r.l. in liquidation |
||
|---|---|---|---|---|
| Share capital: | Euro | 1,000,000 Euro | 600,000 | |
| % held: | A2A S.p.A. | 47.00% A2A S.p.A. | 50.00% | |
| Description thousands of euro |
12 31 17 | 12 31 16 | 12 31 18 | 12 31 17 |
| Revenues | 6,798 | 6,573 | 87 | 1 |
| Gross operating income | 995 | 699 | 35 | (93) |
| Net operating income | 768 | 390 | 30 | (43) |
| Result before taxes | 782 | 1,122 | 24 | (42) |
| Result of the year | 586 | 1,004 | 23 | (42) |
| Assets | 7,617 | 8,077 | 6,963 | 6,872 |
| Liabilities | 2,795 | 3,136 | 7,124 | 7,056 |
| Equity | 4,822 | 4,941 | (161) | (184) |
| Net financial position | 863 | 1,851 | (810) | (756) |
Overview of performance, financial conditions and net debt
1 Financial statements
2 Financial statements pursuant to Consob Resolution no. 17221 of March 12, 2010
3 Notes
Statement of changes in tangible assets
Statement of changes in intangible assets 3/a. Statement
of changes in investments in subsidiaries
3/b. Statement of changes in investments in affiliates
3/c. Statement of changes in investments in other companies
4/a. List of investments in subsidiaries 4/b. List of
investments in affiliates
Key data of the
financial statements of the main subsidiaries and affiliates prepared according to IAS/ IFRS (pursuant to art. 2429.4 of the Italian Civil Code)
Key data of the financial statements of the main subsidiaries and affiliates prepared according to ITALIAN GAAP (pursuant to art. 2429.4 of the Italian Civil Code) Certification of the financial statements pursuant to article 154-bis, paragraph 5 of Legislative Decree no. 58/98
5 Independent Auditors' Report
| A2A Ambiente A2A Smart City Retragas S.r.l. SEASM S.r.l. S.p.A. |
Linea Group Holding S.p.A. |
A2A Illuminazione Pubblica S.r.l. |
Azienda Servizi Valtrompia S.p.A. |
A2A Security S.c.p.a. | A2A Rinnovabili S.p.A. |
S.r.l. | A2A Energy Solution | ACSM-AGAM S.p.A. |
||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 220,000,000 Euro 3,448,276 Euro 34,494,650 Euro 700,000 |
Euro | 189,494,116 Euro | 28,600,000 Euro | 8,938,941 Euro | 50,000 Euro | 50,000 Euro | 4,000,000 Euro | 197,343,794 | ||||||
| 100.00% A2A S.p.A. 87.00% A2A S.p.A. 87.27% A2A S.p.A. 67.00% Linea Group Unareti S.p.A. 4.33% Holding S.p.A. 13.00% |
A2A S.p.A. | 51.00% A2A S.p.A. | 100.00% A2A S.p.A. | 74.55% A2A S.p.A. Unareti S.p.A. A2A Ciclo Idrico S.p.A. Amsa S.p.A. A2A gencogas S.p.A. A2A Ambiente S.p.A. A2A Calore & Servizi S.r.l. 2.70% A2A Energiefuture S.p.A. 2.00% |
47.60% 19.10% 10.90% 9.50% 4.10% 4.10% |
A2A S.p.A. | 100.00% A2A S.p.A. | 100.00% A2A S.p.A. | 41.34% | |||||
| 12 31 18 12 31 17 12 31 18 12 31 17 |
12 31 18 | 12 31 17 | 12 31 18 | 12 31 17 | 12 31 18 | 12 31 17 | 12 31 18 | 12 31 17 | 12 31 18 | 12 31 17 | 12 31 18 | 12 31 17 | 12 31 18 | 12 31 17 |
| 357 357 |
24,263 | 25,560 | 40,328 | 35,302 | 12,519 | 12,727 | 1,590 | 318 | 55 | - | 94,198 | - | 33,592 | 39,953 |
| 295 293 |
(3,653) | 2,549 | 13,090 | 13,415 | 2,790 | 2,443 | 161 | 25 | (174) | (30) | 27,933 | (10) | (3,228) | 6,005 |
| 129 127 |
(4,832) | (5,537) | 10,525 | 10,827 | 1,449 | 1,329 | 123 | 25 | (174) | (30) | 27,615 | (10) | (16,767) | (4,447) |
| 95 79 |
10,082 | 7,303 | 13,626 | 14,312 | 1,410 | 1,270 | 115 | 23 | 226 | 274 | 30,748 | (10) | 1,784 | 9,097 |
| 67 56 |
13,120 | 10,511 | 9,967 | 10,364 | 980 | 987 | 83 | 17 | 172 | 207 | 23,206 | (8) | 5,527 | 10,023 |
| 1,736 | 602,386 | 694,345 | 58,999 | 63,590 | 31,531 | 30,071 | 1,317 | 843 | 91,050 | 39,577 | 59,750 | 13 | 607,210 | 265,165 |
| 736 950 |
393,036 | 488,237 | 11,443 | 16,214 | 10,767 | 10,299 | 1,167 | 780 | 90,622 | 39,321 | 31,992 | 11 | 166,387 | 121,745 |
| 853 786 |
209,350 | 206,108 | 47,556 | 47,376 | 20,764 | 19,772 | 150 | 63 | 428 | 256 | 27,758 | 2 | 440,823 | 143,420 |
