Interim / Quarterly Report • Sep 2, 2015
Interim / Quarterly Report
Open in ViewerOpens in native device viewer
| 3 | Corporate boards | |
|---|---|---|
| --- | ------------------ | -- |
General information The Half-yearly financial report Financial statements Basis of preparation Changes in international accounting standards Scope of consolidation Consolidation policies and procedures Seasonal nature of the business Results sector by sector Notes to the balance sheet Net debt Notes to the income statement Earnings per share Note on related party transactions Significant non-recurring events and transactions Guarantees and commitments with third parties Other information
| 160 | 1. Statement of changes in tangibile assets |
|---|---|
| 162 | 2. Statement of changes in intangibile assets |
| 164 | 3. List of companies included in the consolidated financial statements |
| 166 | 4. List of shareholdings in companies carried at equity |
| 168 | 5. List of available-for-sale financial assets |
| 172 | Generation and Trading Business Unit | |||
|---|---|---|---|---|
| ----- | -------------------------------------- | -- | -- | -- |
Certification of the condensed half-yearly financial statements pursuant to article 154-bis, paragraph 5 of Legislative Decree no. 58/98
This is a translation of the Italian original "Relazione finanziaria semestrale al 30 giugno 2015" and has been prepared solely for the convenience of international readers. In the event of any ambiguity the Italian text will prevail. The Italian original is available on the website www.a2a.eu
CHAIRMAN Giovanni Valotti
DEPUTY CHAIRMAN Giovanni Comboni
CHIEF EXECUTIVE OFFICER Luca Camerano
DIRECTORS Antonio Bonomo Giambattista Brivio Maria Elena Cappello Michaela Castelli Elisabetta Ceretti Luigi De Paoli Fausto Di Mezza Stefano Pareglio Secondina Giulia Ravera
| CHAIRMAN | |
|---|---|
| Giacinto Gaetano Sarubbi | |
| STANDING AUDITORS | |
| Cristina Casadio | |
| Norberto Rosini | |
| SUBSTITUTE AUDITORS | |
| Onofrio Contu | |
| Paolo Prandi | |
PRICEWATERHOUSECOOPERS S.P.A.
The A2A Group operates in the production, sale and distribution of gas and electricity, district heating, environmental services and the integrated water cycle. These sectors are in turn attributable to the "Business Units" specified in the following diagram identified as a result of the reorganization carried out by the management:
| Business Units of the A2A Group | ||||||
|---|---|---|---|---|---|---|
| Generation and Trading |
Commercial | Environment | Heat and Services |
Networks | EPCG | Other Services and Corporate |
| Thermoelectric and hydroelectric plants |
Sale of Electricity and Gas |
Collection and street sweeping |
District Heating Services |
Electricity networks |
Electricity generation and commercial |
Other services |
| Energy Management |
Treatment | Heat management services |
Gas networks | Electricity networks |
Corporate services |
|
| Disposal and energy recovery |
Integrated water cycle |
|||||
| Public lighting and other services |
This breakdown into Business Units reflects the organization of financial reports regularly analyzed by management and the Board of Directors in order to manage and plan the Group's business.
7
Thermoelectric plants Cogeneration plants Waste treatment plants Technological partnerships
Half-yearly financial report at June 30, 2015
| Revenues ___________ | 2,467 millions of euro |
|---|---|
| Gross operating income __________ | 562 millions of euro |
| Result of the period ________ | 152 millions of euro |
| Income statement figures Millions of euro |
01 01 2015 06 30 2015 |
01 01 2014 06 30 2014 |
|---|---|---|
| Revenues | 2,467 | 2,582 |
| Operating expenses | (1,591) | (1,701) |
| Labour costs | (314) | (330) |
| Gross operating income | 562 | 551 |
| Depreciation, amortization, provisions and write-downs | (248) | (249) |
| Net operating income | 314 | 302 |
| Result from non-recurring transactions | (1) | - |
| Financial balance | (74) | (96) |
| Result before taxes | 239 | 206 |
| Income taxes | (77) | (101) |
| Net result from discontinued operations | - | - |
| Minorities | (10) | (8) |
| Group result of the period | 152 | 97 |
| Gross operating income/Revenues | 22.8% | 21.3% |
9
(**) The figures serve as performance indicators as required by CESRN/05/178/B.
Financial highlights at June 30, 2015
| Balance sheet figures Millions of euro |
06 30 2015 | 12 31 2014 |
|---|---|---|
| Net capital employed | 6,483 | 6,542 |
| Equity attributable to the Group and minorities | 3,243 | 3,179 |
| Consolidated net financial position | (3,240) | (3,363) |
| Consolidated net financial position/Equity attributable to the Group and minorities | 1.00 | 1.06 |
| Consolidated net financial position/Average market capitalisation | 1.06 | 1.27 |
| Financial data Millions of euro |
01 01 2015 06 30 2015 |
01 01 2014 06 30 2014 |
|---|---|---|
| Net cash flows from operating activities | 361 | 530 |
| Net cash used in investing activities | (134) | (123) |
| Free cash flow | 227 | 407 |
| Average market capitalization in 2015 ____ | 3,062 millions of euro |
|---|---|
| Market capitalization at June 30, 2015 ____ | 3,352 millions of euro |
| Key figures of A2A S.p.A. | 06 30 2015 | 12 31 2014 |
|---|---|---|
| Share capital (euro) | 1,629,110,744 | 1,629,110,744 |
| Number of ordinary shares (par value 0.52 euro) | 3,132,905,277 | 3,132,905,277 |
| Number of treasury shares (par value 0.52 euro) | 26,917,609 | 26,917,609 |
| Key indicators | 06 30 2015 | 06 30 2014 |
|---|---|---|
| Average 6-month Euribor | 0.093% | 0.395% |
| Average price of Brent crude (US\$/bbl) | 59.40 | 108.29 |
| Average exchange rate euro/US\$ (*) | 1.12 | 1.37 |
| Average price of Brent crude (euro/bbl) | 53.30 | 79.00 |
| Average price of coal (euro/tonne) | 53.30 | 55.99 |
(*) Source: Italian Foreign Exchange Office.
11
(*) Holdings exceeding 2% (updated at June 30, 2015) Source: CONSOB.
| Market capitalisation at June 30, 2015 (millions of euro) | 3,352 |
|---|---|
| Average capitalisation in the first half of 2015 (millions of euro) | 3,062 |
| Average volumes in the first half of 2015 | 20,278,922 |
| Average price in the first half of 2015 (*) | 0.977 |
| Maximum price in the first half of 2015 (*) | 1.169 |
| Minimum price in the first half of 2015 (*) | 0.792 |
| Number of shares | 3,132,905,277 |
(*) euro per share Source: Bloomberg
12
A2A stock is also traded on the following platforms: Chi-X, BATS, Turquoise, Equiduct, Sigma-X, Aquis, BOAT OTC, LSE Europe OTC, BATS Chi-X OTC.
On June 24, 2015, A2A distributed a dividend of 0.0363 euro per share.
| Current | ||
|---|---|---|
| M/L Term Rating | BBB | |
| Standard & Poor's | Short Term Rating | A–2 |
| Outlook | Negative | |
| Moody's | M/L Term Rating | Baa3 |
| Outlook | Stable |
Source: Rating agencies
| FTSE MIB | |
|---|---|
| STOXX Europe | |
| EURO STOXX | |
| Wisdom Tree | |
| S&P Developed Ex-US | |
13
| ECPI Ethical Index EMU |
|---|
| Axia Sustainable Index |
| Solactive Climate Change Index |
| FTSE ECPI Italia SRI Benchmark |
| Standard Ethics Italian Index |
Source: Bloomberg
A2A is also included in the Ethibel Excellence Investment Register and the Ethibel Pioneer Investment Register.
Source: Bloomberg
Consolidated results and report on operations
The results of the A2A Group at June 30, 2015 are set out below together with comparative figures for the same period of the previous year:
| Millions of euro | 01 01 2015 06 30 2015 |
01 01 2014 06 30 2014 |
Changes |
|---|---|---|---|
| Revenues | 2,467 | 2,582 | (115) |
| of which: | |||
| - Revenues from the sale of goods and services | 2,377 | 2,475 | (98) |
| - Other operating income | 90 | 107 | (17) |
| Operating expenses | (1,591) | (1,701) | 110 |
| Labour costs | (314) | (330) | 16 |
| Gross operating income (EBITDA) | 562 | 551 | 11 |
| Depreciation, amortization and write-downs | (199) | (229) | 30 |
| Provisions | (49) | (20) | (29) |
| Net operating income (EBIT) | 314 | 302 | 12 |
| Result from non-recurring transactions | (1) | - | (1) |
| Net financial charges | (77) | (101) | 24 |
| Affiliates | 3 | 5 | (2) |
| Result from disposal of other shareholdings (AFS) | - | - | - |
| Result before taxes | 239 | 206 | 33 |
| Income taxes | (77) | (101) | 24 |
| Result after taxes from operating activities | 162 | 105 | 57 |
| Net result from discontinued operations | - | - | - |
| Minorities | (10) | (8) | (2) |
| Group result of the period | 152 | 97 | 55 |
In the first half of 2015, "Revenues" of the A2A Group equalled 2,467 million euro, a reduction of 115 million euro compared to the first half of 2014.
This performance was mainly due to lower volumes of electricity and gas sold to end customers, the reduction of electricity sales on the IPEX platform, as well as the trend in the reduction of energy prices recorded in recent years.
Key quantitative data for the period contributing to the formation of these revenues, with comparative figures for the first half of 2014, are as follows:
| 06 30 2015 | 06 30 2014 | |
|---|---|---|
| Electricity sold to wholesale customers (GWh) | 5,365 | 4,121 |
| Electricity sold to retail customers (GWh) | 3,479 | 3,791 |
| Electricity sold on the Power Exchange (GWh) | 4,434 | 7,009 |
| Electricity sold domestic and foreign market (GWh) – EPCG | 1,646 | 1,682 |
| Gas sold to wholesale customers (Mcm) | 204 | 149 |
| Gas sold to retail customers (Mcm) | 626 | 665 |
| Heat sold (GWht) | 1,334 | 1,149 |
| Electricity distributed (GWh) | 5,522 | 5,405 |
| Electricity distributed (GWh) – EPCG | 1,054 | 986 |
| Gas distributed (Mcm) | 1,068 | 1,020 |
| Water distributed (Mcm) | 29 | 30 |
| Water purified (Mcm) | 17 | 17 |
| Waste disposed of (Kton) | 1,326 | 1,304 |
| Production Details | 06 30 2015 | 06 30 2014 |
|---|---|---|
| Thermoelectric production (GWh) | 3,713 | 2,657 |
| Thermoelectric production (GWh) – EPCG | 610 | 590 |
| Hydroelectric production (GWh) | 2,278 | 3,043 |
| Hydroelectric production (GWh) – EPCG | 884 | 870 |
| Heat production (GWht) | 1,337 | 1,154 |
| Electricity produced by cogeneration (GWh) | 146 | 153 |
"Gross operating income" of 562 million euro, an increase of 11 million euro compared to the first half of 2014.
| Millions of euro | 06 30 2015 | 06 30 2014 | Change | Change % |
|---|---|---|---|---|
| Generation and Trading | 192 | 193 | (1) | (0.5%) |
| Commercial | 54 | 47 | 7 | 14.9% |
| Environment | 110 | 115 | (5) | (4.3%) |
| Heat and Services | 47 | 39 | 8 | 20.5% |
| Networks | 136 | 138 | (2) | (1.4%) |
| EPCG | 32 | 30 | 2 | 6.7% |
| Other Services and Corporate | (9) | (11) | 2 | n.s. |
| Total | 562 | 551 | 11 | 2.0% |
Gross operating income of the Generation and Trading Business Unit amounted to 192 million euro, in line with the first half of the previous year.
Compared to the previous year, the first six months of 2015 benefited from lower costs from redundancy schemes for around 11 million euro, while it was affected, for around 21 million euro, by the non-recurrent positive elements of income recorded, mainly, in the first half of 2014.
Net of these effects, the Gross operating income of the Generation and Trading Business Unit was up by around 9 million euro compared to the same period of 2014: higher sales of environmental certificates, savings from the operational efficiency plan, as well as the good performance in the thermoelectric segment, due to an improvement in spreads and higher volumes traded on secondary markets, more than offset the decline in margins in the hydroelectric segment due to the exceptional hydraulicity in 2014.
The gross operating income of the Commercial Business Unit amounted to 54 million euro, up by 7 million euro compared to the same period of the previous year.
The 2014 result, however, included negative non-recurring elements of income for an amount equal to 8 million euro. Net of these charges, the Gross Operating Margin of the Business Unit was essentially in line with the first half of 2014 despite the greater costs incurred for the acquisition of new customers.
The gross operating income of the Environment Business Unit was 110 million euro (115 million euro in the first half of 2014).
The reduction, amounting to 5 million euro, is mainly due to the lower revenues from the sale of electricity from the waste-to-energy plant in Acerra (following the reduction of the CIP6 payment caused by the drop in prices of the reference fuels) and the Group's other waste-to-energy plants (due to the drop in electricity prices).
The Gross Operating Margin of the Heat and Services Business Unit, amounting to 47 million euro, was up by 8 million euro compared to the first six months of 2014: the increase, resulting from more favourable climatic conditions compared to the same period of the previous year and the effective commercial development action (in particular in the city of Milan), was partially offset by the lower results achieved on the environmental certificates markets.
Whereas the margins of the Networks Business Unit and the EPCG Business Unit were essentially in line with the previous financial year.
"Amortisation, depreciation, provisions and write-downs" amounted to a total of 248 million euro (249 million euro at June 30, 2014) and include amortisation and depreciation of the intangible and tangible assets for 199 million euro (229 million euro at June 30, 2014) and net provisions for 49 million euro (20 million euro at June 30, 2014).
The "Amortisation and Depreciation" recorded a decrease of 30 million euro mainly deriving from lower depreciations of the tangible assets following the write-downs performed at the end of the previous year, for 17 million euro, as well as from the review of the remaining useful life of the combined-cycle-plants, carried out in 2014 for 13 million euro.
19
The "Provisions for risks" amounted to 40 million euro (12 million euro at June 30, 2014) and refer to the provisions for the period made with regard to ongoing litigation, as well as pending lawsuits. The provisions for the half-year were affected by the provision following the filing of the arbitration relative to compensation for damages in favour of Pessina Costruzioni regarding the dispute over Asm Novara S.p.A..
Due to the effect of the dynamics explained above, the "Net Operating Income (EBIT)" amounted to 314 million euro, up by 12 million euro compared to the first half of 2014 (302 million euro at June 30, 2014).
"Net financial charges" equalled 77 million euro (101 million euro in the first half of 2014). The reduction compared to the corresponding period of the previous year, equal to 24 million euro, is mainly attributed to lower net payable financial interest on the debt for 10 million euro linked to the decrease in the average debt and the effects of the financial strategy implemented by the Group, as well as lower discount charges for 8 million euro. There was also an improvement in the performance of the variation in the financial derivatives contracts, positive for 4 million euro.
"Affiliates" were positive for 3 million euro (positive for 5 million euro at June 30, 2014), and can be mainly attributable to the valuation, according to the equity method, of the shareholding in ACSM-AGAM S.p.A..
The first half of 2014 benefited from the results of the associated company Dolomiti Energia S.p.A., positive for 2 million euro.
"Income taxes" in the period in question amounted to 77 million euro (101 million euro at June 30, 2014).
As a reminder, following Ruling 10/2015 of the Constitutional Court, which declared the additional IRES of 6.50% ("Robin Hood Tax") to be unconstitutional, with effect from February 12, 2015, these financial statements do not present any effect relative to that tax, as the deferred taxes allocated to the temporary differences generated in previous years were entirely reversed in the year 2014. The Half year financial report at June 30, 2014, on the other hand, implemented the effects of the additional tax.
It should also be noted that, following the provisions of art. 1, subsection 20, of Law no. 190 of December 23, 2014 ("2015 Stability Law"), the entire labour cost relative to employees with permanent contracts shall be deducted from the IRAP for the current tax period.
The "Group result for the period", after the minorities were deducted, came to 152 million euro (97 million euro at June 30, 2014).
Consolidated "Capital employed" at June 30, 2015 amounted to 6,483 million euro and is covered by the net equity for 3,243 million euro and the financial position for 3,240 million euro.
The "Working capital" amounted to 389 million euro, up by 41 million euro compared to December 31, 2014 mainly following the reduction of trade payables and other current liabilities, partly offset by the reduction of the trade receivables and gas inventories existing at December 31, 2014.
The "Net fixed capital" amounted to 6,094 million euro, a reduction of 100 million euro compared to December 31, 2014 mainly due to the amortisation and depreciation pertaining to the period.
The "Net financial position", equal to 3,240 million euro, improved by 123 million euro compared to December 31, 2014 following the positive generation of cash flow attributable to the operations, partially offset by the resources absorbed by the investments in tangible and intangible assets and in shareholdings for 135 million euro and by dividends paid for 113 million euro.
Summary of results, assets and liabilities and financial position
| Millions of euro | 06 30 2015 | 12 31 2014 | Changes |
|---|---|---|---|
| CAPITAL EMPLOYED Net fixed capital |
6,094 | 6,194 | (100) |
| - Tangible assets | 5,561 | 5,625 | (64) |
| - Intangible assets | 1,303 | 1,318 | (15) |
| - Shareholdings and other non-current financial assets (*) | 83 | 82 | 1 |
| - Other non-current assets/liabilities (*) | (294) | (287) | (7) |
| - Deferred tax assets/liabilities | 302 | 323 | (21) |
| - Provisions for risks, charges and liabilities for landfills | (525) | (498) | (27) |
| - Employee benefits | (336) | (369) | 33 |
| of which with counter-entry to equity | (372) | (383) | |
| Working capital | 389 | 348 | 41 |
| - Inventories | 207 | 284 | (77) |
| - Trade receivables and other current assets (*) | 1,633 | 1,846 | (213) |
| - Trade payables and other current liabilities (*) | (1,472) | (1,865) | 393 |
| - Current tax assets/tax liabilities | 21 | 83 | (62) |
| of which with counter-entry to equity | (33) | (28) | |
| Assets/liabilities held for sale (*) | - | - | - |
| of which with counter-entry to equity | - | - | |
| TOTAL CAPITAL EMPLOYED | 6,483 | 6,542 | (59) |
| SOURCES OF FUNDS | |||
| Equity | 3,243 | 3,179 | 64 |
| Total financial position beyond one year | 3,707 | 3,908 | (201) |
| Total financial position within one year | (467) | (545) | 78 |
| Total net financial position | 3,240 | 3,363 | (123) |
| of which with counter-entry to equity | 37 | 51 | |
| TOTAL SOURCES | 6,483 | 6,542 | (59) |
(*) Excluding balances included in the net financial position.
Summary of results, assets and liabilities and financial position
| Millions of euro | 01 01 2015 06 30 2015 |
01 01 2014 06 30 2014 |
|---|---|---|
| NET FINANCIAL POSITION AT THE BEGINNING OF THE PERIOD | (3,363) | (3,874) |
| Net result (**) | 162 | 105 |
| Depreciation and amortization | 199 | 229 |
| Write-downs/disposals of tangible and intangible assets | 2 | 1 |
| Affiliates | (3) | (5) |
| Net taxes paid | (8) | (57) |
| Change in assets and liabilities (*) | 9 | 257 |
| Net cash flows from operating activities | 361 | 530 |
| Investments in tangible and intangible assets | (133) | (123) |
| Investments in shareholdings and securities | (2) | - |
| Dividends received from shareholdings | 1 | - |
| Cash flow from investment activities | (134) | (123) |
| Free cash flow | 227 | 407 |
| Dividends paid by the parent company | (113) | (102) |
| Dividends paid by the subsidiaries | (5) | (1) |
| Cash flow from the distribution of dividends | (118) | (103) |
| Changes in financial assets/liabilities with counter-entry to equity | 14 | (2) |
| NET FINANCIAL POSITION AT THE END OF THE PERIOD | (3,240) | (3,572) |
(*) Excluding balances with counter-entry to equity.
(**) The net result is stated excluding gains on the disposal of shareholdings.
On January 13, 2015 A2A S.p.A. and the Repower Group, one of the leading Swiss providers in the management of renewable resources, concluded an agreement to make available to a larger number of users the charging infrastructure for electric vehicles. Thanks to this new partnership, Repower customers have been provided with a card with which they can access, until December 2015, the service offered by the charging points of the A2A Group. It is a real advantage that simplifies the use of electric vehicles.
This agreement stems from the interest of electric mobility, thanks to the common intention to actively support this new sector, relaunching it with new services.
24
The public infrastructure for charging of electric cars realized in Brescia and Milan, with a total of 50 columns for 100 charging points, is now fully operational and, since July 2013, has allowed fast charging up to 22 kW in three-phase, allowing the latest generation cars to recharge to 80% in about 50 minutes. In parallel, the installation of private charging points is ongoing for car-sharing companies and owners of electric vehicles for the benefit of urban air quality.