| (706) (921) |
(175,747) | (183,963) | 15,600 | 18,555 | (4,913) | (3,744) | 51 | (59) | 3,993 | 6,055 | (18,044) | (10) | (66,072) | (76,841) |
(pursuant to art. 2429.4 of the Italian Civil Code)
| SUBSIDIARIES | Unareti S.p.A. | A2A Calore & Servizi S.r.l. | |||
|---|---|---|---|---|---|
| Share capital: | Euro | 965,250,000 | Euro | 150,000,000 | |
| % held: | A2A S.p.A. | 100.00% | A2A S.p.A. | 100.00% | |
| Description thousands of euro |
12 31 18 | 12 31 17 | 12 31 18 | 12 31 17 | |
| Revenues | 566,409 | 535,746 | 240,239 | 312,415 | |
| Gross operating Income | 234,689 | 246,237 | 73,806 | 89,357 | |
| Net operating income | 144,327 | 157,942 | 36,435 | 52,328 | |
| Result before taxes | 144,710 | 156,319 | 34,955 | 49,697 | |
| Result of the year | 103,137 | 111,701 | 24,944 | 35,881 | |
| Assets | 2,114,341 | 2,070,448 | 696,065 | 799,374 | |
| Liabilities | 635,648 | 588,892 | 339,283 | 429,546 | |
| Equity | 1,478,693 | 1,481,556 | 356,782 | 369,828 | |
| Net financial position | (108,981) | (76,198) | (218,583) | (296,114) |
Overview of performance, financial conditions and net debt
1 Financial statements
2 Financial statements pursuant to Consob Resolution no. 17221 of March 12, 2010
3 Notes
Statement of changes in tangible assets
Statement of changes in intangible assets 3/a. Statement
of changes in investments in subsidiaries
3/b. Statement of changes in investments in affiliates
3/c. Statement of changes in investments in other companies
4/a. List of investments in subsidiaries
4/b. List of investments in affiliates
Key data of the financial statements of the main subsidiaries and affiliates prepared according to IAS/ IFRS (pursuant to art. 2429.4 of the Italian Civil Code)
Key data of the
financial statements affiliates prepared according to ITALIAN GAAP (pursuant to art. 2429.4 of the Italian Civil Code)
Certification of the financial statements pursuant to article 154-bis, paragraph 5 of Legislative Decree no. 58/98
5 Independent Auditors' Report
| A2A Calore & Servizi S.r.l. | A2A Energia S.p.A. | A2A Ciclo Idrico S.p.A. | Proaris S.r.l. | Plurigas S.p.A. in liquidation |
||||
|---|---|---|---|---|---|---|---|---|
| 150,000,000 | Euro | 2,000,000 | Euro | 70,000,000 | Euro | 1,875,000 | Euro | 800,000 |
| 100.00% | A2A S.p.A. | 100.00% | A2A S.p.A. | 100.00% | A2A S.p.A. | 60.00% | A2A S.p.A. | 70.00% |
| 12 31 18 | 12 31 17 | 12 31 18 | 12 31 17 | 12 31 18 | 12 31 17 | 12 31 18 | 12 31 17 | |
| 1,618,253 | 1,315,719 | 91,295 | 88,982 | 2,898 | 2,963 | - | 5 | |
| 89,357 | 136,678 | 142,988 | 41,748 | 38,406 | 322 | 349 | (9) | |
| 52,328 | 118,088 | 123,963 | 26,511 | 25,155 | 147 | 314 | (9) | (6) |
| 119,243 | 125,068 | 25,966 | 24,709 | 149 | 317 | (10) | (4) | |
| 85,348 | 89,645 | 18,299 | 16,978 | 102 | 221 | 9 | 20 | |
| 608,474 | 574,252 | 383,083 | 377,640 | 6,880 | 7,253 | 4,160 | 4,257 | |
| 429,546 | 410,829 | 370,650 | 185,753 | 182,489 | 874 | 1,139 | 1,947 | 2,027 |
| 369,828 | 197,645 | 203,602 | 197,330 | 195,151 | 6,006 | 6,114 | 2,213 | 2,230 |
| (31,816) | (19,818) | (122,340) | (118,332) | 2,933 | 3,098 | 2,359 | 2,456 |
of administrative and accounting procedures for the preparation of financial statements in the year 2018.
2.1 the financial statements:
Milan, April 3, 2019
Luca Camerano Andrea Crenna
(for the Board of Directors) (Manager in charge of preparing the corporate accounting documents)
5 Independent Auditors' Report
EY S.p.A. Via Meravigli, 12 20123 Milano
Tel: +39 02 722121 Fax: +39 02 722122037 ey.com
Independent auditor's report pursuant to article 14 of Legislative Decree n. 39, dated 27 January 2010 and article 10 of EU Regulation n. 537/2014 (Translation from the original Italian text)
To the Shareholders of A2A S.p.A.
We have audited the financial statements of A2A S.p.A. (the Company), which comprise the balance sheet as at 31 December 2018, and the income statement, the statement of comprehensive income, statement of changes in equity and the cash flows statement for the year then ended, and notes to the financial statements, including a summary of significant accounting policies.
In our opinion, the financial statements give a true and fair view of the financial position of the Company as at 31 December 2018, and of its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards as adopted by the European Union and with the regulations issued for implementing art. 9 of Legislative Decree n. 38/2005.
We conducted our audit in accordance with International Standards on Auditing (ISA Italia). Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Company in accordance with the regulations and standards on ethics and independence applicable to audits of financial statements under Italian Laws. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the current period. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
EY S.p.A. Sede Legale: Via Po, 32 - 00198 Roma Capitale Sociale Euro 2.525.000,00 i.v. Iscritta alla S.O. del Registro delle Imprese presso la C.C.I.A.A. di Roma Codice fiscale e numero di iscrizione 00434000584 - numero R.E.A. 250904 P.IVA 00891231003 Iscritta al Registro Revisori Legali al n. 70945 Pubblicato sulla G.U. Suppl. 13 - IV Serie Speciale del 17/2/1998 Iscritta all'Albo Speciale delle società di revisione Consob al progressivo n. 2 delibera n.10831 del 16/7/1997
A member firm of Ernst & Young Global Limited
We identified the following key audit matters:
At December 31, 2018, the Shareholdings in subsidiaries balance amount to 3.701 million euro.
The management assesses at least annually the existence of impairment indicators of each investment, in compliance with its strategy of managing legal entities within the group and, in case of occurrence, these assets are subject to impairment test.
The processes and methodologies for assessing and determining the recoverable amount of each shareholdings in subsidiaries are based on complex assumptions, that by their nature imply the use of the management's judgment, in particular with reference to the identification of impairment indicators, to forecast of future cash flows relating to the period covered by the Group's strategic plan, the normalized cash flows assumed as a basis for the terminal value, as well as the long-term growth rates and discount rates applied to such cash flows forecasts.
In consideration of the judgment required and of the complexity of the assumptions used in the estimate of the recoverable amount of investments, we have considered that this area represents a key audit matter.
The disclosures related to the recoverability of the investment in subsidiaries are included in the paragraph "Use of estimates" and in note n.3 "Shareholdings and other non-current financial assets" of the notes to the financial statements.
Our audit procedures related to this key audit matters included, among others:
In performing our procedures, we leveraged the used of EY valuation specialists who performed an independent calculation and sensitivity analysis on key assumptions, in order to determine any changes that could significantly impact the valuation of recoverable amount.
Lastly, we reviewed the adequacy of the disclosures included in the notes to the financial statements.
1 Financial statements
2 Financial statements pursuant to Consob Resolution no. 17221 of March 12, 2010
3 Notes
The Directors are responsible for the preparation of the financial statements that give a true and fair view in accordance with International Financial Reporting Standards as adopted by the European Union and with the regulations issued for implementing art. 9 of Legislative Decree n. 38/2005, and, within the terms provided by the law, for such internal control as they determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
The Directors are responsible for assessing the Company's ability to continue as a going concern and, when preparing the financial statements, for the appropriateness of the going concern assumption, and for appropriate disclosure thereof. The Directors prepare the financial statements on a going concern basis unless they either intend to liquidate the Company or to cease operations, or have no realistic alternative but to do so.
The statutory audit committee ("Collegio Sindacale") is responsible, within the terms provided by the law, for overseeing the Company's financial reporting process.
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with International Standards on Auditing (ISA Italia) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
As part of an audit in accordance with International Standards on Auditing (ISA Italia), we have exercised professional judgment and maintained professional skepticism throughout the audit. In addition:
we have evaluated the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the Directors;
we have concluded on the appropriateness of Directors' use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the financial statements or, if such disclosures are inadequate, to consider this matter in forming our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions may cause the Company to cease to continue as a going concern;
We have communicated with those charged with governance, identified at an appropriate level as required by ISA Italia, regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
We have provided those charged with governance with a statement that we have complied with the ethical and independence requirements applicable in Italy, and we have communicated with them all matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.
From the matters communicated with those charged with governance, we have determined those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We have described these matters in our auditor's report.
The shareholders of A2A S.p.A., in the general meeting held on 11 June 2015, engaged us to perform the audits of the financial statements for each of the years ending 31 December 2016 to 31 December 2024.
We declare that we have not provided prohibited non-audit services, referred to article 5, par. 1, of EU Regulation n. 537/2014, and that we have remained independent of the Company in conducting the audit.
We confirm that the opinion on the financial statements included in this report is consistent with the content of the additional report to the audit committee (Collegio Sindacale) in their capacity as audit committee, prepared pursuant to article 11 of the EU Regulation n. 537/2014.