Thanks to the actions undertaken by A2A Ciclo Idrico S.p.A. in 2014, the quality of drinking water in Brescia improved further.
In December 2014, the value of hexavalent chromium, recorded in 75% of the water supplied to the city aqueduct, was less than 2 micrograms/litre, concentration below the detection limit of the analytical methods currently used.
An amount of 100% of the water has a value of less than 3 micrograms/litre, which is far below the best global regulatory standards.
It is worth remembering that a current limit of 50 micrograms/litre is set by legislation for total chromium (consisting of trivalent chromium and hexavalent chromium), a level also confirmed in the latest edition of the Guidelines for Drinking-water Quality issued by the World Health Organization. The plants realized allow the transformation of hexavalent chromium (soluble in water) into trivalent chromium (insoluble in water), through the addition of ferrous sulphate (FeSO4). The trivalent chromium is then removed by filtering the water through a bed of activated carbon.
A2A Ciclo Idrico S.p.A. started installation of the system for reducing hexavalent chromium in wells that had a greater presence (Sereno 2, San Donino, Grazzine and San Bartolomeo).
The A2A Group will incur expenditure of more than 4 million euro over a two-year period in order to achieve an improvement in the quality of the water distributed in the city of Brescia.
The Brescia aqueduct, managed by A2A Ciclo Idrico S.p.A., is subject to rigorous controls based on a protocol of analyses agreed with the local health authority. This protocol requires water samples to be taken on a monthly basis both from the control points (26 situated throughout the city), which are representative of the distribution network, and from the treatment plants; for the sources of procurement controls are annual or with lower frequency, depending on the quality of the untreated water sampled.
25
In addition to the above controls, since April 2014, the concentration of hexavalent chromium and total chromium has been measured weekly at all 26 control points of the network and the results are regularly published on the website of A2A Ciclo Idrico S.p.A..
In 2014, in the city of Brescia alone, A2A Ciclo Idrico S.p.A. carried out 4,600 tests (3,968 to check chemical and physical parameters and 632 to check microbiological parameters) and analyzed a total of 50,430 chemical, physical and microbiological parameters. These analyses confirmed that the water distributed from the civic aqueduct complies fully with Legislative Decree no. 31/01.
Each year a copy of all the analyses is sent to the local health authority which carries out its own sampling and analyses as a means of ensuring the utmost independence and efficiency of the checks with respect to the operator.
By 2016, all the light point in Brescia, about 43 thousand, will use LED fixtures thanks to a substitution plan planned by the Municipality of Brescia and realized by the A2A Group.
An innovative choice that will ensure equal efficiency and equal light output, a savings of 39% of consumption and 8 million euro in 10 years on the "bill" of the Municipality of Brescia.
A 39% reduction of electricity actually means saving every year more than 1,300 TOE (tonnes of oil equivalent), equivalent to the annual consumption of about 1,500 cars, and avoiding the emission into the atmosphere of 2,700 tons of CO2.
As a result of this new lighting annual consumption per head will be almost halved, falling from the present 92 kWh to 56 kWh.
Taken overall, there will be a reduction from over 18 million kWh a year – a quantity of energy sufficient to satisfy the energy needs of 8,200 apartments – to 11 million kWh, corresponding to the theoretical consumption of 5,000 apartments.
The A2A Group will incur expenditure of 12 million euro for replacing all of the city's lighting bodies.
The decision taken in favor of LED will mean an improvement in terms of efficiency and safety. The new lighting bodies will guarantee lighting performance equal to that of the traditional light bulbs used until now (100 lumens per watt).However, the light beam will be better pointed and the lamps will have a much longer lifecycle (up to 5 times that of traditional lamps); in terms of service quality and safety, this will mean fewer broken lamps on the city streets.
26
At least 2,500 fewer lights will be burnt each year. And with the new remote control technology adopted, information on the condition of the systems or any malfunctioning will be available in real time, enabling action to be taken far more quickly.
Even at the end of life, the LEDs represent an environmental advantage thanks to the total absence of mercury and other pollutants.
The higher efficiency of LED lighting will also have the effect of reducing light pollution, thanks to the concentration of lighting toward sidewalks and roads and the absence of emission of light intensity upwards.
The reduction in expenses is also guaranteed by the significant energy savings and reduced maintenance and replacement costs of the LEDs, which stand out for their durability, resistance to vibration and unfavorable atmospheric conditions.
A2A has created "ILLUMINIamo", a new app to inform citizens on the progress of the project, with a counter that allows users to know the number and percentage of light bulbs already replaced. Thanks to ILLUMINIamo, citizens can report directly to A2A - also by means of automatic detection of their device - the presence of street lights turned off or unlit streets.
A2A Energia S.p.A. has planned several initiatives to spread the values of the project and promote the use of LED lighting in homes as well.
Events have also been planned for the neighborhoods of Brescia, as soon as the replacement of the light bulbs with the new LED equipment will have been completed in each area of the city.
On January 30, 2015, A2A Ambiente S.p.A. and Apindustria Brescia signed an agreement for the integrated management of waste from associated companies.
The agreement represents a real opportunity for associated companies that can thus take advantage of the favorable and simplified service conditions through A2A Ambiente S.p.A.; the latter acts as a single interface that ensures prompt qualified service to handle any issue relating to waste management and the resulting regulatory requirements, with particular attention to the activities of final treatment realized with high standards of quality and safety at plants mostly owned by the A2A Group, or accredited by it, authorized and certified by the most authoritative national Entities.
27
The collection and treatment of industrial waste, in fact, is a complex activity, regulated by a multitude of standards, which requires expertise and constant updating.
By partnering with A2A Ambiente S.p.A., a leading Italian company in the environmental sector, companies in Brescia may also benefit from a direct relation with the final operator, avoiding the need for intermediaries. This will facilitate the transparency of the whole process of waste tracking, with a precise identification of the responsibilities of the players involved.
The agreement is aimed at more than 1,000 potentially interested companies, with an estimated production of 10,000 tons of industrial waste per year.
Under the agreement, in the next few months Apindustria Brescia will manage the dissemination and promotion of the contents of the agreement as well as any update meetings dedicated to associated companies. A2A Ambiente S.p.A. will deal with the activities of customer contact reported by Apindustria Brescia, the formulation of the offers, the conclusion of contracts, the organization and management of logistics for waste collection and transportation and the transfer to the treatment or recovery plants.
On February 18, 2015, A2A S.p.A. issued a 10-year bond for 300 million euro as part of it Euro Medium Term Notes program.The renewal and increase to a total of 4 billion euro was approved by the Board of Directors on November 6, 2014.
The issue, aimed at institutional investors, recorded orders corresponding to twelve times the amount offered. The bonds have an annual coupon of 1.75%, which is at the minimum levels for the A2A Group, and were placed at an issue price of 99.221%, with a spread of 110 basis points compared to the midswap reference rate. The bonds are governed by English law and admission to trading on the regulated market of the Luxembourg Stock Exchange was requested on February 25, 2015, subject to the signing of the relevant contract documents. The bond securities will be assigned a rating by Moody's and Standard&Poor's.
The issue, intended for the reimbursement of a portion of existing debt, will allow reducing the average rate of the debt of the A2A Group and, in line with the financial strategy, extending the average maturity of debt and optimizing the timing of maturities.
28
As previously announced, the A2A Group has also launched an offer for the partial repurchase of bonds maturing in 2016, whose outstanding nominal amount is 762 million euro. The conditions for repurchase are described in the Tender Offer Memorandum dated February 18, 2015.
The placement was handled by Banca IMI, Barclays, BNP Paribas and UniCredit as Joint Bookrunners. The Tender Offer is handled by Barclays and BNP Paribas.
For the third consecutive year, the Cerved Energy Observatory Databank confirmed A2A Energia S.p.A., a company active in the sale of electricity and natural gas of the A2A Group, as the leading market operator in terms of customer satisfaction. The survey conducted by the Cerved Databank Area, now in its seventh edition and which was conducted between September and December 2014, concerned 8,200 customers submitted to a structured questionnaire by phone, allowing the "clear" comparison of the performances of the main market operators (including Eni, Enel, A2A, Hera, Iren, Acea, Edison) with reference to certain factors of quality of commercial service, such as:
the ability to solve problems and requests of customers in the shortest possible time;
the quality/price ratio of the service;
The overall level of satisfaction reported by customers of A2A Energia S.p.A., in particular on the segment of domestic customers, is the highest among the main players operating in the national energy market.
On March 24, 2015, Carlo Tassara S.p.A. filed a lawsuit in civil court against A2A and the French giant EDF for "very heavy damages to the value of its shareholding in Edison", in the reorganization of the energy group dating back to 2012.
29
For further details of the lawsuit, refer to the specific paragraph in "Other information".
On March 26, 2015, A2A Ciclo Idrico S.p.A., Acque Ovest Bresciano due S.r.l., Garda Uno S.p.A., Azienda Servizi Valtrompia S.p.A., Servizi Idrici Valle Camonica S.r.l., Gandovere Depurazione S.r.l. and the Province of Brescia signed a letter of intent which provides for the possibility of starting a project for the rationalization and efficiency of the integrated water service within the ATO (Optimal Territorial Area) of Brescia through aggregation of management currently entrusted to the Parties in a single company.
Through the operation, the companies together with the Province and in line with recent government guidelines and with the development of the local public services sector, in the presence of the necessary conditions, aim to create an operator that, thanks to an appropriate scale and unified management on the reference territories, can:
In the coming weeks, the companies and the Province of Brescia will discuss the terms of the aggregation project by defining, in particular, a joint business plan and a suitable corporate path.
Following the definition of these elements, the possibility may be verified of a further expansion of the shareholder base to other entities and financial investors that can contribute to the acceleration of investments in the territory.
30
On March 27, 2015, Independent Director Mario Cocchi resigned from the office of Director and consequently also Vice Chairman of the Audit and Risks Committee.
It shall be noted that in the first two months of 2015 the Municipalities of Milan and Brescia sold a shareholding of 4.5% of A2A S.p.A.
This transaction was realized to integrate the sale of a block of shares of A2A S.p.A. of 0.51% in December 2014.
At the date of approval of the financial statements at December 31, 2014, the two shareholders hold a shareholding of 50% plus two shares that will enable the two municipalities to maintain control over the company.
The Regional Council of Campania established the environmental observatory of the Acerra waste-to-energy plant. The regional environmental observatory of the Acerra waste-toenergy plant is an independent interface body between citizens (represented also through their associations), institutions and the plant manager that has the task of permanently overseeing the correct operation of the waste-to-energy plant.
The observatory acquires analyses and summaries of technical and scientific data concerning the characteristics and operation of the plant and the results of the monitoring of emissions of the waste-to-energy plant provided by the management company and control entities, the modelling study of pollutant fallout on the territories surrounding the plant prepared by a third party identified in conjunction with the Campania region and the Municipality of Acerra, the report on the quality of soil and groundwater, and proposes technical solutions aimed at the further reduction of pollutants.
The observatory is composed as follows: representative of the department of health and natural resources as Chairman; representative of the Directorate General for health Protection and the coordination of the regional health system; representative of the Directorate General for the environment and the ecosystem; representative of the Directorate General for agriculture, food and forestry policies; representative of the metropolitan city of Naples; mayor of the municipality of Acerra or deputy; mayor of the Municipality of San Felice a Cancello or deputy; representative of ASL (local health authority) Naples 2 North; representative of ARPAC (Regional Agency for Environmental Protection) provincial district of Naples; representatives of maximum two main environmental associations identified by the Municipality of Acerra and San Felice a Cancello; epidemiologist appointed by the University of Naples Federico II; industrial chemical engineer appointed by the University of Naples Federico II.
On April 9, 2015, the Board of Directors of A2A S.p.A. examined and approved the Group's 2015-2019 Strategic Plan. It is the first strategic plan prepared by the new governance of the company, led by Chairman Giovanni Valotti and the CEO Luca Valerio Camerano, both appointed in June of the previous year.
31
The main objective of the Plan is to relaunch and redesign the A2A Group, initiating a process of strategic repositioning that in 2020, will result in more modern multi-utility, leader in the environment, smart grids and new energy models, more balanced and profitable, able to seize the opportunities that will open up in the Green Economy and Smart Cities.
The main development lines of the Plan can be divided into three main areas, characterized by different missions:
With reference to the first area of action, the current context of the thermoelectric sector imposes decisive decisions and actions. The Group will start an articulated path to for exposure reduction and simultaneous modernization of its thermoelectric generation. In particular, the following are expected: decrease of thermoelectric capacity by 40%, significant reduction in operating costs (about 21 million euro per year), the reconversion of obsolete plants and about 35 million euro of investments in the flexibility of the existing Combined Cycles in order to play a leading role in the new electricity market. The restructuring activities of traditional generation are expected to contribute to the creation of about 148 million euro of incremental gross operating income by 2019.
In terms of investment, it was planned to relaunch the same (1.4 billion euro out of a total of 2.1 billion euro of Group investments) with the aim of strengthening its leadership in sectors characterized by excellent development prospects and profitability growth. In particular:
32
The third area of action is aimed, through gradual and scalable investments, at laying the foundations to allow the A2A Group to seize the growing options arising from the Smart Cities and the Green Economy. It is expected to initiate the activities necessary to successfully face the paradigm shift of the electricity system, laying the foundations for the creation of new industrial solutions, developed from projects that are already operationally in progress (ex. LED project in the Municipalities of Milan and Brescia and energy efficiency business line), to achieve increasingly innovative services also in energy conservation, energy community and smart grids. The contribution to the overall growth of the gross operating income of these activities is approximately 33 million euro.
The achievement of these objectives will be pursued in accordance with and through three additional guidelines.
Operational discipline and in the capital structure, divided according to the following guidelines:
34
On April 9, 2015, the Board of Directors appointed, in accordance with articles 18 of the current By-Laws and 2386 Civil Code, Giambattista Brivio as non-executive Director of the company in replacement of Mario Cocchi who resigned on March 27. The new Director will remain in office until the next Shareholders' Meeting.
On April 20, 2015, the office of the section of Brescia of Civil Protection Volunteers of the A2A Group was inaugurated.
The ceremony was attended by the Chairman of A2A, Giovanni Valotti and Environment Councillor and Civil Protection Deputy, Gianluigi Fondra.
The Section of Brescia includes the employees of the Group companies that have chosen to put at the service of the community and the territory the expertise acquired through experience gained at the workplace.
The A2A Civil Protection Group has been registered in the regional volunteer registry of the Lombardy Region since 2000 and as it is the only association that guarantees specialized work on electricity, gas and water distribution plants, in 2013, it was declared the "Association of National Interest" by the National Department of Civil Protection and admitted into its select circle of organizations.
Among the numerous actions in which the A2A Civil Protection Group took part we recall, in particular, the earthquake in Molise in 2002, the tsunami that hit South-East Asia in 2005, the earthquake in Abruzzo in 2009 and the earthquake in Haiti in 2010.
In compliance with the obligations introduced by Resolution 651/2014/R/gas "Provisions concerning the commissioning obligations of gas smart meters" introduced in December 2014, between 2015 and 2019, A2A Reti Gas S.p.A. will replace approximately 120,000 meters with new electronic standard ones.
For this purpose, A2A Reti Gas S.p.A. has adopted its own organizational model with a specific project team dedicated full time to the development and implementation of all necessary activities.
In 2015, the actions will take place in two phases, and in particular:
This project is part of the vast program, defined and regulated by the European Union to achieve the minimum objectives in terms of environmental sustainability, security, energy balance and, above all, to make end users aware of their energy use.
The increased flexibility in the technologies used will offer concrete advantages and benefits and in the future, will allow faster achievement of ad hoc tariffs by range or customized for customers, with the possibility of introducing innovative systems (such as home automation).
On April 29, 2015, the Independent Director Stefano Cao resigned from the Board of Directors, following further work assignments that do not allow him to ensure the commitment and concrete operational presence required by the role.
Consequently, Mr. Cao also resigned from the office of member of the Remuneration and Appointments Committee.
The Board of Directors, taking into account the imminent Shareholders' Meeting deadline, decided not to co-opt any member of the Board until the date of the Shareholders' Meeting, including the appointment on the agenda.
On May 19, 2015, A2A S.p.A. inaugurated in Varese the first solar thermal power plant for district heating in southern Europe. The plant will produce 450 megawatts/hour of energy per year from completely renewable source, equivalent to the needs of domestic hot water of 150 apartments, saving 43 tons of oil equivalent and avoiding the release into the environment of 108 tons of CO2 a year.
The solar district heating technology is widespread and well established in Denmark, with some examples in Sweden, Germany and Austria as well. The plant in Varese will allow providing heat through the city's district heating network. The Varese project is particularly significant for A2A because, along with other projects such as LED street lighting in Brescia, Milan and other cities in Lombardy, or pilot projects on smart grids, it is part of the beginning of the path envisaged by the new business plan.
36
The Shareholders' Meeting of A2A S.p.A., held in Brescia on June 11, 2015:
by the security in the stock exchange session preceding each individual transaction. These parameters are considered adequate to identify the range of values within which the purchase is of interest for the company;
The Administrative Body has been granted the most ample powers for the execution, even through special proxies, of the above resolutions. The authorization for purchase and disposal shall be valid until otherwise resolved and, in any case, for a period not exceeding eighteen months from the date of the resolution.
• conferred the statutory audit assignment for the years 2016-2024 to Reconta Ernst & Young S.p.A.;
37
• approved the adoption of the new meeting regulation in adaptation to the "traditional" administration and control system adopted by the company.
On June 17, 2015, A2A S.p.A. and LGH signed a letter of intent initiating a joint working group aimed at the evaluation of possible industrial partnerships.
At the end of the work (which will last for about two months), the parties may share, where the conditions are fulfilled, the interest to whether to continue or not the path.
LGH also informs that the Board of Directors has also decided to activate an internal working group in order to analyse, in parallel to the discussion with A2A S.p.A., a technical assessment for the stock market listing.
On June 22, 2015 the Board of Directors of A2A S.p.A. assessed the fulfilment, on the part of the Directors Giambattista Brivio and Maria Elena Cappello, of the independence requirements pursuant to article 148, paragraph 3, of the CFA and the fulfilment of the independence requirements under article 3 of the Corporate Governance Code of Listed Companies.
At the meeting, the Board also approved the following composition for:
38
On June 30, 2015, the Shareholders' Meeting of EPCG approved the financial statements for FY 2014, appointed the new members of the Board of Directors (with 3 out of 7 directors designated by A2A) and approved the extraordinary capital restructuring, with coverage of accumulated losses carried forward, a precondition for the distribution of dividends in the coming years.
At the same time, the Shareholders' Meeting approved the return of a share of the capital to shareholders for an amount corresponding to the profit for FY 2014, amounting to approximately 35 million euro. A2A S.p.A. will therefore receive approximately 14.6 million euro in the second half of 2015, first financial return from its entry in the Montenegro company.
A2A S.p.A. and the Government of Montenegro agreed to extend the management rights of A2A S.p.A. in EPCG, as governed by the agreements in place since 2009, until June 30, 2015, further extended, on July 31, 2015, until the end of September 2015, to allow the continuation of the negotiations already under way for the continuation of the partnership in terms of profitability and investment decisions, definition and stability of a new regulatory plan, and lastly autonomy and management efficiency.
For A2A S.p.A., the decision on the arbitration proceedings between A2A S.p.A. and Pessina Costruzioni for the dispute related to the district heating project in the city of Novara is unexpected in terms of negative results and quantification of the sentence.
The case, prior to the establishment of the current Board of Directors, originated in 2004 and is related to the district heating project of the Piedmont city that was planned to be realized by ASM Novara S.p.A., now in liquidation and jointly controlled by A2A S.p.A. and Pessina Costruzioni. The project was never started due to the absence of the conditions of economic efficiency and the interest of the Municipality of Novara in the realization.
39
A2A S.p.A. appealed against the Award and requested and obtained suspension of its execution, which indicated 37.9 million euro in damages to be compensated to Pessina Costruzioni.
A2A S.p.A. underlines that the arbitration board reached this decision without the issuance of interim orders, without proposal by the parties of preliminary requests and without any technical advice, which is usual and certainly necessary in proceedings of such complexity and scope.
A2A S.p.A. informed the market of the issue starting from the consolidated annual report at December 31, 2012 and most recently in the Interim Report on operations at March 31, 2015, pages 117-118.
On July 20, 2015, Standard & Poor's improved the rating outlook of A2A S.p.A., which went from "negative" to "stable", confirming the long and short-term BBB/A-2 rating. The improvement of the outlook reflects the company's positive financial policy and the commitment to carry forward the continuous debt reduction despite difficult market conditions. Standard & Poor's also positively it considered the planned strategic repositioning of the company's business mix, associated with the improved financial structure.
On July 23, 2015, the European Investment Bank (EIB) and A2A S.p.A. entered into an agreement for a 15-year loan of 200 million euro to carry out investments related to electricity distribution, gas distribution and public lighting.
40
The investment program is intended to expand and upgrade the networks that primarily serve the cities of Milan, Bergamo and Brescia. In electricity and gas distribution, the main purpose of the program is to build and modernize substations, improve the security and reliability of the supply of electricity and gas, upgrade the hardware and continue to meet the quality standards set by the national legislature.
The results achieved by the Group in the first half of the year, the performance of the electricity market and the many initiatives to improve operational efficiency underway, suggest that the financial-economic objectives set in the 2015-2019 Plan can be confirmed.
| Millions of euro | Note | 06 30 2015 | 12 31 2014 | 06 30 2014 |
|---|---|---|---|---|
| NON-CURRENT ASSETS | ||||
| Tangible assets | 1 | 5,561 | 5,625 | 5,828 |
| Intangible assets | 2 | 1,303 | 1,318 | 1,306 |
| Shareholdings carried according to equity method | 3 | 74 | 74 | 191 |
| Other non-current financial assets | 3 | 70 | 65 | 51 |
| Deferred tax assets | 4 | 302 | 323 | 359 |
| Other non-current assets | 5 | 40 | 43 | 62 |
| Total non-current assets | 7,350 | 7,448 | 7,797 | |
| CURRENT ASSETS | ||||
| Inventories | 6 | 207 | 284 | 285 |
| Trade receivables | 7 | 1,400 | 1,591 | 1,651 |
| Other current assets | 8 | 233 | 255 | 305 |
| Current financial assets | 9 | 150 | 126 | 126 |
| Current tax assets | 10 | 62 | 85 | 50 |
| Cash and cash equivalents | 11 | 410 | 544 | 376 |
| Total current assets | 2,462 | 2,885 | 2,793 | |
| NON-CURRENT ASSETS HELD FOR SALE | - | - | - | |
| TOTAL ASSETS | 9,812 | 10,333 | 10,590 |
(1) As required by Consob Resolution no. 17221 of March 12, 2010 the effects of related party transactions on the consolidated financial statements are provided in the financial statements in section 0.2 and commented upon in Note 36.
The effects of significant non-recurring events and transactions on the consolidated financial statements are presented in Note 37 as required by Consob Communication no. DEM/6064293 of July 28, 2006.
| Millions of euro | Note | 06 30 2015 | 12 31 2014 | 06 30 2014 |
|---|---|---|---|---|
| EQUITY | ||||
| Share capital | 12 | 1,629 | 1,629 | 1,629 |
| (Treasury shares) | 13 | (61) | (61) | (61) |
| Reserves | 14 | 937 | 1,048 | 1,078 |
| Result of the year | 15 | - | (37) | - |
| Result of the period | 15 | 152 | - | 97 |
| Equity pertaining to the Group | 2,657 | 2,579 | 2,743 | |
| Minority interests | 16 | 586 | 600 | 566 |
| Total equity | 3,243 | 3,179 | 3,309 | |
| LIABILITIES | ||||
| Non-current liabilities | ||||
| Non-current financial liabilities | 17 | 3,751 | 3,931 | 3,989 |
| Employee benefits | 18 | 336 | 369 | 360 |
| Provisions for risks, charges and liabilities for landfills | 19 | 525 | 498 | 568 |
| Other non-current liabilities | 20 | 351 | 364 | 349 |
| Total non-current liabilities | 4,963 | 5,162 | 5,266 | |
| Current liabilities | ||||
| Trade payables | 21 | 1,001 | 1,254 | 1,145 |
| Other current liabilities | 21 | 471 | 611 | 739 |
| Current financial liabilities | 22 | 93 | 125 | 128 |
| Tax liabilities | 23 | 41 | 2 | 3 |
| Total current liabilities | 1,606 | 1,992 | 2,015 | |
| Total liabilities | 6,569 | 7,154 | 7,281 | |
| LIABILITIES DIRECTLY ASSOCIATED WITH NON-CURRENT ASSETS HELD FOR SALE |
- | - | - | |
| TOTAL EQUITY AND LIABILITIES | 9,812 | 10,333 | 10,590 |
| Millions of euro | Note | 01 01 2015 06 30 2015 |
01 01 2014 06 30 2014 |
01 01 2014 12 31 2014 |
|---|---|---|---|---|
| Revenues | ||||
| Revenues from the sale of goods and services | 2,377 | 2,475 | 4,761 | |
| Other operating income | 90 | 107 | 223 | |
| Total revenues | 25 | 2,467 | 2,582 | 4,984 |
| Operating expenses | ||||
| Expenses for raw materials and services | 1,466 | 1,594 | 3,049 | |
| Other operating expenses | 125 | 107 | 262 | |
| Total operating expenses | 26 | 1,591 | 1,701 | 3,311 |
| Labour costs | 27 | 314 | 330 | 649 |
| Gross operating income - EBITDA | 28 | 562 | 551 | 1,024 |
| Depreciation, amortization, provisions and write-downs | 29 | 248 | 249 | 662 |
| Net operating income - EBIT | 30 | 314 | 302 | 362 |
| Result from non-recurring transactions | 31 | (1) | - | 9 |
| Financial balance | ||||
| Financial income | 11 | 12 | 32 | |
| Financial expense | 88 | 113 | 197 | |
| Affiliates | 3 | 5 | (45) | |
| Result from disposal of other shareholdings (AFS) | - | - | - | |
| Total financial balance | 32 | (74) | (96) | (210) |
| Result before taxes | 239 | 206 | 161 | |
| Income taxes | 33 | 77 | 101 | 179 |
| Result after taxes from operating activities | 162 | 105 | (18) | |
| Net result from discontinued operations | - | - | - | |
| Net result | 162 | 105 | (18) | |
| Minorities | (10) | (8) | (19) | |
| Group result of the period | 34 | 152 | 97 | (37) |
(1) As required by Consob Resolution no. 17221 of March 12, 2010 the effects of related party transactions on the consolidated financial statements are provided in the financial statements in section 0.2 and commented upon in Note 36.
The effects of significant non-recurring events and transactions on the consolidated financial statements are presented in Note 37 as required by Consob Communication no. DEM/6064293 of July 28, 2006.
For details of the Result per share reference shall be made to the specific Note 35 "Earnings per share".
| Millions of euro | 06 30 2015 | 06 30 2014 | 12 31 2014 |
|---|---|---|---|
| Net result of the year (A) | - | - | (18) |
| Net result of the period (A) | 162 | 105 | - |
| Actuarial gains/(losses) on Employee's Benefits booked in the Net equity | 22 | (22) | (37) |
| Tax effect of other actuarial gains/(losses) | (4) | 7 | 7 |
| Total actuarial gains/(losses) net of the tax effect (B) | 18 | (15) | (30) |
| Effective part of gains/(losses) on cash flow hedge | 30 | (39) | (37) |
| Tax effect of other gains/(losses) | (9) | 14 | 9 |
| Total other gains/(losses) net of the tax effect of companies consolidated on a line-by-line basis (C) |
21 | (25) | (28) |
| Other gains/(losses) of companies valued at equity net of the tax effect (D) | - | - | - |
| Total comprehensive result (A) + (B) + (C) + (D) | 201 | 65 | (76) |
| Total comprehensive result attributable to: | |||
| Shareholders of the parent company | 191 | 57 | (95) |
| Minority interests | 10 | 8 | 19 |
47
With the exception of the actuarial effects on employee benefits recognized in equity, the other effects stated above will be reclassified to profit or loss in subsequent years.
| Millions of euro | 06 30 2015 | 12 31 2014 | 06 30 2014 |
|---|---|---|---|
| CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE PERIOD/YEAR |
544 | 376 | 376 |
| Operating activities | |||
| Net Result (**) | 162 | (30) | 105 |
| Tangible assets depreciation | 168 | 385 | 200 |
| Intangible assets amortization | 31 | 61 | 29 |
| Fixed assets write-downs/disposals | 2 | 169 | 1 |
| Result from affiliates | (3) | 45 | (5) |
| Net taxes paid (a) Gross change in assets and liabilities (b) |
(8) 9 |
(133) 443 |
(57) 257 |
| Total change of assets and liabilities (a+b) (*) | 1 | 310 | 200 |
| Cash flow from operating activities | 361 | 940 | 530 |
| Investment activities | |||
| Investments in tangible assets | (102) | (237) | (93) |
| Investments in intangible assets and goodwill | (31) | (70) | (31) |
| Investments in shareholdings and securities (*) | (2) | - | - |
| Disposal of fixed assets and shareholdings | - | - | - |
| Dividends received | 1 | 4 | 1 |
| Cash flow from investment activities | (134) | (303) | (123) |
(*) 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.
Consolidated cash-flow statement
| Millions of euro | 06 30 2015 | 12 31 2014 | 06 30 2014 |
|---|---|---|---|
| Free cash flow | 227 | 637 | 407 |
| Financing activities | |||
| Change in financial assets (*) | (35) | (46) | (34) |
| Change in financial liabilities (*) | (142) | (195) | (224) |
| Net financial interests paid | (66) | (122) | (46) |
| Dividends paid by the parent company | (113) | (102) | (102) |
| Dividends paid by the subsidiaries | (5) | (4) | (1) |
| Cash flow from financing activities | (361) | (469) | (407) |
| CHANGE IN CASH AND CASH EQUIVALENTS | (134) | 168 | - |
| CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD/YEAR | 410 | 544 | 376 |
| Description | Share | Treasury | Cash Flow | |
|---|---|---|---|---|
| Millions of euro | Capital | Shares | Hedge | |
| Note 12 | Note 13 | Note 14 | ||
| Net equity at 12.31.2013 | 1,629 | (61) | (21) | |
| Changes of the first half of 2014 | ||||
| 2013 result allocation | ||||
| Distribution of dividends | ||||
| IAS 19 reserve (*) | ||||
| IAS 32 and IAS 39 reserves (*) | (25) | |||
| Other changes | ||||
| Group and minorities result of the period | ||||
| Net equity at 06.30.2014 | 1,629 | (61) | (46) | |
| Changes of the second half of 2014 | ||||
| Distribution of dividends | ||||
| IAS 19 reserve (*) | ||||
| IAS 32 and IAS 39 reserves (*) | (5) | |||
| Put option on Edipower S.p.A. shares | ||||
| Other changes | ||||
| Group and minorities result of the period | ||||
| Net equity at 12.31.2014 | 1,629 | (61) | (51) | |
| Changes of the first half of 2015 | ||||
| 2014 result allocation | ||||
| Distribution of dividends | ||||
| IAS 19 reserve (*) | ||||
| IAS 32 and IAS 39 reserves (*) | 21 | |||
| Put option on Aspem S.p.A. shares | ||||
| Other changes | ||||
| Group and minorities result of the period | ||||
| Net equity at 06.30.2015 | 1,629 | (61) | (30) | |
(*) These form part of the statement of comprehensive income.
Statement of changes in Group equity
| Total Net shareholders' equity |
Minority interests |
Total Equity pertaining to the Group |
Result of the period/year |
Other Reserves and retained earnings |
|---|---|---|---|---|
| Note 16 | Note 15 | Note 14 | ||
| 3,348 | 557 | 2,791 | 62 | 1,182 |
| (62) | 62 | |||
| (102) | (102) | (102) | ||
| (15) | (15) | (15) | ||
| (25) | (25) | |||
| (2) | 1 | (3) | (3) | |
| 105 | 8 | 97 | 97 | |
| 3,309 | 566 | 2,743 | 97 | 1,124 |
| (4) | (4) | |||
| (15) | (15) | (15) | ||
| (5) | (5) | |||
| (1) | (1) | (1) | ||
| 18 | 27 | (9) | (9) | |
| (123) | 11 | (134) | (134) | |
| 3,179 | 600 | 2,579 | (37) | 1,099 |
| 37 | (37) | |||
| (118) | (5) | (113) | (113) | |
| 18 | 18 | 18 | ||
| 21 | 21 | |||
| 1 | 1 | |||
| (20) | (20) | |||
| 162 | 10 | 152 | 152 | |
| 3,243 | 586 | 2,657 | 152 | 967 |
pursuant to Consob Resolution no. 17221 of March 12, 2010
| Millions of euro | 06 30 2015 | of which Related Parties (note 36) |
12 31 2014 | of which Related Parties (note 36) |
06 30 2014 | of which Related Parties (note 36) |
|---|---|---|---|---|---|---|
| NON-CURRENT ASSETS | ||||||
| Tangible assets | 5,561 | 5,625 | 5,828 | |||
| Intangible assets | 1,303 | 1,318 | 1,306 | |||
| Shareholdings carried according to equity method | 74 | 74 | 74 | 74 | 191 | 191 |
| Other non-current financial assets | 70 | 5 | 65 | 7 | 51 | 4 |
| Deferred tax assets | 302 | 323 | 359 | |||
| Other non-current assets | 40 | 43 | 62 | |||
| TOTAL NON-CURRENT ASSETS | 7,350 | 7,448 | 7,797 | |||
| CURRENT ASSETS | ||||||
| Inventories | 207 | 284 | 285 | |||
| Trade receivables | 1,400 | 93 | 1,591 | 119 | 1,651 | 134 |
| Other current assets | 233 | 255 | 305 | |||
| Current financial assets | 150 | 2 | 126 | 126 | ||
| Current tax assets | 62 | 85 | 50 | |||
| Cash and cash equivalents | 410 | 544 | 376 | |||
| TOTAL CURRENT ASSETS | 2,462 | 2,885 | 2,793 | |||
| NON-CURRENT ASSETS HELD FOR SALE | - | - | - | |||
| TOTAL ASSETS | 9,812 | 10,333 | 10,590 |
Balance sheet pursuant to Consob Resolution no. 17221 of March 12, 2010
| Millions of euro | 06 30 2015 | of which Related Parties (note 36) |
12 31 2014 | of which Related Parties (note 36) |
06 30 2014 | of which Related Parties (note 36) |
|---|---|---|---|---|---|---|
| EQUITY | ||||||
| Share capital | 1,629 | 1,629 | 1,629 | |||
| (Treasury shares) | (61) | (61) | (61) | |||
| Reserves | 937 | 1,048 | 1,078 | |||
| Result of the year | - | (37) | - | |||
| Result of the period | 152 | - | 97 | |||
| Equity pertaining to the Group | 2,657 | 2,579 | 2,743 | |||
| Minority interests | 586 | 600 | 566 | |||
| Total equity | 3,243 | 3,179 | 3,309 | |||
| LIABILITIES | ||||||
| NON-CURRENT LIABILITIES | ||||||
| Non-current financial liabilities | 3,751 | 3,931 | 3,989 | |||
| Employee benefits | 336 | 369 | 360 | |||
| Provisions for risks, charges and liabilities for landfills | 525 | 498 | 2 | 568 | 1 | |
| Other non-current liabilities | 351 | 364 | 349 | |||
| Total non-current liabilities | 4,963 | 5,162 | 5,266 | |||
| CURRENT LIABILITIES | ||||||
| Trade payables | 1,001 | 19 | 1,254 | 34 | 1,145 | 32 |
| Other current liabilities | 471 | 9 | 611 | 8 | 739 | 8 |
| Current financial liabilities | 93 | 125 | 3 | 128 | 4 | |
| Tax liabilities | 41 | 2 | 3 | |||
| Total current liabilities | 1,606 | 1,992 | 2,015 | |||
| Total liabilities | 6,569 | 7,154 | 7,281 | |||
| LIABILITIES DIRECTLY ASSOCIATED WITH NON-CURRENT ASSETS HELD FOR SALE |
- | - | - | |||
| TOTAL EQUITY AND LIABILITIES | 9,812 | 10,333 | 10,590 |
Half-yearly financial report at June 30, 2015
pursuant to Consob Resolution no. 17221 of March 12, 2010
| Millions of euro | 01 01 2015 06 30 2015 |
of which Related Parties (note 36) |
01 01 2014 06 30 2014 |
of which Related Parties (note 36) |
01 01 2014 12 31 2014 |
of which Related Parties (note 36) |
|---|---|---|---|---|---|---|
| Revenues | ||||||
| Revenues from the sale of goods and services | 2,377 | 192 | 2,475 | 223 | 4,761 | 429 |
| Other operating income | 90 | 107 | 223 | |||
| Total revenues | 2,467 | 2,582 | 4,984 | |||
| Operating expenses | ||||||
| Expenses for raw materials and services | 1,466 | 20 | 1,594 | 12 | 3,049 | 19 |
| Other operating expenses | 125 | 107 | 20 | 262 | 41 | |
| Total operating expenses | 1,591 | 1,701 | 3,311 | |||
| Labour costs | 314 | 1 | 330 | 649 | 2 | |
| Gross operating income - EBITDA | 562 | 551 | 1,024 | |||
| Depreciation, amortization, provisions and write-downs |
248 | 249 | 1 | 662 | 1 | |
| Net operating income - EBIT | 314 | 302 | 362 | |||
| Result from non-recurring transactions | (1) | - | 9 | |||
| Financial balance | ||||||
| Financial income | 11 | 3 | 12 | 3 | 32 | 3 |
| Financial expense | 88 | 113 | 197 | |||
| Affiliates | 3 | 3 | 5 | 5 | (45) | (45) |
| Result from disposal of other shareholdings (AFS) | - | - | - | |||
| Total financial balance | (74) | (96) | (210) | |||
| Result before taxes | 239 | 206 | 161 | |||
| Income taxes | 77 | 101 | 179 | |||
| Result after taxes from operating activities | 162 | 105 | (18) | |||
| Net result from discontinued operations | - | - | - | |||
| Net result | 162 | 105 | (18) | |||
| Minorities | (10) | (8) | (19) | |||
| Group result of the period | 152 | 97 | (37) |
Notes to the Half-yearly financial report
A2A S.p.A. is a company incorporated under Italian law.
A2A S.p.A. and its subsidiaries (the "Group") operate both in Italy and abroad. In particular, abroad, the A2A Group is present in Montenegro following the acquisition of the shareholding in the company EPCG which took place in 2009.
The A2A Group mainly operates in the following sectors:
sale and distribution of gas;
production, distribution and sale of heat through district heating networks;
57
The Half-yearly financial report (in the following the "Half-yearly report") of the A2A Group at June 30, 2015 is presented in millions of euro; the euro is also the functional currency of the economies in which the Group operates.
The Half-yearly report of the A2A Group at June 30, 2015 has been prepared:
In preparing the Half-yearly report, the same principles used in the preparation of the annual financial report at December 31, 2014 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, 2015.
This Half-yearly report at June 30, 2015 was approved on July 30, 2015 by the Board of Directors, which authorized publication.
The Group has adopted a format for the balance sheet which presents current and noncurrent assets and current and non-current liabilities as separate classifications, as required by paragraph 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.
58
The specific line items "Result from non-recurring transactions" and "Result from disposal of other shareholdings (AFS)" 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. The line 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 noncurrent 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 expenses. 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 consolidated financial statements at December 31, 2014.
The Half-year financial report at June 30, 2015 has been prepared on a historical cost basis, with the exception of those items which under IFRS must or can be measured at fair value.
The consolidation principles, the accounting principles, the accounting policies and the methods of measurement used in the preparation of the Half-year report are consistent with those used to prepare the annual consolidated financial statements at December 31, 2014, except as specified below.
The accounting principles adopted in the first half of 2015 are the same as those used in the prior year, with the exception of those discussed below in the paragraph "Accounting principles, amendments and interpretations applied by the Group from the current year".
A summary is provided in the following paragraph "Accounting principles, amendments and interpretations not yet adopted by the European Union" of the changes that will be adopted in future periods, stating the expected effects on the A2A Group's Half-year report to the extent this is possible.
As from January 1, 2015, some additions have been applied following specific paragraphs of the international accounting standards already adopted by the Group in previous years, none of which had an effect on the Group's financial statements.
The main changes are described in the following:
a) IFRS 2 "Share-based Payment": the amendment clarifies the definition of "vesting condition" by separately defining a "performance condition" and a "service condition";
b) IFRS 3 "Business Combinations": the amendment clarifies that the obligation to pay consideration in a business combination that meets the classification requirements for a financial instrument is classified in the financial statements as a financial liability on the basis of IAS 32 "Financial Instruments: Presentation" and measured at fair value through the income statement. The amendment also clarifies that the standard is not applicable to the joint ventures and joint arrangements regulated by IFRS 11;
e) IAS 16 "Property, Plant and Equipment" and IAS 38 "Intangible Assets": both standards are amended to clarify how recoverable amounts and useful lives are treated when an entity carries out a revaluation;
f) IAS 24 "Related Party Disclosures": the standard is amended in order to include an entity providing key management personnel services as a related party (so-called management company);
The following standards, amendments and interpretations have not been applied, since at the present time the competent bodies of the European Union have still to complete their adoption process:
• IFRS 9 "Financial instruments": this standard is the first of a multi-phase project which is designed to replace IAS 39 "Financial instruments: recognition and measurement" and to introduce 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.
62
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. The amendment in question is applicable from January 1, 2018;
(iv) it is probable that the consideration to which the entity is entitled to in exchange for the goods or services will be collected.
The new standard, which will replace IAS 18 "Revenues" and IAS 11 "Construction Contracts", is applicable from January 1, 2018;
64
(iv) IAS 34 "Interim financial reporting".