Overview of performance, financial conditions and net debt
1 Financial statements
2 Financial statements pursuant to Consob Resolution no. 17221 of March 12, 2010
3 Notes
4 Attachments
The Directors of A2A S.p.A. are responsible for the preparation of the Report on Operation and of the Report on Corporate Governance and Ownership Structure of A2A S.p.A. as at 31 December 2018, including their consistency with the related financial statements and their compliance with the applicable laws and regulations.
We have performed the procedures required under audit standard SA Italia n. 720B, in order to express an opinion on the consistency of the Report on Operations and of specific information included in the Report on Corporate Governance and Ownership Structure as provided for by article 123-bis, paragraph 4, of Legislative Decree n. 58, dated 24 February 1998, with the financial statements of A2A S.p.A. as at 31 December 2018 and on their compliance with the applicable laws and regulations, and in order to assess whether they contain material misstatements.
In our opinion, the Report on Operation and the above mentioned specific information included in the Report on Corporate Governance and Ownership Structure are consistent with the financial statements of A2A S.p.A. as at 31 December 2018 and comply with the applicable laws and regulations.
With reference to the statement required by art. 14, paragraph 2, subparagraph e), of Legislative Decree n. 39, dated 27 January 2010, based on our knowledge and understanding of the entity and its environment obtained through our audit, we have no matters to report.
Milan, April 16, 2019
EY S.p.A. Signed by: Paolo Zocchi, Partner
This report has been translated into the English language solely for the convenience of international readers.
REPORT
OF
THE
BOARD
OF
STATUTORY
AUDITORS
PURSUANT
TO
ARTICLE
153
OF
LEGISLATIVE
DECREE
58/1998
AND
ARTICLE
2429
PARAGRAPH
3,
CIVIL
CODE.
TO
THE
SHAREHOLDERS'
MEETING
OF
A2A
S.P.A.
OF
MAY
13,
2019
(SECOND
CALL,
IF
APPLICABLE,
MAY
14,
2019)
Shareholders,
The
Board
of
Statutory
Auditors
in
office
was
appointed
by
the
Shareholders'
Meeting
of
A2A
S.p.A.
(hereinafter
referred
to
as
the
Company)
of
May
15,
2017
and
will
end
its
term
of
office
with
the
Shareholders'
Meeting
convened
to
approve
the
financial
statements
at
December
31,
2019.
Pursuant
to
article
153,
paragraph
1,
of
Legislative
Decree
no.
58
of
February
24,
1998
(hereinafter
Consolidated
Law
on
Finance),
the
Board
of
Statutory
Auditors
informs
that,
during
the
year
ended
December
31,
2018,
it
carried
out
the
supervisory
and
control
activities
required
by
current
legislation,
with
particular
regard
to
the
provisions
of
the
Italian
Civil
Code,
articles
148
et
seq.
of
the
Consolidated
Law
on
Finance,
Legislative
Decree
no.
39
of
January
27,
2010
as
amended
by
Legislative
Decree
no.
135
of
2016
and
Legislative
Decree
no.
254
of
2016,
also
taking
into
account
the
indications
contained
in
CONSOB
communications
concerning
corporate
controls
and
the
activities
of
the
Board
of
Statutory
Auditors,
the
indications
contained
in
the
Corporate
Governance
Code
for
listed
companies
as
well
as
the
principles
of
conduct
recommended
by
the
National
Council
of
Chartered
Accountants
and
Accounting
Experts.
This
Report
is
given
to
the
Shareholders
of
the
Company
in
view
of
the
Shareholders'
Meeting
called,
on
first
call,
on
May
13,
2019
and,
if
necessary,
on
second
call,
on
May
14,
2019
for
the
approval
of
the
Financial
Statements
at
December
31,
2018.
That
said,
the
activities
carried
out
by
the
Board
of
Statutory
Auditors
during
2018
and
up
to
the
Overview of performance, financial conditions and net debt
1 Financial statements
2 Financial statements pursuant to Consob Resolution no. 17221 of March 12, 2010
3 Notes
4 Attachments
5 Independent Auditors' Report
6 Report of the Board of Auditors
***
The
most
significant
economic,
financial
and
equity
transactions
and
events
that
took
place
in
2018
were
as
follows:
The
Board
of
Statutory
Auditors
received
from
the
Directors,
with
due
periodicity,
information
on
the
activities
carried
out
and
transactions
of
major
economic,
financial
and
equity
importance
carried
out
by
the
Company
and
its
subsidiaries.
The
Directors
have
reported
on
these
transactions
in
their
Report
on
Operations,
to
which
reference
is
made,
also
with
regard
to
the
characteristics
of
the
transactions
and
their
economic
effects.
The
Board
of
Statutory
Auditors
has
acquired
adequate
information
on
these
transactions,
which
have
allowed
it
to
reasonably
believe
that
the
above
transactions
complied
with
the
law,
By-‐laws
and
the
principles
of
correct
administration
and
were
not
imprudent,
risky
or
in
conflict
with
the
resolutions
passed
by
the
shareholders'
meeting
or
in
any
case
such
as
to
compromise
the
integrity
of
the
company's
assets.