Regarding the first point, the amendment clarifies that the restatement of the financial statement figures shall not be resort to if an asset or group of assets available for sale is reclassified as "held for distribution", or vice versa.
With reference to IFRS 7, the amendment provides that if an entity transfers a financial asset on terms which allow the "derecognition" of the asset, it shall be required to provide information regarding the involvement of the entity in the transferred asset, if it has signed service contracts that show an entity's interest in the future performance of the financial assets transferred.
The proposed amendment to IAS 19 clarifies that in determining the discount rate of obligations arising following the termination of employment, the currency in which the obligations are denominated is relevant rather than the State in which they arise.
The proposed amendment to IAS 34 requires disclosure of cross-references between the
data reported in the interim financial statements and the information associated with them;
The Half-yearly report of the A2A Group at June 30, 2015 includes the figures of the parent A2A S.p.A. and those of the subsidiaries over which A2A S.p.A. exercises either direct or indirect control, even if the holding is less than 50%. In addition, companies in which the parent exercises joint control with other entities (joint ventures) and those over which it has a significant influence are consolidated using the equity method.
It is noted that following the acquisition in April 2015 of the remaining 50% of the share capital of the company Bellisolina S.r.l., the latter, previously consolidated with the equity method, at June 30, 2015 is 100% controlled by A2A Ambiente S.p.A. and is therefore fully consolidated.
Following the acquisition of the additional 50% of the share capital of the company Bergamo Servizi S.r.l., the latter, previously valued using the equity method, at June 30, 2015, is 100% controlled by Aprica S.p.A. and fully consolidated.
In the first half of 2015, the acquisition was finally completed of an additional 30% of the share capital the SED S.r.l. by 2A Ambiente S.p.A. At June 30, 2015, SED S.r.l. is 80% controlled by A2A Ambiente S.p.A. and is therefore consolidated on a line-by-line basis.
Subsidiaries are those companies over which the parent company, A2A S.p.A., exercises control and has the power, as defined by IFRS 10, to determine financial and operating policy, either directly or indirectly, in order to obtain returns from their activities. Subsidiaries are consolidated from the date on which the Group effectively acquires control and cease to be consolidated on a line-by-line basis from the date on which control is transferred to a company outside the Group.
67
Investments in associates, namely those in which the A2A Group has a considerable interest and is able to exercise significant influence are accounted for using the equity method. Gains and losses attributable to the Group are recognized in the financial statements from the date on which significant influence or joint control commences.
In the event that the loss attributable to the Group exceeds the carrying amount of an investment, the carrying amount is reduced to zero and any excess loss is provided for to the extent that the Group has legal or constructive obligations to make good the associate's losses or in any case to make payments on its behalf.
With the adoption of IFRS 11, the Group must now classify investments in joint arrangements as either joint ventures (if the Group has rights to the net assets of the arrangement) or joint operations (if the Group has rights to the assets, and obligations for the liabilities, relating to the arrangement).
The Group's investments in joint ventures as defined by IFRS 11 are accounted for using the equity method, whereas for joint operations the standard requires that the Group recognize its portion of the assets, liabilities, revenues and expenses, rather than account for the investments using the equity method.
The A2A Group is not a party to any joint operations and accordingly the adoption of the new standard had no effect on the Half-yearly report at June 30, 2015.
If the A2A Group holds call options on shares or other equity instruments that represent capital (warrants) that are convertible into ordinary shares or similar instruments having the potential, if exercised or converted, to give the Group voting rights or reduce the voting rights of third parties ("potential voting rights"), such potential voting rights are taken into consideration when assessing whether or not the Group has the power to govern or influence another company's financial and operating policies.
The Group has granted put options to minority shareholders which entitle them to require the A2A Group to purchase the shares they own at a future date.
Paragraph 23 of IAS 32 states that a contract that contains an obligation for an entity to purchase shares for cash or another financial asset gives rise to a financial liability for the present value of the exercise price of the option.
As a result, therefore, if the Group does not have the unconditional right to avoid the delivery of cash or other financial instruments when a put option on the shares of subsidiaries is exercised, it must recognize a liability.
In the absence of specific instructions in the related accounting standards, the A2A Group: (i) considers the shares involving put options to have already been purchased, including in cases in which the risks and rewards connected with ownership of the shares remain with the minority shareholders and they remain exposed to equity risk; (ii) records a corresponding entry among equity reserves for the liability resulting from the obligation and any subsequent changes that are not related to the mere unwinding of the present value of the strike price; (iii) and recognises such changes through the Income Statement.
The financial statements of the subsidiaries, associates and joint ventures consolidated by the A2A Group are prepared at the end of each reporting period using the same accounting policies as the parent. Any items recognized by using different accounting principles are adjusted during the consolidation process to bring them into line with Group accounting policies. All intragroup balances and transactions, including any unrealized profits arising from transactions between Group companies, are fully eliminated.
In preparing the Half-yearly report the assets, liabilities, income and expenses of the companies being consolidated are included in their entirety on a line-by-line basis, with the portion of equity and net income for the period attributable to minority interests being stated separately in the balance sheet and income statement.
The carrying amount of the investment in each subsidiary is eliminated against the corresponding share of its net equity, including any adjustments to fair value at the acquisition date; any differences arising are accounted for in accordance with IFRS 3.
Transactions with minority interests which do not lead to the loss of control in consolidated companies are accounted for using the economic entity view approach.
With effect from January 1, 2014 the A2A Group has among other things adopted international accounting standard IFRS 12 "Disclosure of Interests in Other Entities", issued by the IASB in 2011 and adopted by the European Commission on December 11, 2012.
On the basis of the requirements of paragraphs 7 and following of the standard the Group discloses information below about the significant judgments and assumptions it has made in determining:
70
The A2A Group has established that the requirements of IFRS 10 exist for the consolidation of the shareholding in the Montenegro company EPCG whose business is the production, distribution and sale of electricity.
More specifically, the Group consolidates EPCG, in whose share capital it has an interest of 41.75%, on a line-by-line basis.
Although the parent company does not holding the majority of the votes that may be exercised at a shareholders' meeting, the company is considered to be a subsidiary because by being able to appoint the CEO and CFO, the parent has de facto control, applying in practice the provisions of the purchase agreement, namely it is able to manage the company from a effective standpoint.
The adoption of IFRS 10 (superseding IAS 27 on the subject of consolidated financial statements) has had no effect on the way in which the shareholding in EPCG is consolidated, since A2A S.p.A. has 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".
IFRS 11 identifies two types of arrangement, joint operations and joint ventures, on the basis of the rights and obligations of the parties, and governs the resulting accounting treatment to be adopted for the recognition of these arrangements in the financial statements.
The most significant effect of the new standard is the fact that a number of entities jointly controlled by A2A, which up until now have been recognized using the equity method, could fall under the definition of joint operations on the basis of the requirements of IFRS 11. The accounting treatment for this type of joint arrangement requires the assets/liabilities and revenue/expenses connected with the arrangement to recognized on the basis of the rights/ obligations due to/assumed by A2A, regardless of the interest held.
In the particular case of its shareholdings in two joint arrangements operating in the Generation and Trading Business Unit, Ergosud S.p.A. and PremiumGas S.p.A., the A2A Group considers that these fall under the category joint ventures as far as their legal form and the nature of the contractual agreements are concerned.
More specifically, for the shareholding in PremiumGas S.p.A. the Group holds rights exclusively connected with the company's results; the company's activities are not directed solely towards the sale of gas to Group companies, thereby ensuring its continuity independent of its commercial relationships with the Group.
For the shareholding in Ergosud S.p.A., despite the existence of a tolling agreement the investee could dispatch energy autonomously, thereby ensuring business continuity also at the end of the agreement. In addition, the Group does not appoint any of the company's key management.
On the basis of the above considerations, the A2A Group has accounted for the shareholdings using the equity method, continuing the treatment used in previous years.
In the case of particularly large amounts and in connection with non-current assets and liabilities held for sale, and only in this case, in accordance with IFRS 5 the relative intragroup financial receivables and payables are not eliminated in order to provide a clear presentation of the financial impact of a possible disposal.
71
On May 24, 2012, A2A S.p.A., the other shareholders of Edipower S.p.A. (formerly Delmi S.p.A.) and Iren Energia S.p.A. (terminated its shareholding of Edipower S.p.A. on November 1, 2013) signed a Framework Agreement concerning the governance of Edipower S.p.A. and its operating model. This Framework Agreement has a duration of 5 years and renews automatically unless expressly terminated.
The Framework Agreement also includes provisions regarding the circulation of Edipower S.p.A. shares (lock-up, pre-emption, acceptance, right to joint sale and right to purchase clauses) and divestment from Edipower S.p.A..
On this final point, beginning on the date of the third anniversary of the merger the parties in the Framework Agreement are required to meet to verify, in good faith, if the necessary conditions exist for listing the shares in Edipower S.p.A., including by way of mergers with Half-yearly financial report at June 30, 2015 Consolidation policies and procedures
other listed companies. In the event of a listing, the financial shareholders of Edipower S.p.A., namely Mediobanca, Fondazione CRT and BPM, shall be entitled to place their own equity investments on the market with priority over the other parties to the framework agreement.
Should the company not be listed within 48 months of the effective date of the Delmi/ Edipower merger, Mediobanca, Fondazione CRT and BPM shall each have the right to liquidate their entire equity interest in Edipower S.p.A. in exchange for payment of the fair value of said investment, to be paid in kind by assignment of a business unit to be selected by the board of directors of Edipower S.p.A. Should this procedure not be completed for any reason within 50 months of the date of the merger, Mediobanca, Fondazione CRT and BPM shall each have a put option at fair value on their holding which can be exercised with the other shareholders of Edipower S.p.A. subsequent to the merger, in proportion to the equity interest each shareholder owns in Edipower S.p.A. In this respect, as the result of the non-proportional demerger of Edipower S.p.A. effective from November 1, 2013, Iren S.p.A. and Iren Energia S.p.A. are no longer shareholders of Edipower S.p.A..
The signing of the Framework Agreement and the consequent rights granted to the financial shareholders (Mediobanca, Fondazione CRT and BPM) have been considered as put options on non-controlling interests and have been accounted for as described in paragraph 23 of IAS 32. The standard in question states that a contract that contains an obligation for an entity to purchase its own equity instruments for cash or another financial asset gives rise to a financial liability for the present value of the exercise price of the option.
72
The A2A Group therefore considers the shares involved in the put options to have already been purchased, even though the other shareholders maintain the risks and benefits connected with ownership of the shares and they continue to be exposed to the related equity risk, and has recognized the liability resulting from this obligation. Any subsequent changes in the liability that are not related to the mere unwinding of the present value of the exercise price will be recognized in Group equity.
On May 24, 2012, A2A S.p.A. signed an option agreement with Società Elettrica Altoatesina S.p.A. (SEL) concerning a portion of the shares held in Edipower S.p.A. following the merger of Delmi S.p.A. in Edipower S.p.A.; this merger became effective on January 1, 2013, based on the deed signed on December 18, 2012.
Following the merger SEL S.p.A. held a 6.75% equity interest in Edipower S.p.A. After the nonproportional partial demerger of Edipower S.p.A. in favor of Iren Energia S.p.A. this interest has risen to 8.5%.
Half-yearly financial report at June 30, 2015 Consolidation policies and procedures
The option agreement states that SEL S.p.A. has a put option (the right to sell) and A2A S.p.A. has a call option (the right to buy) on the shares held by SEL S.p.A. in Edipower S.p.A..
SEL S.p.A. may exercise its put option during the three-month period prior to May 24, 2017, and A2A S.p.A. may exercise its call option during that three-month period after May 24, 2017. The exercise price of these options is made up of a fixed portion and a variable portion to be based on the fair value of the shares involved in the options at the exercise date.
The signing of the option agreement and the consequent granting of rights to SEL S.p.A. have been considered to be a put option on a non-controlling interest and have been recognized for accounting purposes as described above.
* * *
As a result of the agreements described under points a) and b) above, the Half-yearly report at June 30, 2015 includes a liability to SEL S.p.A. and the financial shareholders of Edipower S.p.A. for the potential exercising of the put options on Edipower S.p.A. shares totalling approximately 235 million euro recorded under "Other non-current liabilities". On the initial recognition of the put option at a carrying amount of 284 million the counter-entry was recorded as a minority interest in equity. Subsequent changes have been recorded with a counter-entry to equity pertaining to the Group. The change in value of the put option due to the passage of time has been recognized in the income statement.
73
* * *
As part of the initiatives undertaken by the A2A Group to achieve the strategic objectives in the business plan, A2A, Società Elettrica Altoatesina (SEL) and the financial shareholders of Edipower (Mediobanca, Fondazione CRT and BPM) signed on June 23, 2015 a non-binding term sheet summarizing the main terms and conditions under which the parties will assess the feasibility of a reorganization of the overall ownership structure of Edipower. Based on the ongoing discussions between the parties, it is assumable that the transaction may be carried out through a partial non-proportional asymmetrical spin-off of Edipower aimed at separating certain assets from the assets of the company; thus, at the outcome of the transaction, A2A will hold 100% of Edipower in order to allow over time a more systematic valorisation of the various assets, even through a different strategic management and a different sharing of related values. The perimeter of the assets subject of the possible spin-off is currently being defined.
The transaction will simplify and streamline the corporate structure, and if realized, will also allow better use in integrated terms of diversified portfolio of Edipower assets.
A2A S.p.A. holds 90% of the shares of Aspem S.p.A., a company that provides local public services in the city of Varese and in other towns in the province of Varese.
Under the shareholders' agreement of January 15, 2009 between A2A S.p.A. and the Municipality of Varese, at the end of a three-year period of non-transferability of the shares of Aspem S.p.A., starting from the date of the shareholders' agreement, the Municipality of Varese has the right, but not the obligation, to sell (put option) 9.8% of the share capital of Aspem S.p.A. to A2A S.p.A. The option, which was expected to expire in the second quarter of 2015, has not been exercised and therefore the Group has taken steps to undo the effects on the financial statements equal to 1 million euro, resulting from the inclusion of the above transaction in accordance with paragraph 23 of IAS 32.
On the basis of the agreement signed on April 2, 2015 with A2A S.p.A. and extended in July 2015 and the one signed in 2009 on the acquisition of the shareholding in EPCG by the Italian listed company, currently 41.75%, the Montenegro government holds a call option for the purchase of this interest which, depending on whether certain quantitative targets or specific indicators are reached, may be exercised from this year at a price which is higher than the carrying amount in the financial statements at June 30, 2015.
74
Following the purchase by Enrgeticky to Prumyslovy Holding a.s. (EPH) of the shareholding held by E.On in Ergosud S.p.A., A2A S.p.A. renounced its pre-emption rights on the shares of the subsidiary upon signing of a term sheet (on June 29, 2015). The term sheet recognizes A2A, among other things, a call option right exercisable in a time frame of 42 days from July 24, 2015 at a predetermined price. The exercise of the call, also in light of the assessments made by the company at the closing of the financial year ended December 31, 2014, is estimated by the Group management, as highly remote.
| Key figures at June 30, 2015 Millions of euro |
Subsidiary of A2A Ambiente 50% (*) |
PremiumGas 50% |
Metamer 50% figures at 03 31 2015 |
|---|---|---|---|
| INCOME STATEMENT | |||
| Sales revenues | 0.2 | - | 4.1 |
| Gross operating income | - | (0.2) | 0.5 |
| % of net revenues | (20.0%) | n.s. | 11.11% |
| Depreciation, amortization and write-downs | (0.6) | - | 0.1 |
| Net operating income | 0.7 | (0.2) | 0.4 |
| Result of the period | 0.5 | (0.2) | 0.2 |
| BALANCE SHEET | |||
| Total assets | 3.7 | 4.8 | 7.1 |
| Equity | 0.5 | 3.2 | 1.6 |
| Net (debt) | (0.1) | (0.3) | (1.4) |
(*) Bergamo Pulita S.r.l..
| Key figures at June 30, 2014 Millions of euro INCOME STATEMENT |
Subsidiaries of A2A Ambiente 50% (*) |
PremiumGas 50% |
Metamer 50% figures at 12 31 2013 |
|---|---|---|---|
| Sales revenues | 4.5 | 3.2 | 13.2 |
| Gross operating income | 0.6 | (0.3) | 1.1 |
| % of net revenues | 13.3% | (9.5%) | 8.0% |
| Depreciation, amortization and write-downs | 0.6 | - | 0.4 |
| Net operating income | - | (0.3) | 0.7 |
| Result of the period | - | (0.4) | 0.3 |
| BALANCE SHEET | |||
| Total assets | 12.0 | 5.2 | 5.4 |
| Equity | 0.8 | 2.7 | 1.5 |
| Net (debt) | (1.3) | 0.5 | 0.9 |
(*) Bellisolina S.r.l., Bergamo Pulita S.r.l. and SED S.r.l..
77
Given the nature of the Group's ordinary activities, the interim results can vary as the result of the meteorological conditions during the period.
In this respect reference should be made to the comments on performance by Business Unit presented below.
| Millions of euro | Trading | Generation and | Commercial | Environment | |||
|---|---|---|---|---|---|---|---|
| 01 01 15 06 30 15 |
01 01 14 06 30 14 |
01 01 15 06 30 15 |
01 01 14 06 30 14 |
01 01 15 06 30 15 |
01 01 14 06 30 14 |
||
| Revenues | 1,381 | 1,488 | 699 | 803 | 406 | 401 | |
| - of which inter-sector | 416 | 487 | 24 | 36 | 43 | 53 | |
| Gross operating income | 192 | 193 | 54 | 47 | 110 | 115 | |
| % of revenues | 13.9% | 13.0% | 7.7% | 5.9% | 27.1% | 28.7% | |
| Depreciation, amortization, provisions and write-downs | (82) | (121) | (8) | (7) | (32) | (40) | |
| Net operating income | 110 | 72 | 46 | 40 | 78 | 75 | |
| % of revenues | 8.0% | 4.8% | 6.6% | 5.0% | 19.2% | 18.7% | |
| Result from non-recurring transactions | |||||||
| Financial income (expense) | |||||||
| Result before taxes | |||||||
| Income taxes | |||||||
| Result after taxes from operating activities | |||||||
| Net result from discontinued operations | |||||||
| Minorities | |||||||
| Group result of the period | |||||||
| Gross investments (1) | 28 | 15 | 1 | 3 | 23 | 21 |
(1) See the items "Investments" in the schedules on tangible and intangible assets presented in Notes 1 and 2 to the balance sheet.
It should be noted that the data for the first half of 2014 and the balance sheet data at December 31, 2014 have been reallocated by "Business Unit" following the company reorganization carried out by the Management, as detailed in the section "Results sector by sector".
| Millions of euro | Generation and Trading |
Commercial | Environment | ||||
|---|---|---|---|---|---|---|---|
| 06 30 15 | 12 31 14 | 06 30 15 | 12 31 14 | 06 30 15 | 12 31 14 | ||
| Tangible assets | 2,657 | 2,711 | 2 | 2 | 428 | 433 | |
| Intangible assets | 49 | 90 | 63 | 64 | 12 | 12 | |
| Trade receivables and current financial assets | 707 | 776 | 451 | 578 | 316 | 352 | |
| Trade payables and current financial liabilities | 592 | 905 | 277 | 393 | 255 | 258 |
Half-yearly financial report at June 30, 2015
Results sector by sector
| Environment Heat and Services Networks EPCG |
Other Services and Eliminations Corporate |
Total Group |
|---|---|---|
| 01 01 15 01 01 14 01 01 15 01 01 14 01 01 15 01 01 14 01 01 15 01 01 14 06 30 15 06 30 14 06 30 15 06 30 14 06 30 15 06 30 14 06 30 15 06 30 14 |
01 01 15 01 01 14 01 01 15 01 01 14 06 30 15 06 30 14 06 30 15 06 30 14 |
01 01 15 01 01 14 06 30 15 06 30 14 |
| 406 401 146 146 351 360 118 119 |
89 95 (723) (830) |
2,467 2,582 |
| 43 53 19 22 139 143 - - |
82 89 (723) (830) |
|
| 115 47 39 136 138 32 30 |
(9) (11) |
562 551 |
| 32.2% 26.7% 38.7% 38.3% 27.1% 25.2% |
(10.1%) (11.6%) |
22.8% 21.3% |
| (16) (15) (44) (44) (17) (20) |
(49) (2) - - |
(248) (249) |
| 31 24 92 94 15 10 |
(58) (13) |
314 302 |
| 21.2% 16.4% 26.2% 26.1% 12.7% 8.4% |
(65.2%) (13.7%) |
12.7% 11.7% |
| (1) - |
||
| (74) (96) |
||
| 239 206 |
||
| (77) (101) |
||
| 162 105 |
||
| - | ||
| (10) (8) |
||
| 152 97 |
||
| 23 25 48 44 7 12 |
3 4 - - |
133 124 |
| Heat and Services | Networks | EPCG | Other Services and Corporate |
Eliminations | Total Group | |||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 06 30 15 | 12 31 14 | 06 30 15 | 12 31 14 | 06 30 15 | 12 31 14 | 06 30 15 | 12 31 14 | 06 30 15 | 12 31 14 | 06 30 15 | 12 31 14 | |
| 570 | 561 | 1,005 | 990 | 811 | 818 | 186 | 209 | (98) | (99) | 5,561 | 5,625 | |
| 33 | 34 | 1,293 | 1,290 | 3 | 3 | 52 | 54 | (202) | (229) | 1,303 | 1,318 | |
| 74 | 110 | 233 | 264 | 225 | 210 | 58 | 124 | (514) | (697) | 1,550 | 1,717 | |
| 69 | 100 | 264 | 230 | 28 | 25 | 124 | 154 | (515) | (686) | 1,094 | 1,379 |
It is noted that following the acquisition in the half year of additional shareholdings in the companies Bellisolina S.r.l., Bergamo Servizi S.r.l. and SED S.r.l., previously accounted for using the equity method, as from this Half-yearly financial report these companies are fully consolidated, as further described in the paragraph "Scope of consolidation".
| Millions of euro | Balance First con Changes during the period solidation |
||||||||
|---|---|---|---|---|---|---|---|---|---|
| at 12 31 2014 |
Bellisolina/ SED and Bergamo Servizi |
Invest./ Acquisit. |
Other changes |
Disposals and sales |
Amortiza tion and deprecia tion |
Total changes |
at 06 30 2015 |
||
| Land | 270 | 2 | (1) | (1) | 271 | ||||
| Buildings | 949 | 2 | 1 | 5 | (20) | (14) | 937 | ||
| Plant and machinery | 4,136 | 1 | 31 | 38 | (1) | (132) | (64) | 4,073 | |
| Industrial and commercial equipment | 20 | 1 | 1 | (2) | 20 | ||||
| Other assets | 52 | 6 | 3 | (7) | 2 | 54 | |||
| Landfills | 30 | (3) | (3) | (6) | 24 | ||||
| Construction in progress and advances | 109 | 56 | (46) | 10 | 119 | ||||
| Leasehold improvements | 57 | 7 | (3) | 4 | 61 | ||||
| Leased assets | 2 | 2 | |||||||
| Total | 5,625 | 5 | 102 | (2) | (1) | (168) | (69) | 5,561 | |
| of which: | |||||||||
| Historical cost | 10,089 | 11 | 102 | (2) | (6) | 94 | 10,194 | ||
| Accumulated depreciation | (4,464) | (6) | 5 | (168) | (163) | (4,633) |
"Tangible assets" amounted to 5,561 million euro at June 30, 2015 (5,625 million euro at December 31, 2014), representing a decrease, net of the first consolidation of the companies Bellisolina, SED and Bergamo Servizi, of 69 million euro.
The following changes took place during the period:
Tangible assets include "Leased assets" totalling 2 million euro, recognized in accordance with IAS 17, for which the outstanding payable to lessors at June 30, 2015 amounted to 2 million euro.
82
| Millions of euro | Balance | Changes during the period | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| at 12 31 2014 |
Invest./ Acquisit. |
Recl./Other changes |
Disposals and sales |
Amortization and depreci ation |
Total changes |
at 06 30 2015 |
||||||
| Industrial patents and industrial property rights | 34 | 2 | (7) | (5) | 29 | |||||||
| Concessions, licences, trademarks and similar rights |
766 | 25 | 2 | (1) | (23) | 3 | 769 | |||||
| Assets in progress | 15 | 4 | (2) | 2 | 17 | |||||||
| Other intangible assets | 21 | (14) | (1) | (15) | 6 | |||||||
| Goodwill | 482 | 482 | ||||||||||
| Total | 1,318 | 31 | (14) | (1) | (31) | (15) | 1,303 |
"Intangible assets" amounted to 1,303 million euro at June 30, 2015 (1,318 million euro at December 31, 2014), representing a net decrease of 15 million euro.
Applying IFRIC 12, from 2010 intangible assets also include assets in concession relating to gas distribution, the integrated water cycle and district heating plants of Varese Risorse.
The following changes took place during the period:
More specifically, investments relate to the following:
"Other intangible assets" include customer lists arising on the acquisition of customer portfolios by Group companies. These balances are being amortized on the basis of the estimated benefits expected to be obtained in future years. More specifically, the outstanding balance of 3 million euro relates to the amount paid in previous years by subsidiaries regarding a portion of the networks and customers of the city and province of Brescia and the customer portfolio of the subsidiary Aspem Energia S.r.l.
| Millions of euro | Balance at | Changes during the period | Balance at | |||
|---|---|---|---|---|---|---|
| 12 31 2014 | Invest. | Other changes |
Write downs |
Total changes |
06 30 2015 | |
| Goodwill | 482 | - | 482 | |||
| Total | 482 | - | - | - | - | 482 |
There has been no change in goodwill over the period.
"Goodwill" may be analyzed by CGU as follows at June 30, 2015:
CGU - Millions of euro
| Electricity networks | 184 |
|---|---|
| Environment | 232 |
| Gas networks | 38 |
| Gas | 7 |
| Heat - Italy | 21 |
| Total goodwill at June 30, 2015 | 482 |
Based on the information currently available, the changes (positive and negative) resulting from the "internal" and "external" indicators, lead us to conclude that there are no elements such to consider likely a material and sustained loss of value of the assets of the electricity CGU and other CGUs/shareholdings of the A2A Group. Consequently, the Group has not deemed it necessary to proceed with the Impairment Test that will be carried out at year-end.
| Millions of euro | Balance at 12 31 2014 |
Changes during the |
Balance at 06 30 2015 |
of which included in the NFP |
|
|---|---|---|---|---|---|
| period | 12 31 2014 | 06 30 2015 | |||
| Shareholdings carried according to equity method | 74 | - | 74 | - | - |
| Other non-current financial assets | 65 | 5 | 70 | 57 | 61 |
| Total shareholdings and other non-current financial assets | 139 | 5 | 144 | 57 | 61 |
"Shareholdings carried according to equity method" do not show any changes compared to December 31, 2014.
The following table sets out details of the changes:
| Shareholdings carried according to equity method - Millions of euro | ||
|---|---|---|
| Balance at December 31, 2014 | 74 | |
| Changes during the period: | ||
| - acquisitions and capital increases | ||
| - valuations at equity | 3 | |
| - write-downs | ||
| - dividends received from shareholdings in companies carried at equity | (1) | |
| - sales | ||
| - other changes | ||
| - reclassifications | (2) | |
| Total changes during the period | - | |
| Balance at June 30, 2015 | 74 |
The changes are attributable to the increase due to the valuation at equity mainly of the shareholding in ACSM-AGAM S.p.A., for 3 million euro, the decrease resulting from the collection of dividends, for 1 million euro, and the decrease of 2 million euro resulting from the reclassification of the shareholdings in SED S.r.l., Bergamo Servizi S.r.l. e Bellisolina S.r.l., of which control was acquired in the reporting period.
"Other non-current financial assets" had a balance of 70 million euro at June 30, 2015, representing an increase of 5 million euro over the figure at December 31, 2014 and mainly refer to financial receivables for deposits in the medium/long term of the subsidiary EPCG.
| Millions of euro | Balance at 12 31 2014 |
Changes during the period |
Balance at 06 30 2015 |
|---|---|---|---|
| Deferred tax assets | 323 | (21) | 302 |
"Deferred tax assets" amounted to 302 million euro (323 million euro at December 31, 2014). This item consists of the net balance of IRES and IRAP deferred tax assets and liabilities arising from changes and accruals made solely for fiscal purposes. The recoverability of "Deferred tax assets" recorded in the financial statements is considered likely, as the future plans envisage future taxable income sufficient to use the deferred tax assets.
At June 30, 2015, the amounts relative to deferred tax assets/deferred tax liabilities have been expressed as net ("offsetting") as per IAS 12 standards.
| Millions of euro | Consoli dated financial statements at 12 31 2014 |
Accruals (A) |
Utilizations (B) |
Adjustment rates (C) |
Total (A+B+C) |
IAS 39 to equity |
IAS 19 Revised to equity |
Other changes/ Reclass./ Mergers |
Consoli dated financial statements at 06 30 2015 |
|---|---|---|---|---|---|---|---|---|---|
| Detail of deferred tax assets and liabilities |
|||||||||
| Deferred tax liabilities | |||||||||
| Value differences in tangible assets | 788 | (6) | (6) | 782 | |||||
| Application of the finance lease standard (IAS 17) |
7 | - | 7 | ||||||
| Application of the financial instrument standard (IAS 39) |
- | - | - | ||||||
| Value differences for intangible assets |
(1) | - | (1) | ||||||
| Capital gains accounted for on an installment basis |
- | - | - | ||||||
| Employee leaving entitlement (TFR) | 4 | - | 4 | ||||||
| Goodwill | 93 | - | 93 | ||||||
| Other deferred tax liabilities | 64 | (15) | (15) | 49 | |||||
| Total deferred tax liabilities (A) | 955 | - | (21) | - | (21) | - | - | - | 934 |
| Deferred tax assets | |||||||||
| Taxed risk provisions | 151 | 18 | (12) | 6 | (1) | (7) | 149 | ||
| Value differences in tangible assets | 646 | 3 | (22) | (19) | 12 | 639 | |||
| Application of the financial instrument standard (IAS 39) |
31 | - | (5) | (1) | 25 | ||||
| Bad debts provision | 12 | 3 | (1) | 2 | 14 | ||||
| Grants | 14 | - | 14 | ||||||
| Goodwill | 371 | (20) | (20) | 351 | |||||
| Other deferred tax assets | 53 | 21 | (25) | (4) | (5) | 44 | |||
| Total deferred tax assets (B) | 1,278 | 45 | (80) | - | (35) | (5) | (7) | 5 | 1,236 |
| NET DEFERRED TAX ASSETS/ LIABILITIES (B-A) |
323 | 45 | (59) | - | (14) | (5) | (7) | 5 | 302 |
| Millions of euro | Balance at 12 31 2014 |
Changes during the |
Balance at 06 30 2015 |
of which included in the NFP |
|
|---|---|---|---|---|---|
| period | 12 31 2014 | 06 30 2015 | |||
| Non-current derivatives | 34 | (3) | 31 | 34 | 31 |
| Other non-current assets | 9 | - | 9 | - | - |
| Total other non-current assets | 43 | (3) | 40 | 34 | 31 |
"Other non-current assets" amounted to 40 million euro, a decrease of 3 million euro over the balance at December 31, 2014, and consist of the following:
| Millions of euro | Balance at 12 31 2014 |
Changes during the period |
Balance at 06 30 2015 |
|---|---|---|---|
| Inventories | 284 | (77) | 207 |
"Inventories" amounted to 207 million euro (284 million euro at December 31, 2014), net of the obsolescence provision, and changed as follows:
| Millions of euro | Balance at 12 31 2014 |
Changes during the period |
Balance at 06 30 2015 |
|---|---|---|---|
| Trade receivables | 1,923 | (191) | 1,732 |
| (Bad debt provision) | (332) | - | (332) |
| Total trade receivables | 1,591 | (191) | 1,400 |
"Trade receivables" amounted to 1,400 million euro at June 30, 2015 (1,591 million euro at December 31, 2014), representing a net decrease of 191 million euro. In further detail:
The Group makes spot sales of receivables on a non-recourse basis. At June 30, 2015 the receivables which had not yet fallen due, sold by the Group on a definitive basis and derecognized in accordance with the requirements of IAS 39, amounted to 134 million euro in total. These receivables amounted to 27 million euro at the date of publication of this Halfyearly report. The sales relate to trade balances. In addition, the Group has sold receivables on a with-recourse basis for 2 million euro.
The Group has no rotating factoring programs.
The "Bad debt provision" amounted to 332 million euro, unchanged over December 31, 2014. Provisions made in the period for 9 million euro are equal to utilizations.
| Millions of euro | Balance at 12 31 2014 |
Changes during the |
Balance at 06 30 2015 |
of which included in the NFP |
|
|---|---|---|---|---|---|
| period | 12 31 2014 | 06 30 2015 | |||
| Current derivatives | 51 | (41) | 10 | - | - |
| Other current assets | 204 | 19 | 223 | - | - |
| Total other current assets | 255 | (22) | 233 | - | - |
"Other current assets" had a balance of 233 million euro compared to 255 million euro at December 31, 2014, representing a decrease of 22 million euro which may be analyzed as follows:
| Millions of euro | Balance at 12 31 2014 |
Changes during the |
Balance at 06 30 2015 |
of which included in the NFP |
|
|---|---|---|---|---|---|
| period | 12 31 2014 | 06 30 2015 | |||
| Other financial assets | 126 | 22 | 148 | 126 | 148 |
| Financial assets due from related parties | - | 2 | 2 | - | 2 |
| Total current financial assets | 126 | 24 | 150 | 126 | 150 |
This item had a balance of 150 million euro (126 million euro at December 31, 2014), mainly relating to interest-bearing bank deposits.
| Millions of euro | Balance at 12 31 2014 |
Changes during the period |
Balance at 06 30 2015 |
|---|---|---|---|
| Current tax assets | 85 | (23) | 62 |
"Current tax assets" amounted to 62 million euro (85 million euro at December 31, 2014) representing a decrease of 23 million euro over the previous year-end.
| Millions of euro | Balance at 12 31 2014 |
Changes during the |
Balance at 06 30 2015 |
of which included in the NFP |
|
|---|---|---|---|---|---|
| period | 12 31 2014 | 06 30 2015 | |||
| Cash and cash equivalents | 544 | (134) | 410 | 544 | 410 |
"Cash and cash equivalents" at June 30, 2015 represent the sum of the Group's bank and postal asset balances.
Bank deposits include accrued interest although this had not yet been credited at the end of the period.
Equity, which amounted to 3,243 million euro at June 30, 2015 (3,179 million euro at December 31, 2014), is set out in the following table:
| Millions of euro | Balance at 12 31 2014 |
Changes during the period |
Balance at 06 30 2015 |
|---|---|---|---|
| Equity pertaining to the Group: | |||
| Share capital | 1,629 | - | 1,629 |
| (Treasury shares) | (61) | - | (61) |
| Reserves | 1,048 | (111) | 937 |
| Group result of the period/year | (37) | 189 | 152 |
| Total equity pertaining to the Group | 2,579 | 78 | 2,657 |
| Minority interests | 600 | (14) | 586 |
| Total equity | 3,179 | 64 | 3,243 |
The overall change in equity, an increase of 64 million euro, is due to the profit of the period of 152 million euro, the distribution of the dividend for 113 million euro, the measurements under IAS 32 and IAS 39 of cash flow hedge derivatives, changes in the IAS 19 Revised reserve - Employee benefits - and changes in minority interests.
"Share capital" amounts to 1,629 million euro and consists of 3,132,905,277 ordinary shares each of nominal value 0.52 euro.
"Treasury shares", which amounted to 61 million euro, unchanged over December 31, 2014, consist of 26,917,609 own shares held by the parent company A2A S.p.A.
Notes to the balance sheet
92
| Millions of euro | Balance at 12 31 2014 |
Changes during the period |
Balance at 06 30 2015 |
|---|---|---|---|
| Reserves | 1,048 | (111) | 937 |
| of which: | |||
| Changes in the fair value of cash flow hedge derivatives | (68) | 30 | (38) |
| Tax effect | 17 | (9) | 8 |
| Cash flow hedge reserve | (51) | 21 | (30) |
| Change in the IAS 19 Revised reserve - Employee Benefits | (82) | 22 | (60) |
| Tax effect | 20 | (4) | 16 |
| IAS 19 Revised reserve - Employee Benefits | (62) | 18 | (44) |
"Reserves", which amounted to 937 million euro (1,048 million euro at December 31, 2014), consist of the legal reserve, extraordinary reserves, and the retained earnings of subsidiaries.
This item also includes the negative cash flow hedge reserve of 30 million euro which arises from the period-end measurement of derivatives qualifying for hedge accounting.
The balance also includes negative reserves of 44 million euro arising from the adoption of IAS 19 Revised "Employee benefits" which requires actuarial profits and losses to be recognized directly in an equity reserve.
Lastly, the item also includes the effects of applying paragraph 23 of IAS 32 to the put options agreed between A2A S.p.A. and Società Elettrica Altoatesina S.p.A. (SEL) and the effects arising from the "Framework Agreement" entered into between the parent A2A S.p.A. and the financial shareholders of Edipower S.p.A. (Mediobanca, Fondazione CRT and Banca Popolare di Milano) based on the shares of Edipower S.p.A. As discussed in the section "Consolidation policies and procedures", the change between the present value of the exercise price for these put options compared to the previous year that are not related to the mere unwinding of the present value and the carrying amount of minority interests is deducted from Group equity (if positive) or added to Group equity (if negative). At June 30, 2015, the effects of the put options on Edipower S.p.A. shares did not involve any changes in the Group equity.
This item consists of the profit for the period of 152 million euro.
| Millions of euro | Balance at 12 31 2014 |
Changes during the period |
Balance at 06 30 2015 |
|---|---|---|---|
| Minority interests | 600 | (14) | 586 |
"Minority interests" amounted to 586 million euro (600 million euro at December 31, 2014) and represent the portion of capital, reserves and result pertaining to minority shareholders mainly related to third-party shareholders of EPCG.
The decrease for the period, amounted to 14 million euro, is mainly due to the reclassification to "Other current liabilities", for 20 million euro, of the portion of equity of minority shareholders of the EPCG Group in relation to the return of the share capital as approved by the Shareholders' Meeting of EPCG on June 30, 2015, as further described in the paragraph "Significant events during the period".
94
| Millions of euro | Balance at Changes 12 31 2014 during the |
Balance at 06 30 2015 |
of which included in the NFP |
||
|---|---|---|---|---|---|
| period | |||||
| Non-convertible bonds | 2,988 | 39 | 3,027 | 2,988 | 3,027 |
| Due to banks | 941 | (218) | 723 | 941 | 723 |
| Finance lease payables | 2 | (1) | 1 | 2 | 1 |
| Total non-current financial liabilities | 3,931 | (180) | 3,751 | 3,931 | 3,751 |
"Non-current financial liabilities", which amounted to 3,751 million euro (3,931 million euro at December 31, 2014), decreased by 180 million euro.
"Non-convertible bonds" regard the following:
• a ten-year bond having a nominal value of 300 million euro issued on February 25, 2015 bearing interest at a nominal fixed rate of 1.750% and having a carrying amount, measured at amortized cost, of 296 million euro.
The increase in the non-current component of the "Non-convertible bonds", amounting to 27 million euro compared to December 31, 2014 is mainly due to the partial repurchase of the bond due 2016 and the new ten-year bond issue in February 2015, the resulting changes in amortized costs and the change in the fair value hedge.
Interest of 64 million euro (52 million euro at December 31, 2014) accrued on the bonds at June 30, 2015.
Non-current "Due to banks" amounted to 723 million euro, a decrease of 218 million euro mainly related to the voluntary early repayment of the 200 million euro loan of Cassa Depositi e Prestiti carried out in June.
"Finance lease payables" amounted to 1 million euro (2 million euro at December 31, 2014).
The balance on this item amounted to 336 million euro (369 million euro at December 31, 2014) with changes as follows during the period:
| Millions of euro | Balance at 12 31 2014 |
Accruals | Utilizations | Other changes |
Balance at 06 30 2015 |
|---|---|---|---|---|---|
| Employee leaving entitlement (TFR) | 182 | 12 | (8) | (18) | 168 |
| Employee benefits | 187 | - | (5) | (14) | 168 |
| Total employee benefits | 369 | 12 | (13) | (32) | 336 |
Other changes mainly refer to the payments made to INPS and supplementary pension funds, as well as the recognition of actuarial differences.
Technical valuations were carried out on the basis of the following assumptions:
| 06 30 2015 | 12 31 2014 | |
|---|---|---|
| Discount rate (*) | from 0.35% to 1.99% | from 0.29% to 1.49% |
| Annual inflation rate | from 0.6% to 2.0% | from 0.6% to 2.0% |
(*) The discount rate used by the Group varies from company to company on the basis of the average financial term of the bond.
The discount rate used is that corresponding to Iboxx Corporate AA.
| Millions of euro | Balance at 12 31 2014 |
Provisions net of releases |
Utilizations | Other changes |
Balance at 06 30 2015 |
|---|---|---|---|---|---|
| Provisions for risks, charges and liabilities for landfills |
498 | 40 | (12) | (1) | 525 |
These provisions totalled 525 million euro at June 30, 2015 (498 million euro at the previous year end). Provisions had a net effect of 40 million euro, resulting from charges for the period of 60 million euro less the release of provisions of 20 million euro recognized in previous years for certain disputes that have been superseded. The utilizations of 12 million euro mainly refer to the use of provisions for payments made during the period.
It shall be specified that the provision includes decommissioning liabilities regarding some thermoelectric plants.
Provisions of the half year were affected by the provision subsequent to the filing of the arbitration related to compensation for damages in favour of Pessina Costruzioni in relation to the dispute for Asm Novara S.p.A.. For further information, reference shall be made to the specific paragraph in "Other information – Asm Novara S.p.A. dispute".