Transactions
with
interests
of
the
Directors
or
with
other
related
parties
have
been
subject
to
the
transparency
procedures
provided
for
by
current
legislation.
The
Board
of
Statutory
Auditors
has
not
found
or
received
any
indications
from
the
Board
of
Directors,
the
Independent
Auditors
or
the
Head
of
Internal
Audit
regarding
the
existence
of
atypical
and/or
unusual
transactions,
as
defined
by
Consob
communication
DEM/6064293
of
July
28,
2006,
carried
out
with
third
parties,
related
parties
or
intragroup.
In
the
notes
to
the
financial
statements,
the
Directors
reported
on
ordinary
transactions
carried
out
during
the
year
with
Group
companies
and
related
parties,
to
which
reference
should
be
made,
also
with
regard
to
the
characteristics
of
the
transactions
and
their
economic
effects.
Their
examination
did
not
reveal
any
critical
issues
with
regard
to
their
suitability,
congruity
or
correspondence
to
the
interests
of
the
Company.
The
Board
of
Statutory
Auditors
verified
the
actual
implementation
and
functioning
of
the
Procedure
for
Transactions
with
Related
Parties
adopted
by
the
Company,
including
periodic
information
from
the
Board
of
Directors
in
the
event
of
such
transactions
being
carried
out.
On
April
16,
2019,
the
independent
auditors
EY
S.p.A.
issued
their
report
pursuant
to
article
14
of
Legislative
Decree
January
27,
2010,
no.
39
and
article
10
of
Regulation
(EU)
no.
537
of
April
16,
2014,
in
which
the
independent
auditors
certify
that
in
their
opinion:
Overview of performance, financial conditions and net debt
1 Financial statements
2 Financial statements pursuant to Consob Resolution no. 17221 of March 12, 2010
3 Notes
4 Attachments
5 Independent Auditors' Report
6 Report of the Board of Auditors
in
accordance
with
the
International
Financial
Reporting
Standards
adopted
by
the
European
Union,
as
well
as
the
measures
issued
in
implementation
of
article
9
of
Legislative
Decree
no.
38
of
February
28,
2005;
On
April
16,
2019,
the
independent
auditors
EY
S.p.A.
also
issued
their
additional
report
pursuant
to
article
11
of
Regulation
(EU)
537/2014,
which,
among
other
things,
confirms
that,
during
the
audit
of
the
Company's
annual
financial
statements
and
the
Group's
consolidated
financial
statements
for
the
year
ended
December
31,
2018,
no
significant
deficiencies
were
identified
in
the
internal
control
system
for
financial
information
and/or
in
the
accounting
system.
The
auditor's
reports
highlight
the
key
aspects
of
the
audit,
to
which
reference
should
be
made.
In
2018,
no
complaints
were
received
pursuant
to
article
2408
of
the
Civil
Code
nor
reports
of
any
kind
by
third
parties.
In
this
regard,
it
should
be
noted
that
the
Company
has
adopted
a
whistleblowing
procedure
that
provides
for
the
establishment
of
suitable
information
channels
to
ensure
the
reception,
analysis
and
processing
of
reports,
related
internal
control
issues,
corporate
information,
administrative
liability
of
the
Company,
fraud
or
other
matters,
sent
by
employees,
members
of
corporate
bodies
or
third
parties,
including
in
confidential
or
anonymous
form.
The
annual
financial
statements
of
A2A
S.p.A.
and
its
subsidiaries
have
been
subject
to
a
full
audit
by
EY
S.p.A.
on
the
basis
of
the
appointment
conferred
by
the
shareholders'
meeting
for
financial
years
2016
to
2024.
The
following
table
provides
a
summary
of
the
fees
paid
for
audit
work
performed
within
the
Group
during
2018,
analyzed
between
the
leading
auditor
EY
S.p.A.
and
other
auditors.
| Description thousands of euro |
Leading Auditor |
Other auditors |
|---|---|---|
| A2A S.p.A. | ||
| Audit of annual financial statements | 145.0 | |
| Audit of consolidated financial statements | 42.0 | |
| Periodic tests of accounting | 21.0 | |
| Review of half-‐year report | 67.0 | |
| Audit of the separate annual accounts for ARERA | 15.0 | |
| Total | 290.0 | -‐ |
| Subsidiaries | ||
| Audit of annual financial statements | 752.0 | |
| Periodic tests of accounting | 194.0 | |
| Review of half-‐yearly report | 187.0 | |
| Audit of the separate annual accounts for ARERA | 47.0 | |
| LGH Group | 263.0 | |
| ACSM-‐AGAM Group | 400.0 | |
| Total | 1,443.0 | 400.0 |
| Associates and joint ventures | ||
| Audit of the information sent to shareholders for the consolidation | 34.0 | |
| Total | 34.0 | -‐ |
| TOTAL A2A GROUP | 1,767.0 | 400.0 |
Overview of performance, financial conditions and net debt
1 Financial statements
2 Financial statements pursuant to Consob Resolution no. 17221 of March 12, 2010
3 Notes
4 Attachments
5 Independent Auditors' Report
6 Report of the Board of Auditors
The
Board
of
Statutory
Auditors
has
been
informed
by
the
Company
that
the
following
additional
fees
paid
to
companies
or
professional
firms
connected
to
the
international
network
of
EY
S.p.A.