At June 30, 2014, this item had decreased by 13 million euro compared to the balance at the end of the previous year. "Non-current derivatives" amounted to 48 million euro and the negative change of 20 million euro compared to the previous year-end is mainly due to the fair value valuation of financial instruments at period-end. "Other non-current liabilities", which showed a balance of 303 million euro mainly relate to payables to third parties for the valorization of the put options on the shares of Edipower S.p.A., for 235 million euro, security deposits from customers for 51 million euro, as well as other non-current liabilities for 17 million euro. For further details of the options outstanding, refer to the specific paragraph "Consolidation policies and procedures".
| Millions of euro | Balance at 12 31 2014 |
Changes during the |
Balance at 06 30 2015 |
in the NFP | of which included |
|---|---|---|---|---|---|
| period | 12 31 2014 | 06 30 2015 | |||
| Advances | 5 | (2) | 3 | - | - |
| Trade payables | 1,249 | (251) | 998 | - | - |
| Total trade payables | 1,254 | (253) | 1,001 | - | - |
| Payables to social security institutions | 38 | (2) | 36 | - | - |
| Other current liabilities | 506 | (80) | 426 | - | - |
| Current derivatives | 67 | (58) | 9 | - | - |
| Total other current liabilities | 611 | (140) | 471 | - | - |
| Total trade payables and other current liabilities | 1,865 | (393) | 1,472 | - | - |
"Trade payables and other current liabilities" amounted to 1,472 million euro (1,865 million euro at December 31, 2014), representing an overall decrease of 393 million euro which arose mainly from both the decrease in "Trade payables" and the decrease in "Other current liabilities" and "Current derivatives". "Other current liabilities" mainly refer to amounts due to employees for 62 million euro at June 30, 2015 against 83 million euro at December 31, 2014, amounts due to the Electricity Sector Equalisation Fund for 70 million euro at June 30, 2015 (85 million euro at December 31, 2014), amounts due to the tax authorities for VAT, excise duties and withholding taxes that amounted to 83 million euro at June 30, 2015 against 89 million euro at December 31, 2014, amounts due to the Electricity Services Operator for tariff components for 91 million euro at June 30, 2015 (97 million euro at December 31, 2014), and 20 million euro for the reclassification from "Minority interests" of the portion that will be recognized to the minority shareholders of EPCG.
| Millions of euro | Balance at Changes 12 31 2014 during the |
Balance at 06 30 2015 |
of which included in the NFP |
||
|---|---|---|---|---|---|
| period | 12 31 2014 | 06 30 2015 | |||
| Non-convertible bonds | - | - | - | - | - |
| Due to banks | 121 | (29) | 92 | 121 | 92 |
| Finance lease payables | 1 | - | 1 | 1 | 1 |
| Financial payables to related parties | 3 | (3) | - | 3 | - |
| Total current financial liabilities | 125 | (32) | 93 | 125 | 93 |
"Current financial liabilities" amounted to 93 million euro, compared to 125 million euro at the end of the previous year.
98
| Millions of euro | Balance at 12 31 2014 |
Changes during the period |
Balance at 06 30 2015 |
|---|---|---|---|
| Tax liabilities | 2 | 39 | 41 |
"Tax liabilities" amounted to 41 million euro (2 million euro at December 31, 2014) representing an increase of 39 million euro over the previous year-end.
The following table provides details of net debt.
| Millions of euro | Notes | 06 30 2015 | 12 31 2014 |
|---|---|---|---|
| Bonds – non-current portion | 17 | 3,027 | 2,988 |
| Bank loans – non-current portion | 17 | 723 | 941 |
| Finance leases – non-current portion | 17 | 1 | 2 |
| Other non-current liabilities | 20 | 48 | 68 |
| Total medium/long-term debt | 3,799 | 3,999 | |
| Non-current financial assets – related parties | 3 | (5) | (7) |
| Financial assets – non-current portion | 3 | (56) | (50) |
| Other non-current assets | 5 | (31) | (34) |
| Total medium/long-term financial receivables | (92) | (91) | |
| Total non-current net debt | 3,707 | 3,908 | |
| Bonds – current portion | 22 | - | - |
| Bank loans – current portion | 22 | 92 | 121 |
| Finance leases – current portion | 22 | 1 | 1 |
| Current financial liabilities – related parties | 22 | - | 3 |
| Other current liabilities | 21 | - | - |
| Total short-term debt | 93 | 125 | |
| Other current financial assets | 9 | (148) | (126) |
| Current financial assets – related parties | 9 | (2) | - |
| Other current assets | 8 | - | - |
| Total short-term financial receivables | (150) | (126) | |
| Cash and cash equivalents | 11 | (410) | (544) |
| Total current net debt | (467) | (545) | |
| Net debt | 3,240 | 3,363 |
101
It is noted that following the acquisition in the half year of additional shareholdings in the companies Bellisolina S.r.l., Bergamo Servizi S.r.l. and SED S.r.l., previously accounted for using the equity method, as from this Half-yearly financial report these companies are fully consolidated, as further described in the paragraph "Scope of consolidation".
Revenues for the period totalled 2,467 million euro (2,582 million euro at June 30, 2014) and therefore decreased by 115 million euro.
Details of the more significant items are as follows:
| Revenues - Millions of euro | 06 30 2015 | 06 30 2014 |
|---|---|---|
| Revenues from the sale of goods | 1,985 | 2,092 |
| Revenues from services | 383 | 374 |
| Revenues from long-term contracts | 9 | 9 |
| Total revenues from the sale of goods and services | 2,377 | 2,475 |
| Other operating income | 90 | 107 |
| Total revenues | 2,467 | 2,582 |
"Revenues from the sale of goods and services" amounted in total to 2,377 million euro (2,475 million euro in the corresponding period of the previous year), decreasing by 98 million euro. This change is due to lower sales revenues of 107 million euro and the increase in service revenues of 9 million euro.
"Other operating income" amounted to 90 million euro, which was a decrease of 17 million euro compared to the first six months of the previous year.
The decrease in revenues was mainly due to lower volumes of electricity and gas sold to end customers, the reduction of electricity sales on the IPEX platform, as well as the trend of lower energy prices in recent years.
| Millions of euro | 06 30 2015 | 06 30 2014 |
|---|---|---|
| Sale and distribution of electricity | 1,315 | 1,422 |
| Sale and distribution of gas | 441 | 461 |
| Sale of heat | 99 | 90 |
| Sale of materials | 6 | 1 |
| Sale of water | 22 | 23 |
| Sales of emission certificates and allowances | 88 | 80 |
| Connection contributions | 14 | 15 |
| Total revenues from the sale of goods | 1,985 | 2,092 |
| Services to customers | 383 | 374 |
| Total revenues from services | 383 | 374 |
| Revenues from long-term contracts | 9 | 9 |
| Total revenues from the sale of goods and services | 2,377 | 2,475 |
| Other operating income | 90 | 107 |
| Total revenues | 2,467 | 2,582 |
Further details on the reasons for the performance of revenues relating to the various Business Units can be found in the paragraph "Result by sector".
"Operating expenses" amounted to 1,591 million euro (1,701 million euro in the corresponding period of the previous year), representing a decrease of 110 million euro.
The main components of this item are as follows:
| Operating expenses - Millions of euro | 06 30 2015 | 06 30 2014 |
|---|---|---|
| Expenses for raw materials and consumables | 1,123 | 1,218 |
| Service costs | 343 | 376 |
| Total expenses for raw materials and services | 1,466 | 1,594 |
| Other operating expenses | 125 | 107 |
| Total operating expenses | 1,591 | 1,701 |
"Total expenses for raw materials and services" amounted to 1,466 million euro (1,594 million euro at June 30, 2014), decreasing by 128 million euro.
This decrease is due to the combined effect of the following factors:
• a reduction of 111 million euro in the purchase of raw materials and consumables, due to lower costs for the purchase of power and fuel of 108 million euro, a decrease in the costs relating to the purchase of emission certificates and allowances of 3 million euro, a decrease in the water purchases of 1 million euro and an increase in water purchases of 1 million euro.
The following table sets out details of the more significant components:
| Millions of euro | 06 30 2015 | 06 30 2014 |
|---|---|---|
| Purchases of power and fuel | 1,031 | 1,139 |
| Purchases of materials | 36 | 35 |
| Purchases of water | 1 | 2 |
| Hedging losses on operating derivatives | 3 | 1 |
| Hedging gains on operating derivatives | (5) | (3) |
| Purchases of emission certificates and allowances | 30 | 33 |
| Total expenses for raw materials and consumables | 1,096 | 1,207 |
| Delivery, subcontracted work and services | 343 | 376 |
| Total service costs | 343 | 376 |
| Change in inventories of fuel and materials | 27 | 11 |
| Total expenses for raw materials and services | 1,466 | 1,594 |
| Other operating expenses | 125 | 107 |
| Total operating expenses | 1,591 | 1,701 |
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 - Millions of euro | Notes | 06 30 2015 | 06 30 2014 |
|---|---|---|---|
| Revenues | 25 | 569 | 1,072 |
| Operating expenses | 26 | (563) | (1,058) |
| Total trading margin | 6 | 14 |
Net of capitalized expenses, labour costs at June 30, 2015 amounted to 314 million euro (330 million euro at June 30, 2014). The decrease compared to the same period of the previous year, was mainly due to lower mobility costs that had been recognized to the income statement in the first half of 2014 for about 11 million euro and the decrease in the workforce that at June 30, 2015 amounted to an "average workforce" of 12,204 resources while at June 30, 2014, it amounted to 12,270 resources.
Labour costs" may be analyzed as follows:
| Labour costs - Millions of euro | 06 30 2015 | 06 30 2014 |
|---|---|---|
| Wages and salaries | 211 | 212 |
| Social security charges | 81 | 81 |
| Employee leaving entitlement (TFR) | 12 | 12 |
| Other costs | 10 | 25 |
| Total labour costs | 314 | 330 |
As a result of the above movements, consolidated "Gross operating income" at June 30, 2015 amounted to 562 million euro (551 million euro at June 30, 2014).
Further details may be found in the section "Results by sector".
"Depreciation, amortization, provisions and write-downs" totalled 248 million euro (249 million euro at June 30, 2014), representing a decrease of 1 million euro.
The following table provides details of the individual items:
| Depreciation, amortization, provisions and write-downs - Millions of euro | 06 30 2015 | 06 30 2014 |
|---|---|---|
| Amortization of intangible assets | 31 | 29 |
| Depreciation of tangible assets | 168 | 200 |
| Other write-downs of fixed assets | - | - |
| Total amortization, depreciation and write-downs | 199 | 229 |
| Provisions for risks and charges | 40 | 12 |
| Bad debt provision (receivables recognized as current assets) | 9 | 8 |
| Total depreciation, amortization, provisions and write-downs | 248 | 249 |
Half-yearly financial report at June 30, 2015 Notes to the income statement
"Depreciation and amortization" amounted to 199 million euro (229 million euro in the corresponding period of the previous year) and recorded a decrease of 30 million euro mainly deriving from lower depreciations of the tangible assets following the write-downs performed at the end of the previous year, for 17 million euro, as well as from the review of the remaining useful lives of the combined-cycle plants, carried out in 2014 for 13 million euro. Depreciation is calculated on the basis of technical and economic rates considered representative of the remaining useful life of the related tangible assets.
Regarding the recognition of the provisions of the "Growth Decree" which lays down procedures for calculating the surrender value of the water system works used to supply water under concession to hydroelectric power plants (the "wet works"), the calculation criteria (revaluation coefficients and useful lives) needed to quantify the surrender value at the end of the relative concessions have not been set yet by the relevant authorities. In the absence of a regulatory framework, the A2A Group carried out a series of simulations estimating the revaluations using ISTAT coefficients, which were found to be the only possible data objectively usable, and made its own estimates of the economic and technical lives of the assets. The results of these simulations led to a very wide variability range, confirming that it is currently impossible to make a reliable estimate of the surrender values at the end of the concessions. Nevertheless, for concessions close to expiry the net carrying amount of the wet works was significantly lower than the range of results obtained. As a result, therefore, since June 30, 2012 depreciation and amortization is no longer charged only for those concessions nearing expiry, while the same valuation methods continue to be applied to the remaining concessions.
105
"Provisions for risks" amounted to 40 million euro (12 million euro at June 30, 2014) and refer to the provisions for the period with regard to ongoing litigation, as well as pending lawsuits.
Provisions of the half year were affected by the provision following the filing of the arbitration relative to compensation for damages in favour of Pessina Costruzioni regarding the dispute over Asm Novara S.p.A.. For further information, reference shall be made to the specific paragraph in "Other information – Asm Novara S.p.A. dispute".
The "Bad debt provision" amounted to 9 million euro (8 million euro at June 30, 2014), consisting of the accrual for the period.
"Net operating income" amounted to 314 million euro (302 million euro at June 30, 2014).
The "Result from non-recurring transactions" was negative and amounted to 1 million euro related to the subsidiary EPCG (zero balance at June 30, 2014).
The "Financial balance" closed with net expense of 74 million euro (net expense of 96 million euro at June 30, 2014).
Details of the more significant items are as follows:
| Financial balance - Millions of euro | 06 30 2015 | 06 30 2014 |
|---|---|---|
| Financial income | 11 | 12 |
| Financial expenses | (88) | (113) |
| Affiliates | 3 | 5 |
| Total financial balance | (74) | (96) |
"Financial expense", which amounted to 88 million euro, decreased by 25 million euro over the balance at June 30, 2014, and may be analyzed as follows:
| Financial expense - Millions of euro | 06 30 2015 | 06 30 2014 |
|---|---|---|
| Interest on bond loans | 63 | 70 |
| Interest charged by banks | 8 | 10 |
| Interest on Cassa Depositi e Prestiti loans | 2 | 4 |
| Fair value of derivatives | (3) | 2 |
| Realized losses on derivatives | 11 | 10 |
| Decommissioning costs | 1 | 2 |
| Other financial expense | 6 | 15 |
| Total financial expense | 88 | 113 |
"Gains and losses on valuation of investments using the equity method" was positive for 3 million euro (positive for 5 million euro at June 30, 2014) and is mainly due to the valuation at equity method of the shareholding in ACSM-AGAM S.p.A.
| Income taxes - Millions of euro | 06 30 2015 | 06 30 2014 |
|---|---|---|
| Current taxes | 63 | 67 |
| Deferred tax assets | 35 | 68 |
| Deferred tax liabilities | (21) | (34) |
| Total income taxes | 77 | 101 |
"Income taxes" for the period amounted to 77 million euro (101 million euro at June 30, 2014).
As a reminder, following Ruling 10/2015 of the Constitutional Court, which declared the additional IRES of 6.50% ("Robin Hood Tax") to be unconstitutional, with effect from February 12, 2015, these financial statements do not present any effect relative to that tax, as the deferred taxes allocated to the temporary differences generated in previous years were entirely reversed in the year 2014. The Half year financial report at June 30, 2014, on the other hand, implemented the effects of the additional tax.
It should also be noted that, following the provisions of art. 1, subsection 20, of Law no. 190 of December 23, 2014 ("2015 Stability Law"), the entire labour cost relative to employees with permanent contracts shall be deducted from the IRAP for the current tax period.
107
The "Group result of the period", stated after attributing a loss of 10 million euro to minority interests (a loss of 8 million euro at June 30, 2014), amounted to a profit of 152 million euro (a profit of 97 million euro at June 30, 2014).
| 01 01 2015 06 30 2015 |
01 01 2014 06 30 2014 |
|
|---|---|---|
| Earnings (loss) per share (euro) | ||
| - basic | 0.0489 | 0.0311 |
| - basic from continuing operations | 0.0489 | 0.0311 |
| - basic from assets held for sale | - | - |
| - diluted | 0.0489 | 0.0311 |
| - diluted from continuing operations | 0.0489 | 0.0311 |
| - diluted from assets held for sale | - | - |
| Weighted average number of outstanding shares for the calculation of earnings (loss) per share |
||
| - basic | 3,105,987,497 | 3,105,987,497 |
| - diluted | 3,105,987,497 | 3,105,987,497 |
"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.
109
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 with 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. At the date of approval of this Half-yearly report, the two shareholders hold 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.
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 3, 2014, Amsa S.p.A., a subsidiary of A2A S.p.A., entered a service agreement with the Municipality of Milan covering waste management, street and green area cleaning, special services and other services upon request (such as the removal of illegally dumped waste, reclamation and snow removal) for the period from January 1, 2014, to December 31, 2016.
110
The parent company A2A S.p.A., operates like a centralized treasury for the majority of the subsidiaries.
The relationships between the companies take place through current accounts, entertained between the parent company and the subsidiaries, regulated at the Euribor three-month rate for receivables (of A2A S.p.A.) or decreased by the liabilities by an amount equal to the rate applied by the financial market.
For the financial year 2015, A2A S.p.A. and its subsidiaries have adopted the VAT procedure of the Group.
For the purpose of IRES, A2A S.p.A. joined the so-called "national consolidation" option under articles 117 to 129 of DPR 917/86 with the main subsidiaries. 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 regulated by special intercompany service contracts stipulated annually. A2A S.p.A. also provides its subsidiaries and affiliates with office spaces and operating areas, at their own sites, as well as the services related to their use, at market conditions.
In exchange for the monthly consideration, in proportion to the actual availability of the thermoelectric and hydroelectric plant, the parent company offers A2A Trading S.r.l. the electrical generation service.
Telecom services are provided by the subsidiary Selene S.p.A.
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. On June 22, 2015, the Board of Directors resolved, with the prior approval of the Risks Control Committee, the adaptation of the procedure to the traditional governance system.
111
Below are the tables with detail of the related party transactions, in accordance with the Consob Resolution no. 17221 of March 12, 2010:
| Balance sheet | Total | Of which with related parties | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Millions of euro | 06 30 2015 | Associa tes compa nies |
Affiliates compa nies |
Munici pality of Milan |
Subsidia ries Munici pality of Milan |
Munici pality of Brescia |
Subsidia ries Munici pality of Brescia |
Related indivi duals |
Total related parties |
% effect on balance sheet item |
| TOTAL ASSETS OF WHICH: |
9,812 | 71 | 12 | 76 | 1 | 13 | 1 | - | 174 | 1.8% |
| Non-current assets | 7,350 | 66 | 10 | - | - | 3 | - | - | 79 | 1.1% |
| Shareholdings | 74 | 64 | 10 | - | - | - | - | - | 74 | 100.0% |
| Other non-current financial assets |
70 | 2 | - | - | - | 3 | - | - | 5 | 7.1% |
| Current assets | 2,462 | 5 | 2 | 76 | 1 | 10 | 1 | - | 95 | 3.9% |
| Trade receivables | 1,400 | 3 | 2 | 76 | 1 | 10 | 1 | - | 93 | 6.6% |
| Current financial assets | 150 | 2 | - | - | - | - | - | - | 2 | 1.3% |
| TOTAL LIABILITIES OF WHICH: |
6,569 | 9 | 3 | 6 | - | 10 | - | - | 28 | 0.4% |
| Current liabilities | 1,606 | 9 | 3 | 6 | - | 10 | - | - | 28 | 1.7% |
| Trade payables | 1,001 | - | 3 | 6 | - | 10 | - | - | 19 | 1.9% |
| Other current liabilities | 471 | 9 | - | - | - | - | - | - | 9 | 1.9% |
Note on related party transactions
| Income statement | Total | Of which with related parties | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Millions of euro | 06 30 2015 | Associa tes compa nies |
Affiliates compa nies |
Munici pality of Milan |
Subsidia ries Munici pality of Milan |
Munici pality of Brescia |
Subsidia ries Munici pality of Brescia |
Related indivi duals |
Total related parties |
% effect on balance sheet item |
| REVENUES | 2,467 | 1 | 20 | 167 | 2 | 1 | 1 | - | 192 | 7.8% |
| Revenues from the sale of goods and services |
2,377 | 1 | 20 | 167 | 2 | 1 | 1 | - | 192 | 8.1% |
| OPERATING EXPENSES | 1,591 | - | 15 | 1 | 1 | 3 | - | - | 20 | 1.3% |
| Expenses for raw materials and services |
1,466 | - | 15 | 1 | 1 | 3 | - | - | 20 | 1.4% |
| LABOUR COSTS | 314 | - | - | - | - | - | - | 1 | 1 | 0.3% |
| FINANCIAL BALANCE | (74) | 4 | - | - | - | 2 | - | - | 6 | (8.1%) |
| Financial income | 11 | 1 | - | - | - | 2 | - | - | 3 | 27.3% |
| Affiliates | 3 | 3 | - | - | - | - | - | - | 3 | 100.0% |
The complete financial statements are included in the section "Consolidated financial statements" of this report pursuant to Consob Resolution no. 17221 of March 12, 2010.
112
* * *
With regard to the compensation paid to the corporate governance bodies, reference shall be made to the document "Remuneration Report - 2015" available on the website www.a2a.eu.