in
relation
to
the
offices
specified
below
have
been
recorded
(amounts
in
euro):
| Company | Purpose | Amount |
|---|---|---|
| Retragas S.r.l. | Certification of revenues and investments and disposals relating to 2017. Resolution 514/2013/R/GAS (RTTG 2014 -‐ 2017) |
1,000.00 euro |
| Aspem S.p.A. | Acts consequent to the determination of the liquidation value of the shares in the event of the right of withdrawal -‐ assignment to be conferred to the person in charge of the audit |
25,000.00 euro |
| A2A S.p.A. | Full Audit "Idro" unit | 18,000.00 euro |
| A2A Energia S.p.A. | Financial Statements "Clienti Varese" unit |
23,000.00 euro |
| A2A Energiefuture S.p.A. | Request for reinstatement of 2017 costs San Filippo del Mela -‐ Essential plants resolution ARERA 111/06 |
1,000.00 euro |
| A2A S.p.A. | Attestation activities related to the updating of the EMTN program |
45,000.00 euro |
| Acsm-‐Agam S.p.A. | Risk assessment aimed at supporting the updating of the Organization, Management and Control Models pursuant to Legislative Decree 231/01 of the ACSM AGAM Group |
75,000.00 euro |
| Total | 188,000.00 euro |
The
conferral
of
the
above
appointments
was
approved
in
advance
by
the
Board
of
Statutory
Auditors.
Pursuant
to
the
provisions
of
article
6,
paragraph
2,
letter
a)
of
Regulation
(EU)
no.
537/2014,
the
Board
of
Statutory
Auditors
has
received
from
EY
S.p.A.
a
statement
that
it
has
maintained
its
position
of
independence
and
objectivity
with
respect
to
the
Company
and
its
Group
throughout
the
2018
financial
year,
taking
into
account
the
activities
carried
out.
In
2018,
the
Board
of
Statutory
Auditors,
in
particular:
After
the
end
of
the
financial
year
and
up
to
the
date
of
this
report,
the
Board
of
Statutory
Auditors
has
also:
Overview of performance, financial conditions and net debt
1 Financial statements
2 Financial statements pursuant to Consob Resolution no. 17221 of March 12, 2010
3 Notes
4 Attachments
5 Independent Auditors' Report
6 Report of the Board of Auditors
In
2018,
the
Board
attended
all
the
meetings
of
the
Board
of
Directors,
for
a
total
of
18
sessions,
during
which
it
was
informed
about
the
activities
carried
out
and
the
most
significant
transactions
made
by
the
Company
and
its
subsidiaries.
In
this
context,
the
Board
received
from
the
Chairman
and
CEO
the
information
regarding
the
exercise
of
the
respective
proxies.
Moreover,
the
Board
held
24
meetings
in
2018,
during
which
information
was
also
exchanged
with
the
independent
auditors
in
order
to
ensure
that
no
transactions
were
carried
that
were
imprudent,
risky,
in
potential
conflict
of
interest,
in
contrast
with
the
law,
By-‐laws
or
the
resolutions
of
the
shareholders'
meeting
or
such
to
affect
the
integrity
of
the
Company's
assets.
The
Board
of
Statutory
Auditors
also
attended
18
meetings
of
the
Control
and
Risk
Committee,
17
meetings
of
the
Remuneration
and
Appointments
Committee,
and
3
meetings
of
the
Committee
for
Transactions
with
Related
Parties,
gaining
knowledge
of
the
work
they
performed
during
the
year.
The
Control
Body
also
participated
in
the
Shareholders'
Meeting
of
April
27,
2018.
In
2019,
to
date,
the
Board
of
Statutory
Auditors
has
attended5
meetings
of
the
Board
of
Directors,
5
meetings
of
the
Control
and
Risk
Committee,
4
meetings
of
the
Remuneration
and
Appointments
Committee,
1
meeting
of
the
Committee
for
Transactions
with
Related
Parties
and
has
held
9
meetings
of
the
Board
of
Statutory
Auditors.
The
Board
of
Statutory
Auditors,
following
its
supervisory
activity,
has
no
observations
to
make
regarding
compliance
with
the
principles
of
correct
administration
and
has
verified
that
the
Directors
are
aware
of
the
riskiness
and
effects
of
the
operations
carried
out.
In
particular,
the
Board
of
Statutory
Auditors
verified
that
the
management
decisions
were taken
in
the
interest
of
the
Company,
compatible
with
the
Company's
resources
and
assets
and
adequately
supported
by
information,
analysis
and
verification
processes,
also
with
recourse,
when
deemed
necessary,
to
the
advisory
activities
of
the
Committees
and
external
professionals.
The
Board
of
Statutory
Auditors
constantly
collected
information
on
the
organizational
structure
of
the
Company
and
changes
thereto,
also
meeting
with
the
related
managers
of
the
Company.
In
light
of
what
has
been
verified,
the
Board
of
Statutory
Auditors
believes
that
the
organizational
structure
of
the
Company,
the
procedures,
expertise
and
responsibilities
are
adequate
in
relation
to
the
size
of
the
Company
and
the
type
of
activity
performed.
The
Board
of
Statutory
Auditors
also
verified
the
adequacy
of
the
organizational
structure
of
subsidiaries
with
strategic
importance
of
A2A
S.p.A.,
with
particular
reference
to
the
internal
control
and
risk
management
system.
Overview of performance, financial conditions and net debt
1 Financial statements
2 Financial statements pursuant to Consob Resolution no. 17221 of March 12, 2010
3 Notes
4 Attachments
5 Independent Auditors' Report
6 Report of the Board of Auditors
The
Board
of
Statutory
Auditors
monitored
the
adequacy
of
the
Internal
Control
and
Risk
Management
System
of
A2A
S.p.A.
and
its
strategically
important
subsidiaries,
by
means
of:
and
the
internal
control
and
risk
management
system
of
A2A
S.p.A.
and
its
strategically
important
subsidiaries.
The
Board
of
Statutory
Auditors
has
also:
Therefore,
in
the
course
of
carrying
out
the
above
activities,
the
Board
of
Statutory
Auditors:
a) did
not
identify
any
critical
situations
or
facts
that
might
suggest,
in
relation
to
2018,
that
A2A
S.p.A.'s
Internal
Control
and
Risk
Management
System
is
inadequate;
Overview of performance, financial conditions and net debt
1 Financial statements
2 Financial statements pursuant to Consob Resolution no. 17221 of March 12, 2010
3 Notes
4 Attachments
5 Independent Auditors' Report
6 Report of the Board of Auditors
The
Board
of
Statutory
Auditors,
to
the
extent
of
its
competence,
monitored
the
adequacy
of
the
administrative-‐accounting
system
and
its
reliability
in
correctly
representing
operating
events
as
well
as
the
activities
carried
out,
under
the
coordination
of
the
Head
of
Financial
Reporting,
for
the
purposes
of
compliance
with
Law
262/05
"Provisions
for
the
protection
of
savings
and
the
regulation
of
financial
markets"
and
subsequent
amendments
and
additions,
by
means
of:
d) meetings
with
the
Independent
Auditors
and
analysis
of
the
results
of
their
work;
e) examination
of
company
documents.
The
Board
of
Statutory
Auditors
also
noted
that,
following
the
favourable
opinion
issued
by
the
Control
and
Risks
Committee,
in
accordance
with
the
recommendations
made
by
the
European
Securities
and
Markets
Authority
("ESMA")
on
January
21,
2013,
the
joint
document
Bank
of
Italy/Consob/ISVAP
no.
4
of
March
3,
2010
and
Consob
Communication
no.
3907
of
January
19,
2015,
on
March
1,
2018,
the
Board
of
Directors
autonomously
and
prior
to
the
approval
of
the
annual
financial
statements,
approved
the
impairment
test
procedures
applied
by
the
Company
in
preparing
the
financial
statements
at
December
31,
2018
and
the
impairment
test
procedures
to
be
applied
to
the
annual
financial
statements
of
the
companies
of
the
A2A
Group.
In
the
course
of
carrying
out
the
activity
described
above,
the
Board
of
Statutory
Auditors
did
not
identify
any
critical
situations
or
facts
that
might
lead
to
the
conclusion,
in
relation
to
2018,
that
the
administrative-‐accounting
system
of
A2A
S.p.A.
is
inadequate
and/or
unreliable.
It
should
be
noted
that
the
Company
regulates,
by
means
of
specific
procedures,
the
flow
of
information
to
it
from
its
subsidiaries,
particularly
with
regard
to
major
transactions.
The
Board
of
Statutory
Auditors
considers
the
instructions
given
by
the
Company
to
its
subsidiaries
pursuant
to
article
114,
paragraph
2
of
the
Consolidated
Law
on
Finance
to
be
adequate,
in
order
to
comply
with
the
communication
obligations
provided
for
by
law.
The
Board
of
Statutory
Auditors
met
with
the
independent
auditors
in
relation
to
the
Annual
Report
at
December
31,
2018:
a) to
exchange
information
on
the
verifications
carried
out
by
the
latter
pursuant
to
Legislative
Decree
39/2010
and
article
150,
paragraph
3
of
the
Consolidated
Law
on
Finance,
on
the
Overview of performance, financial conditions and net debt
1 Financial statements
2 Financial statements pursuant to Consob Resolution no. 17221 of March 12, 2010
3 Notes
4 Attachments
5 Independent Auditors' Report
6 Report of the Board of Auditors
regular
accounting
and
correct
reporting
of
events
in
the
accounting
records.