113
There were no atypical and/or unusual transactions during the period under review.
| Millions of euro | 06 30 2015 | 12 31 2014 |
|---|---|---|
| Guarantees received | 457 | 453 |
| Guarantees given | 1,402 | 1,340 |
114
Guarantees received amounted to 457 million euro (453 million euro at December 31, 2014) and include 228 million euro for sureties and security deposits issued by subcontractors to guarantee the proper execution of the work assigned and 229 million euro for sureties and security deposits received from customers to guarantee the regularity of payments.
Guarantees provided amounted to 1,402 million euro (1,340 million euro at December 31, 2014) and relate to sureties issued as security for commitments made to third parties. These guarantees have been issued by banks for 440 million euro, insurance companies for 41 million euro and the parent company A2A S.p.A., as parent company guarantee, for 921 million euro.
* * *
Group companies hold third party assets under concession, relating mainly to the integrated water cycle, amounting to 66 million euro.
Reference should be made to the specific section of this Half-yearly financial report for a description of subsequent events.
At June 30, 2015, A2A S.p.A. held 26,917,609 treasury shares, being 0.859% of share capital which consists of 3,132,905,277 shares, unchanged from the end of the previous year. At June 30, 2015, no treasury shares were held through subsidiaries, finance companies or nominees.
115
In the first half of 2015, the Group has improved the transactions concerning the acquisition of additional shares that led to: 100% shareholding in the share capital of Bergamo Servizi S.r.l. and Bellisolina S.r.l., and 80% shareholding in the share capital of SED S.r.l.; these transactions are classified as business combinations in accordance with international accounting standard IFRS 3 Revised "Business Combinations".
IFRS 3 Revised requires all business combinations to be accounted for using the acquisition method. The acquirer must therefore recognize all the identifiable assets, liabilities and contingent liabilities relating to the acquisition at their fair values at the acquisition date and also recognize any goodwill, which instead of being amortized is subsequently submitted to impairment testing.
In particular, IFRS 3 Revised contains the following definitions:
• a "business combination" is a transaction in which a single entity (the acquirer) obtains control of one or more distinct entities or businesses (the acquisition);
In the second quarter of 2015, A2A Ambiente S.p.A., company controlled 100% by A2A S.p.A., acquired the additional 50% in Bellisolina S.r.l., thus bringing the shareholding in the company to 100%, acquired 30% in the share capital of SED S.r.l., bringing the shareholding in the company to 80%.
Also in the second quarter of 2015, Aprica S.p.A., a company controlled 100% by A2A Ambiente S.p.A., acquired the remaining 50% of the share capital of Bergamo Servizi S.r.l., thus bringing the shareholding in the company to 100%.
As this was a business combination, the Group fully consolidated the company, using the acquisition method required by IFRS 3, from the second quarter of 2015.
The application of the acquisition method led to the recognition of the assets and liabilities acquired at fair value, based on the agreement between the parties.
The accounting resulted in a purchase price allocation process, which led to the allocation of a higher value of 0.1 million euro on the asset of SED S.r.l. and a higher value of 0.1 million euro on the asset of Bergamo Servizi S.r.l..
The items "Non-current assets held for sale" and "Liabilities directly associated with noncurrent assets held for sale" had a nil balance at June 30, 2015.
The A2A Group operates in the electricity, natural gas and district heating industry and is exposed to various financial risks in performing its activity:
Commodity price risk is the risk linked to changes in the price of energy commodities (gas, electricity, fuel oil, coal etc.) and environmental securities (EUA/ETS emission allowances, green certificates, white certificates, etc.). This consists of the potentially adverse effects that a change in the market price of one or more commodities could have on the company's cash flow and earnings prospects including the commodity exchange rate risk.
Interest rate risk is the risk of incurring additional financial costs as the result of an unfavorable change in interest rates.
117
Currency risk not related to commodities is the possibility of incurring losses because of an unfavorable 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 unfavorable change in the price of shares.
Default and covenant 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.
Half-yearly financial report at June 30, 2015 Other information
Details on the risks to which the A2A Group is exposed are provided below.
118
The Group is exposed to price risk, including the related currency risk, on all of the energy commodities that it handles, namely electricity, natural gas, heat, coal, fuel oil and environmental certificates; the results of production, purchases and sales are similarly affected by fluctuations in the prices of such energy commodities. These fluctuations act both directly and indirectly, through formulas and indexing in the pricing structure.
To stabilize cash flows and to lock in Group profits on transactions, 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 approved in June 2004 ( Basel 2) 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 Unit as part of the Planning, Finance and Control department. 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, A2A S.p.A. sets the Group's commodity risk limits; the 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.
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 (IAS) 39: 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), 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 period 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 its optimization of the portfolio of greenhouse gas emission allowances (see Directive 2003/87/EC), the A2A Group operates both on OTC markets for environmental certificates with swaps and forward contracts and on the ICE ECX (European Climate Exchange) with futures contracts. These are considered hedging transactions from an accounting point of view in the event of demonstrable surplus/deficit quotas.
The A2A Group, also as part of the optimization of the industrial portfolio, has entered into hedging contracts with leading banks on contracts for the supply of gas.
Also as part of its optimization of the industrial portfolio, contracts have been entered to hedge the fee for the use of electricity transport capacity within the areas of the IPEX market (CCC contracts).
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.
120
As part of its trading activity, the A2A Group has taken out future contracts on major European energy stock exchanges (Idex, EEX) and forward contracts on the price of electricity with delivery in Italy and neighboring countries such as France, Germany and Switzerland. The Group has also signed interconnection contracts with operators in neighboring countries, which are considered purchases of options. Futures have been stipulated on the ICE ECX market price of EUA environmental certificates, which permit delivery of the allowances at the contract price as well as cash settlement of the differential between the market price and the contract price. The Group has also taken out forward contracts on OTC markets on the price of environmental certificates that provide for the delivery of allowances at the contract price. Also as part of trading activities, forward contracts were also stipulated for the market price of gas (ICE-Endex CEGH).
PaR(1) 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 the A2A Group 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
(1) Profit at Risk: statistical measurement of the maximum potential negative deviation of the margin of an asset portfolio in case of unfavorable market changes over a given time horizon and with a defined confidence interval.
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 negative change in financial derivatives outstanding at June 30, 2015 was 27,334 million euro (18,475 million euro at December 31, 2014).
The following are the results of the simulation with the related maximum variances:
| Millions of euro | 06 30 2015 | 12 31 2014 | |||
|---|---|---|---|---|---|
| Profit at Risk (PaR) | Worst case | Best case | Worst case | Best case | |
| Confidence level 99% | (27,334) | 31,846 | (18,475) | 18,200 |
This means that with a 99% probability the A2A Group expects not to have changes in fair value exceeding 27,334 million euro in the fair value of its entire portfolio of financial instruments at June 30, 2015 due to commodity price fluctuations.
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.
121
VaR (Value at Risk)(2) is used to assess the impact that fluctuations in the market price of the underlying have on the financial derivatives taken out by the A2A Group 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 unfavorable shift in the market indices. VaR is calculated using the RiskMetrics method with a holding period of 1 day 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 1 day, the maximum estimated loss on the derivatives in question was 883 thousand euro at June 30, 2015 (1,606 thousand euro at December 31, 2014).
The interest rate risk relates to the uncertainty associated to the performance of interest rates and is mainly associated with the components of financial debt at a floating rate. The volatility of financial expenses associated to the performance of interest rates is therefore 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.
(2) Value at Risk: statistical measurement of the maximum potential drop in the fair value of an asset portfolio in the event of unfavorable movements in the market with a given time horizon and confidence level.
| Millions of euro | June 30, 2015 | December 31, 2014 | |||||
|---|---|---|---|---|---|---|---|
| Without derivatives |
With derivatives |
% with derivatives |
Without derivatives |
With derivatives |
% with derivatives |
||
| Fixed rate | 3,094 | 3,256 | 85% | 3,065 | 3,436 | 85% | |
| Floating rate | 750 | 588 | 15% | 991 | 620 | 15% | |
| 3,844 | 3,844 | 4,056 | 4,056 |
| Loan | Derivative | Accounting |
|---|---|---|
| A2A loan with BEI, expiring in 2023, residual balance at June 30, 2015 amounting to 161.9 million euro, at floating rate interest. |
Collar due to run until November 2023; fair value at June 30, 2015 was negative for 17.8 million euro. |
The loan is measured at amortized cost. The collar is a cash flow hedge, with the effective portion of the hedge recognized in a specific equity reserve. |
| A2A bond with a nominal value of 503.4 million euro, maturing in 2016 bearing fixed interest at 4.5%. |
IRS on the full nominal amount, same duration as the loan; fair value at June 30, 2015 was positive for 31.3 million euro. |
Fair value hedge The valuation based on the fair value hedge of the bond loan will be equal to the book value of the financial liability and includes the financial expenses and a portion of the accrual relating to the premium and issue costs. The accumulated changes in the fair value of the risk being hedged, i.e. the interest flow differentials booked to the income statement, are added to this value. |
| Collar on 3.4 million euro with same duration as the loan; the fair value at June 30, 2015, was negative for 0.1 million euro. |
The collar is measured at fair value through profit or loss. |
|
| Collar on 350 million euro maturing November 2016; at June 30, 2015, the fair value was negative for 7.8 million euro. |
The collar is measured at fair value through profit or loss. |
|
| Collar with double cap on 150 million euro expiring in November 2016; fair value at June 30, 2015 was negative for 2.6 million euro. |
The collar is measured at fair value through profit or loss. |
In order to analyze and manage the risks relating to interest rate risk the Group has developed an internal model enabling the exposure to this risk to be calculated using the Montecarlo method, assessing the effect that fluctuations in interest rates may have on future cash flows. Under this methodology at least ten thousand scenarios are simulated for each key variable on the basis of the associated volatilities and correlations, using market rate forward curves for future levels. In this way a probability distribution of the results is obtained from which the worst case scenario and best case scenario can be extrapolated using a 99% confidence level.
The following are the results of the simulation with the related maximum variances (worst case and best case scenarios) for the 12 months subsequent to June 30, 2015, and a comparison with the 12 preceding months (excluding EPCG):
| Millions of euro | 07 2015 - 06 2016 (base case: -122.052) |
07 2014 - 06 2015 (base case: -139.091) |
|||
|---|---|---|---|---|---|
| Worst case | Best case | Worst case | Best case | ||
| Change in expected cash flows (including hedge flows) Confidence level 99% |
(0.2) | 0.1 | (0.5) | 0.3 |
123
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 | 06 30 2015 (base case: 3.0) |
12 31 2014 (base case: -4.1) |
|||
|---|---|---|---|---|---|
| -50 bps | +50 bps | -50 bps | +50 bps | ||
| Change in fair value of derivatives | (3.5) | 2.5 | (9.6) | 8.1 | |
| (of which cash flow hedges) | (3.6) | 3.3 | (4.2) | 3.9 | |
| (of which fair value hedges) | 2.7 | (2.7) | 4.0 | (3.9) |
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.
A2A S.p.A. does not consider it necessary at the present time to take out any specific hedges against currency risk for sales, other than that arising from commodity prices, as the amounts involved are quite small and are paid or collected within a short period of time, and any imbalance is immediately offset by a sale or purchase of foreign currency.
The only case of hedging currency risk that was not related to commodities is the fixed rate bullet bond of 14 billion yen with maturity 2036 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. This derivative is accounted for as a cash flow hedge, with the effective portion of the hedge being recognized in a specific equity reserve.
At June 30, 2015, the fair value of the hedge was negative 19.6 million euro. This fair value would improve by 17.0 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 13.9 million euro in the event of a 10% rise in the forward curve of the euro/yen exchange rate (depreciation of the yen).
In this case too, the 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.
124
Liquidity risk regards the Group's timely ability to meet its payment commitments. To cover this risk, the Group ensures the maintenance of adequate financial resources, as well as a liquidity buffer sufficient to meet unexpected commitments. At June 30, 2015, the Group contracted revolving committed credit lines for 650 million euro, unused. The Group also has unused long-term financing for a total of 35 million euro and cash and cash equivalents totaling 410 million euro, 320 million euro of which held by the parent company.
Liquidity risk management is also pursued by directly accessing the capital market, particularly through the Bond Issue Program (Euro Medium Term Note Programme), extended to 4 billion euro, as approved by the Board of Directors on November 6, 2014.
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 (excluding EPCG, for which interest is not included); they also include the undiscounted nominal flows of derivative contracts on interest rates. Loans are generally included on the basis of their contractual maturity for repayment, whereas revocable loans have been considered redeemable at sight.
| 06 30 2015 Millions of euro | 1-3 months | 4-12 months | After 12 months |
|---|---|---|---|
| Bonds | 2 | 108 | 3,567 |
| Payables and other financial liabilities | 6 | 97 | 802 |
| Total financial flows | 8 | 205 | 4,369 |
| Trade payables | 233 | 60 | 11 |
| Total trade payables | 233 | 60 | 11 |
| Year 2014 Millions of euro | 1-3 months | 4-12 months | After 12 months |
|---|---|---|---|
| Bonds | 44 | 72 | 3,533 |
| Payables and other financial liabilities | 8 | 130 | 1,047 |
| Total financial flows | 52 | 202 | 4,580 |
| Trade payables | 433 | 13 | 3 |
| Total trade payables | 433 | 13 | 3 |
125
The Group's exposure to credit risk is principally linked to its sales activity. In order to control this risk, which is handled by the credit management function located centrally and relative departments in the operating companies, a credit policy has been implemented to regulate the assessment of customers' credit standing and grant extended credit terms or exceptions if necessary, possibly backed by suitable 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 stated in the balance sheet net of any write-downs; the amount shown is considered to be a correct reflection of the realizable value of the receivables portfolio. The situation can be understood better with the aid of the following analysis of gross trade receivables and the related bad debt provision.
| Millions of euro | 06 30 2015 | 12 31 2014 |
|---|---|---|
| Trade receivables from third parties (gross) | 1,732 | 1,923 |
| Bad debt provision (-) | (332) | (332) |
| Trade receivables | 1,400 | 1,591 |
| Of which: | ||
| Receivables past due for 9-12 months | 31 | 21 |
| Receivables past due for more than 12 months | 332 | 312 |
Trade receivables past due by more than 12 months amount to 364 million euro. The bad debt provision represents the estimated amount of receivables that are difficult to collect.
A2A S.p.A. was not exposed to equity risk at June 30, 2015.
At June 30, 2015, A2A S.p.A. held 26,917,609 treasury shares, representing 0.859% 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.
The following table sets out for the A2A Group amounts relating to bank borrowings and amounts due to other providers of finance, excluding financial payables relating to derivatives:
| Millions of euro | Accounting | Portions | Portions | Portion maturing | ||||
|---|---|---|---|---|---|---|---|---|
| balance 06 30 2015 |
with expiry within 12 months |
with expiry after 12 months |
06 30 2017 | 06 30 2018 | 06 30 2019 | 06 30 2020 | After | |
| Bonds | 3,027 | - | 3,027 | 548 | - | - | 766 | 1,713 |
| Finance lease payables | 2 | 1 | 1 | 1 | - | - | - | - |
| Finance payables to related parties |
- | - | - | - | - | - | - | - |
| Bank loans | 815 | 92 | 723 | 83 | 84 | 78 | 81 | 397 |
| TOTAL | 3,844 | 93 | 3,751 | 632 | 84 | 78 | 847 | 2,110 |
At June 30, the parent company had bonds to the public for a total nominal value of 2,553 million euro as follows: 503 million euro falling due in November 2016; 750 million euro falling due in November 2019; 500 million euro falling due in January 2021; and 500 million euro falling due in January 2022; 300 million euro falling due in 2025.
127
A2A has also issued a bond of 14 billion yen falling due in 2036, in the form of a private placement, and a bond of 300 million euro falling due in December 2023 as part of the EMTN Programme.
The terms and conditions of these bond issues are in line with the market standard for this type of financial instrument. The bonds issued by A2A as part of the EMTN Programme (amounting in total to 2,350 million euro at June 30, 2015) contain a change of control put clause in favor of investors for any changes in control of the company which lead to a resulting downgrading of the rating to sub-investment grade in the following 180 days. If the rating returns to investment grade within the 180-day period the put option is not exercisable.
The private bond in yen falling due in 2036 contains a put right clause in favor of the investor, which triggers if the rating falls below BBB- or equivalent level (sub-investment grade).
The loan agreements entered into with the European Investment Bank contain a credit rating clause guarding against a rating of below BBB- or equivalent level (sub-investment grade). In the event of a change in control of the parent company, the loan agreements entered into with the European Investment Bank falling due after 2024 (a total of 458 million euro at June 30, 2015) grant the bank the right to invoke early repayment of the loan on providing notice to the company containing an explanation of the underlying reasons.
The agreement entered into by the parent with Unicredit, brokered by the EIB, for which the term of the loan having an outstanding balance of 21 million euro at June 30, 2015 expires in June 2018, includes a credit rating clause that requires the company to maintain an investment grade rating throughout the duration of the loan. In the event of non-compliance there are a number of annual covenants to be respected based on the ratios of debt to equity, debt to gross operating income and gross operating income to interest expense.
The line of revolving committed credit in Club Deal for 600 million euro expiring November 2019 and bilateral of 50 million euro signed recently with Cassa Depositi e Prestiti falling due June 2017, currently unused, include a Change of Control clause which in the event of a change of control of the parent company causing a Material Adverse Effect allows the banks to request the facility to be extinguished and early repayment of any amounts drawn. In addition, the revolving facility in Club Deal is subject to the financial covenant NFP/EBITDA.
The following can be found in the agreements for the bond loans, the loans mentioned above and the lines of revolving committed credit: (i) negative pledge clauses under which the parent company 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 nonperformance; and (iii) clauses that provide for immediate repayment in the event of declared insolvency on the part of certain Group companies.
With regard to subsidiaries, the loan to Abruzzoenergia S.p.A. is backed by a secured guarantee (mortgage) for a maximum of 264 million euro and the related agreement contains two covenants based on the ratios NFP to shareholders' funds and NFP to gross operating income.
With reference to the subsidiary EPCG, the loans granted by the EBRD (European Bank for Reconstruction and Development) in November 2010, which has been fully drawn down, and in April 2014, drawn down for 5 million euro at June 30, 2015, for a total of 65 million euro, and include some financial covenants.
As things currently stand, and no companies in the A2A Group have defaulted and there has been no breach of the financial covenants.
Tests were performed to determine whether these transactions qualify for hedge accounting in accordance with International Accounting Standard IAS 39.
In particular:
129
b. trading transactions: the accrued result and future value are recognized above gross operating income for commodities transactions and in financial income and expense for interest rate and currency transactions.
The use of derivatives 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.
Outstanding derivatives at June 30, 2015, 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 have 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.
The A2A Group 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 IAS 39.
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 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 bVCA is thus calculated with reference to the exposure, measured on the basis of the market value of the derivative at the time of default, to 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.
Other information
| Millions of euro | to be received |
Notional value (a) maturing within 1 year to be paid |
to be received |
Notional value (a) maturing in 1 to 5 years to be paid |
Notional value (a) maturing after 5 years |
Amount reported in balance sheet(b) |
Progressive effect to income statement at 06 30 2015 (c) |
|---|---|---|---|---|---|---|---|
| Interest rate risk management | |||||||
| - cash flow hedges as per IAS 39 | 19 | 76 | 67 | (18) | |||
| - not considered hedges as per IAS 39 | 503 (d) | 21 (e) | 21 (e) | ||||
| Total derivatives on interest rates |
- | 19 | - | 579 | 67 | 3 | 21 |
| Exchange rate risk management | |||||||
| - considered hedges as per IAS 39 on commercial transactions on financial transactions |
98 | (19) | |||||
| - not considered hedges as per IAS 39 on commercial transactions on financial transactions |
|||||||
| Total exchange rate derivatives | - | - | - | - | 98 | (19) | - |
(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.
(d) Includes derivative instruments with underlying bond worth 503 million euro, maturing in 2016, and an IRS with notional value of 503 million euro, with no economic effect, as a result of the fair value measurement, hedges and three collars with a notional value of 503 million euro, not qualifying as hedges under IAS 39.
(e) Includes the effect on collars, with a total notional amount of 503 million euro, not considered as hedges according to IAS 39.