During
these
meetings,
there
were
no
reports
of
problems
or
abnormalities;
b) for
the
examination
and
evaluation
of
the
preparation
process,
including
the
evaluation
of
the
correct
application
of
accounting
standards
and
homogeneity
of
the
same,
the
Half-‐Year
Report
of
the
Group
at
June
30,
2018
and
the
Annual
Report
of
the
Group
at
December
31,
2018,
as
well
as
the
outcomes
of
the
audit
and
evaluation
of
these
documents.
In
particular,
the
Board
of
Statutory
Auditors:
-‐
analyzed
the
activity
carried
out
by
the
independent
auditors,
and
in
particular,
the
methodological
structure,
the
audit
approach
used
for
the
various
significant
areas
of
the
financial
statements
and
the
planning
of
the
audit
work;
-‐ shared
with
the
independent
auditors
the
problems
relating
to
corporate
risks,
thus
being
able
to
appreciate
the
adequacy
of
the
response
planned
by
the
independent
auditors
with
the
structural
and
risk
profiles
of
the
Company
and
the
Group.
The
Board
of
Statutory
Auditors,
in
addition
to
as
already
stated
in
paragraph
3,
also:
14.
Adhesion
to
the
Corporate
Governance
Code
of
the
Governance
Committee
of
listed
companies.
The
Board
of
Statutory
Auditors
verified
that
the
Company
complies
with
the
Corporate
Governance
Code
for
listed
companies
approved
in
March
2006
and
last
amended
in
July
2018
(hereinafter
Code).
It
therefore
supervised,
pursuant
to
article
149,
paragraph
1,
letter
c-‐bis)
of
the
Consolidated
Law
on
Finance,
the
procedures
for
the
concrete
implementation
of
the
rules
of
corporate
governance
provided
for
by
the
Code,
with
particular
regard
to:
The
Board
of
Statutory
Auditors
also
acknowledges
that
the
Board
of
Directors,
at
its
meeting
of
January
31,
2019,
examined
the
recommendations
of
the
Corporate
Governance
Committee
contained
in
the
letter
of
December
21,
2018
addressed
by
the
Chair
of
the
Committee,
Patrizia
Grieco,
to
the
Chairpersons
of
the
Boards
of
Directors
of
Italian
listed
companies
and,
for
information,
to
the
relative
Chief
Executive
Officers
and
Chairpersons
of
the
control
bodies,
in
order
to
make
the
necessary
decisions
in
this
regard.
The
Board
of
Statutory
Auditors
monitored
the
activities
carried
out
by
the
Control
and
Risk
Committee,
the
Remuneration
and
Appointments
Committee
and
the
Related
Parties
Committee,
also
through
participation
in
their
meetings.
Overview of performance, financial conditions and net debt
1 Financial statements
2 Financial statements pursuant to Consob Resolution no. 17221 of March 12, 2010
3 Notes
4 Attachments
5 Independent Auditors' Report
6 Report of the Board of Auditors
****
In
addition
to
the
above,
the
Board
of
Statutory
Auditors:
Final
evaluations
of
the
supervisory
activity
carried
out
and
proposal
to
the
Shareholders'
Having
regard
to
the
foregoing,
and
having,
in
the
year
under
consideration:
monitored
compliance
with
the
law
and
By-‐laws,
principles
of
proper
administration,
and
in
particular
the
adequacy
of
the
administrative
and
accounting
organization
structure
adopted
by
the
Company
and
proper
functioning
thereof;
monitored
observance
of
information
obligations
regarding
privileged
information;
Overview of performance, financial conditions and net debt
1 Financial statements
2 Financial statements pursuant to Consob Resolution no. 17221 of March 12, 2010
3 Notes
4 Attachments
5 Independent Auditors' Report
6 Report of the Board of Auditors
compliance
with
these
rules.
The
Board
of
Statutory
Auditors
verified
the
approval
by
the
Board
of
Directors
on
April
3,
2019
of
the
aforementioned
Statement
and
the
issue
on
April
16,
2019,
by
the
independent
auditors,
of
the
attestation
of
conformity
of
the
information
provided
in
said
document
with
the
requirements
of
articles
3
and
4
of
Legislative
Decree
254/2016
and
the
"Global
Reporting
Initiative
Sustainability
Reporting
Standards",
identified
as
the
reporting
standard
by
the
Directors
of
A2A
S.p.A.
Providing
the
foregoing,
the
Board
of
Statutory
Auditors
states
that,
during
the
supervision
activities
described
above,
no
reprehensible
facts,
omissions,
or
irregularities
arose
that
require
reporting
to
the
competent
bodies.
In
view
of
the
above,
the
Board
of
Statutory
Auditors
kindly
requests
that
you
approve
the
financial
statements
at
December
31,
2018
presented
by
the
Board
of
Directors
along
with
the
report
on
operations
and
the
proposed
distribution
of
a
dividend.
Milan,
April
16,
2019
| (Signed Giacinto Sarubbi) | -‐ | Chairman |
|---|---|---|
| (Signed Maurizio Leonardo Lombardi) | -‐ | Statutory Auditor |
| (Signed Chiara Segala) | -‐ | Statutory Auditor |
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