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.
| Unit of measurement of the notional value |
Notional amount expiring within 1 year |
Notional amount expiring within 2 years |
Notional amount expiring within 5 years |
Balance sheet balance (*) (millions of euro) |
Progressive effect to income statement (**) (millions of euro) |
|
|---|---|---|---|---|---|---|
| Energy product price risk management | ||||||
| A. Cash flow hedges as per IAS 39, including: |
(0.8) | - | ||||
| - Electricity |
TWh | 3.8 | 0.5 | 0.0 | (0.8) | |
| - Oil |
Bbl | |||||
| - Coal |
Tons | 277,633 | (1.0) | |||
| - Natural gas |
Millions of cubic metres |
|||||
| - Exchange rate |
Millions of dollars |
|||||
| - Emission rights |
Tons | 1,936,000 | 0.9 | |||
| B. Considered fair value hedges as per IAS 39 |
- | - | ||||
| C. Not considered as hedges as per IAS 39 of which |
2.0 | 1.0 | ||||
| C.1 hedge margin | - | - | ||||
| - Electricity |
TWh | 0.1 | (0.4) | (0.4) | ||
| - Oil |
Bbl | |||||
| - Natural gas |
MWh | 474,720 | 0.1 | 0.1 | ||
| - Natural gas |
Millions of cubic metres |
45,0 | 0.4 | 0.4 | ||
| - CO2 emission rights |
Tons | |||||
| - Exchange rate |
Millions of dollars |
|||||
| C.2 trading transactions | 2.0 | 1.0 | ||||
| - Electricity |
TWh | 26.4 | 3.8 | 0.3 | 2.4 | (0.6) |
| - Natural gas |
TWh | 3.4 | 0.3 | (0.3) | (0.3) | |
| - CO2 emission rights |
Tons | 591,000 | 100,000 | (0.1) | 2.0 | |
| - Environmental Certificates |
MWh | |||||
| - Environmental Certificates |
Tep | |||||
| Total | 1.2 | 1.0 |
(*) 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 the stipulation of the contract to the present day.
The following table shows the balance sheet figures at June 30, 2015, for derivative transactions.
| Millions of euro | Notes | |
|---|---|---|
| ASSETS | ||
| NON-CURRENT ASSETS | 31 | |
| Other non-current assets - Derivatives | 5 | 31 |
| CURRENT ASSETS | 10 | |
| Other current assets - Derivatives | 8 | 10 |
| TOTAL ASSETS | 41 | |
| LIABILITIES | ||
| NON-CURRENT LIABILITIES | 48 | |
| Other non-current liabilities - Derivatives | 20 | 48 |
| CURRENT LIABILITIES | 9 | |
| Trade payables and other current liabilities - Derivatives | 21 | 9 |
| TOTAL LIABILITIES | 57 |
The following table sets out the income statement figures for the year ended June 30, 2015 arising from the management of derivatives.
| Millions of euro | Notes | Realized in the period |
Fair value change in the period |
Amounts booked to the statement of comprehensive income |
|---|---|---|---|---|
| REVENUES | 25 | |||
| Revenues from the sale of goods | ||||
| Energy product price risk management and exchange rate risk management on commodities |
||||
| - considered hedges as per IAS 39 | - | - | - | |
| - not considered hedges as per IAS 39 | 2 | (40) | (38) | |
| Total revenues from the sale of goods | 2 | (40) | (38) | |
| 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 IAS 39 | 1 | - | 1 | |
| - not considered hedges as per IAS 39 | (2) | 41 | 39 | |
| Total expenses for raw materials and services | (1) | 41 | 40 | |
| Total booked to gross operating income (*) | 1 | 1 | 2 | |
| FINANCIAL BALANCE | 32 | |||
| Financial income | ||||
| Interest rate risk management and equity risk management | ||||
| Gains on derivatives | ||||
| - considered hedges as per IAS 39 | - | - | - | |
| - not considered hedges as per IAS 39 | - | - | - | |
| Total | - | - | - | |
| Total financial income | - | - | - | |
| Financial expense | ||||
| Interest rate risk management and equity risk management | ||||
| Charges on derivatives | ||||
| - considered hedges as per IAS 39 | (2) | - | (2) | |
| - not considered hedges as per IAS 39 | (9) | 3 | (6) | |
| Total | (11) | 3 | (8) | |
| Total financial expenses | (11) | 3 | (8) | |
| TOTAL BOOKED TO FINANCIAL BALANCE | (11) | 3 | (8) |
(*) These figures do not include the effect of the net presentation of the trading margin.
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 June 30, 2015, where applicable.
| Millions 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 amortized cost |
Share holding / Holdings securities convertible into unlisted |
Amount as stated in the consolidated balance sheet at |
Fair value at 06 30 2015 (*) |
|||
| Income statement |
Equity | shareholdings measured at cost |
06 30 2015 | |||||
| (1) | (2) | (3) | (4) | (5) | ||||
| ASSETS | ||||||||
| Other non-current financial assets: | ||||||||
| Shareholding / Securities convertible into shareholdings available for sale of which: |
||||||||
| - unlisted | 9 | 9 | n.d. | |||||
| - listed | - | - | ||||||
| Financial assets held to maturity | - | - | ||||||
| Other non-current financial assets | 61 | 61 | 61 | |||||
| Total other non-current financial assets | 3 | 70 | ||||||
| Other non-current assets | 5 | 31 | 9 | 40 | 40 | |||
| Trade receivables | 7 | 1,400 | 1,400 | 1,400 | ||||
| Other current assets | 8 | 9 | 1 | 223 | 233 | 233 | ||
| Current financial assets | 9 | 126 | 126 | 126 | ||||
| Cash and cash equivalents | 11 | 610 | 610 | 610 | ||||
| LIABILITIES | ||||||||
| Financial liabilities | ||||||||
| Non-current and current bonds | 17 and 22 | 548 | 2,479 | 3,027 | 3,027 | |||
| Other non-current and current financial liabilities 17 and 22 | 817 | 817 | 817 | |||||
| Other non-current liabilities | 20 | 11 | 37 | 303 | 351 | 351 | ||
| Trade payables | 21 | 1,001 | 1,001 | 1,001 | ||||
| Other current liabilities | 21 | 7 | 2 | 462 | 471 | 471 |
(*) The fair value has not been calculated for receivables and payables not related to derivative contracts and loans as the corresponding book value comes close to it.
(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.
(5) Available-for-sale financial assets, including unlisted shareholdings whose fair value cannot be measured reliably, are carried at the lower of costs, which may be reduced due to impairment.
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.
| Millions of euro | Note | Level 1 | Level 2 | Level 3 | Total |
|---|---|---|---|---|---|
| Available-for-sale assets measured at fair value | 3 | 9 | 9 | ||
| Other non-current assets | 5 | 31 | 31 | ||
| Other current assets | 8 | 10 | 10 | ||
| TOTAL ASSETS | 10 | 40 | - | 50 | |
| Non-current financial liabilities | 17 | 548 | 548 | ||
| Other non-current liabilities | 20 | 48 | 48 | ||
| Other current liabilities | 21 | 8 | 1 | - | 9 |
| TOTAL LIABILITIES | 8 | 597 | - | 605 |
As required by IFRS 13, the following table sets out the effects arising from changes in the unobservable parameters used in calculating fair value for financial instruments included in level 3 of the hierarchy.
| Financial instrument | Parameter | Parameter change |
Sensitivity (millions of euro) |
|---|---|---|---|
| Commodity Derivatives | Probability of default (PD) | 1% | 0.00 |
| Commodity Derivatives | Loss Given Default (LGD) | 25% | 0.00 |
| Commodity Derivatives | Volatility underlying interconnection capacity abroad |
1% | 0.01 |
| Commodity Derivatives | Correlation underlying interconnection capacity abroad |
1% | (0.00) |
| Commodity Derivatives | Underlying interconnection capacity zonal Italy |
1% | (0.01) |
The following table sets out the main concessions obtained by the A2A Group:
| Number | |
|---|---|
| Hydroelectric concessions | 77 |
| District heating concessions | 10 |
| Electricity distribution concessions | 48 |
| Gas distribution concessions | 209 |
| Solid urban waste concessions ("SUW") (*) | 96 |
| Water service management concessions (**) | 114 |
| Urban illumination and traffic lights management agreements | 13 |
| Other concessions | 11 |
(*) Agreements can relate to the disposal and treatment of SUW, the construction, running and safety of landfills or waste to energy.
(**) Concessions may regard the sale and distribution of drinking water or water purification and sewage services.
Adequate provisions are provided where necessary for the disputes and litigation described below.
On June 5, 2002, the European Commission published Decision no. 2003/193/EC stating that the three-year exemption from income tax provided by article 3 paragraph 70 of Law no. 549/95 and article 66.14 of Decree Law no. 331/1993, converted into Law no. 427/93, is incompatible with community law, considering this to be "State aid" which is prohibited by article 87.1 of the EC Treaty.
The company appealed against this decision before the community jurisdictions but these appeals were rejected. The Italian State went ahead with the recovery of the aid in three separate stages, issuing different orders for the various tax period concerned.
The process followed by the various community and national appeals was described in the financial statements up until 2012 and in the quarterly reports up until the third quarter of 2013, to which reference is made for brevity. All the amounts requested for the principal and interest have been settled to avoid any executive action.
The situation regarding pending matters is as follows:
As of today, therefore, the question concerning the quantification of the interest due on the amounts to be recovered is still pending (whether the interest is compound or simple interest). On this point, an opinion has been requested of the EU Court of Justice and it is considered that the result of this will affect the proceedings on both the third and the second recovery. On March 26, 2015, the Attorney General at the Court of Justice, Melchior Wathelet, submitted his non-binding conclusions to the Court. According to the Attorney General, European legislation does not preclude that national legislation provides for the application of compound interest to a recovery action for illegal aid. However, the same Attorney General found that before 2008, neither European nor national legislation envisaged the application of compound interest for recovery activities. The Court of Justice is expected to definitively rule on the point in the coming months.
In any case, concerning the position of A2A, as all the amounts requested were settled some time ago, it is believed that once the pending disputes are completed the company should not have to bear any further costs for the recovery of State aid.
The purchase by BAS S.p.A. of the investment in HISA was made through a local consultant, Consul Latina.
139
As the wording of the contract was not totally clear and because BAS S.p.A. on its own did not buy 100% of HISA, BAS S.p.A. held that the contractual clause was not applicable and that the payment request made by Consul Latina was unjustified, and accordingly did not pay the fee due to Consul Latina which in 1998 commenced legal action for payment.
Legal counsel has confirmed that the preliminary phase has been completed and that only the final sentence is awaited.
A2A S.p.A. has always instructed legal counsel to settle the case and has recently expressed its willingness to increase previous offers to cover the costs of the suit, although awaiting a specific figure that can then be assessed, also showing its availability to listen to and consider incremental requests. To date, specific requests are pending, considering that the Court urged the parties to find a settlement solution in recent months. Redengas, a subsidiary of HISA, the shares of which are subject to a lien by Consult Latina, has filed a new suit to call for the removal of the lien on the shares that remains in Consul Latina's favor; legal counsel has advised that the legal counsel of Redengas has announced that it will file a counter suit against A2A S.p.A. and Consul Latina, but several months later this has still to be notified. On June 3, 2014 the court rejected the suit filed by A2A S.p.A. and Consul Latina to remove the sequestration ordered by the judge at the request of Consul Latina on the present and future shares of Redengas, and A2A S.p.A. has filed an appeal.
The Court convened the parties in a council chamber which was held December 18, 2014 to verify the conditions of a conciliation or transaction; following the discussion, the Court has set a new discussion session for February 19, 2015 to receive indications from the parties; in view of subsequent postponements requested by Consul Latina, the date of said hearing is fixed for May 8, 2015, with a further postponement to June 4 and August 4, 2015, and to date, with no definitive news.
140
An investigation is pending at the Public Prosecutor's Office in Trento concerning the way that gas consumption is accounted for. The investigation involves, among others, a number of A2A Group companies and some of their directors and managers. The alleged offence is fraud, as well as other matters.
The investigation was initiated by the Milan Judicial Authority but then transferred to Brescia for a question of territorial jurisdiction. After notification of the "Notice of the Conclusion of Preliminary Investigations – article 415-bis of the Italian Criminal Procedure Code" dated February 7, 2011, the "Notice of the Preliminary Hearing Date" was received on June 9, 2011 regarding the committal for trial presented by the Public Prosecutor. The preliminary hearing was held before the preliminary investigations judge (GIP) of Brescia on November 8, 2011. The defense for the accused raised a preliminary exception claiming that the notification of the decree containing the "Notice of the Preliminary Hearing Date" was null and void, given that it did not include the CD with the list of "indicted" meters indicated in the decree as an "attachment forming a material part of the charge". The Gip upheld the exception and declared the notification null and void. As a result, the Public Prosecutor had to reissue the "Notification of the Conclusion of Preliminary Investigations – article 415-bis of the Italian Criminal Procedure Code" and return to the previous stage in the proceedings. On January 4-9, 2012, the "Notification of the Conclusion of Preliminary Investigations – article 415-bis of the Italian Criminal Procedure Code" was reissued, this time with the CD.
The preliminary hearing was held on October 18, 2012. The preliminary hearing was held on October 18, 2012, at which the judge raised a preliminary exception pursuant to article 11 of the criminal procedure code noting that at least two magistrates, whose judicial offices are included within the district of the Brescia Appeal Court, are "injured parties" in the proceeding and asked the judge in charge of the preliminary hearing (Gup), Dr. Napo, to declare that the Brescia judicial authority was acting beyond its jurisdiction. The defense agreed with the application. The Gup therefore declared that the case was beyond his jurisdiction and ordered the papers to be sent to the Public Prosecutor's Office of Venice. As a result of this provision the proceeding has returned to the initial stage.
However, as A2A Reti Gas S.p.A. had to carry out maintenance on certain plants sequestered as part of the criminal proceeding in question, checks were carried out to identify the prosecuting magistrate in charge of the case at the Public Prosecutor's Office of Venice. It was learned from this that without giving notice of such to any of the attorneys of the persons under investigation or to those persons themselves, in the meantime the proceeding had been transferred from the Public Prosecutor's Office of Venice (which presumably recognized a similar case of lack of competence) to that of Trento, having territorial competence for the proceedings in which a magistrate from the Public Prosecutor's Office of Venice assumes the role as the "injured party". On June 10 and 23, 2014 the Prosecutor's Office of Trento served notice that the preliminary investigations had been completed as per article 415 bis of the Italian Criminal Procedure Code. On September 16, 2014 the decree was served setting December 11, 2014 as the date of the preliminary hearing before Judge Ancona. After this hearing, the case was postponed to February 19, 2015. At this hearing, the Gup has ruled sentence declaring not to proceed against all defendants (both individuals and legal entities) as their crimes are extinct due to prescription. The sentence was not contested by the prosecution and on April 6, 2015, the irrevocability record was filed.
141
On May 2 and May 3, 2011 respectively, the Milan Arbitration Chamber sent A2A S.p.A. (the holder of an interest of 50% in the share capital of Ergosud S.p.A.) and E.ON Europa S.L. a request for arbitration in which Société Financiere Cremonese S.A. in conjunction with Eurosviluppo Industriale S.p.A. initiated an arbitration procedure against such companies, requesting (i) ascertainment as to non-fulfillment by E.ON Europa S.L. and A2A S.p.A. of the obligations assumed in the agreements of December 16, 2004, October 15, 2004 and July 25, 2007 inter partes and (ii) by virtue of the effect, that they be ordered to pay the remaining part of the price for the sale of the shares making up the whole share capital of Ergosud S.p.A., amounting to 10,000,000 euro, as well as compensation for the damages suffered by Société Financiarie Cremonese S.A. and Eurosviluppo Industriale S.p.A. from the double standpoint of the consequential loss or damage and loss of profits in the amount of 126,496,496 euro, save better specification, plus damages for the stoppage at the worksite, interest and revaluation.
E.ON Europa S.L. and A2A S.p.A. duly appeared before the court calling for the request to be rejected in full and by cross-claim calling for the counterparties to be condemned to pay compensation for the damages suffered by the defendants as the result of the numerous examples of contractual non-fulfillment, quantified initially in the amount of 30,500,000 euro, or alternatively the greater or lesser sum considered equitable, quantified also pursuant to article 1226 of the Italian civil code, plus interest, ex article 1283 of the Italian civil code, and monetary revaluation, ex article 1284 of the Italian civil code.
On September 7, 2011, the Chamber of Arbitration officially suspended arbitration due to the non-payment of the legal expenses by the claimant.
Lawyers for A2A S.p.A. and E.ON Europa S.L. have checked whether arbitration can be continued only for the counter-claim without having to take responsibility for the payment of the claimant's expenses.
With regard to payment of the legal fees by defendants A2A S.p.A and E.ON Europa S.L., and the non-payment by claimants S.F.C. S.A. and Eurosviluppo Industriale S.p.A., on December 2, 2011 the secretary of the Chamber of Arbitration communicated that the claimants' applications had been extinguished and proceedings would continue only for the applications presented by A2A S.p.A. and E.ON Europa S.L.; in simultaneous letters, the secretary also advised that all documentation had been sent to the arbitrators to allow the proceedings to commence.
The Board is composed of Lawyer Prof. Giuseppe Portale (chairman), Lawyer Prof. Vincenzo Mariconda (arbitrator identified by A2A S.p.A. and E.ON Europa S.L.) and Lawyer Giovanni Frau (arbitrator identified by S.F.C. S.A. and Eurosviluppo Industriale S.p.A.).
On February 1, 2012 the first hearing was held after formalities had been completed regarding the setting up of the Board at which it was stated that the terms for the questions originally proposed by S.F.C. S.A. and Eurosviluppo Industriale S.p.A. had lapsed. In addition, the parties were assigned the dates by which pleading and replies should be filed and items of evidence produced. In particular, having become claimants from a substantial standpoint (wishing to continue with the case by counter-claim following the above-mentioned lapse of the counterparty's terms), E.ON Europa S.L. and A2A S.p.A. were invited to note their questions and indicate their evidence by March 15, 2012; the subsequent dates for filing pleading were set as April 16, 2012, May 8, 2012 and May 31, 2012.
The date of the hearing for the personal appearance of the parties was set for June 12, 2012 in order to make an attempt at reaching a settlement and for any informal questioning. At the hearing, adjourned to June 19, 2012, the Arbitration Board acknowledged the bankruptcy of Eurosviluppo Industriale S.p.A. which had occurred and set a date of October 30, 2012 for the appointment of a receiver and a date of November 20, 2012 for the hearing for the attempt to reach a settlement and carry out any informal questioning of the parties.
In view of the intervening bankruptcy of Eurosviluppo Industriale and the process issues raised during such declaration, the Board issued a decision dated November 13, 2012 ordering that the hearing set for November 20, 2012 should not be devoted to an attempt at reaching a settlement and, therefore, would not include the presence of the parties.At the hearing on November 20, 2012, the Board set the deadline for filing the award as July 4, 2013; also, the deadlines for the parties to file briefs were set as December 20, 2012 and January 31, 2013, and February 20, 2013 was set for the hearing date for discussion, to be held at the office of the Chairman of the Board. At the hearing of February 22, 2013 (the hearing was adjourned from February 20 to February 22 due to a commitment of the Chairman of the Arbitration Board), the Board issued an order requesting A2A S.p.A. and E.ON Europa S.L. to add to their respective attorneys to remedy all possible defects by March 20, 2013, and set March 20, 2013 and April 5, 2013 as the new final dates for the filing of briefs and replies to clarify and explain their respective positions. Subsequent to these obligations, the Board reserved the right to issue an order. On June 5, 2013, the Board filed an order in which it set July 22, 2013 as the date of the hearing for an attempt to reach a settlement and for questioning by the parties; given the deadline of July 4, 2013 previously set for the filing of the decision, the Board made an application to the Chamber for the granting of a reasonable extension.
At the end of the hearing of July 22, 2013, in which the questioning by the parties took place and the absence of the conditions for reaching a settlement was confirmed, the Chamber set a deadline of September 30, 2013 for filing documents and drawing up preliminary motions and October 21, 2013 for any submissions in reply from the lawyers. On October 2, 2013 the Chamber of Arbitration noted that S.F.C. S.A. and the bankruptcies had not paid the contributions requested in July and as of today the proceeding is suspended. On October 22, 2013, S.F.C. S.A., in breach of the terms of the arbitration and the questions raised by the Arbitration Board, filed an appraisal arranged on its behalf having technical content. In a decision on November 27, 2013, the Board ordered an expert witness to verify the co- generation capabilities of the plant and appointed Prof. Eng. L. Guizzi. The company appointed Prof. Massardo as its own expert witness, S.F.C. S.A. Prof. Ambrogio and Eng. Lazzeri. After the hearing of January 22, 2014 for formalities relating to the appointment of the expert witnesses, the Board set a deadline of June 16, 2014 for the filing of the related report. The report was filed within the legal terms and contained confirmation of the arguments of A2A S.p.A. and E.ON Europa S.L. The continuation of the arbitration may be affected by the fact the S.F.C. S.A., Eurosviluppo Industriale S.p.A. and Consorzio Eurosviluppo S.c.a.r.l. have failed to pay the arbitration fees: the judgment of the Chamber of Arbitration is pending. On February 4, 2015, the Arbitration Board set new terms for the expert witness and the parties for replies following the filing of a further technical brief of S.F.C. S.A. to then set the hearing for April 23, 2015. The Chamber of Arbitration ordered the postponement of the deadline for filing the award. At the hearing on April 23, 2015, the board set new terms for briefs and a hearing date if requested by the parties at September 23. The Chamber of Arbitration set a new deadline for the filing of the award on February 1, 2016.
On May 27, 2011, Consorzio Euroviluppo 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 extra-contractual 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 currently 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.
The first hearing has been fixed for October 30, 2011. This case has been assigned to the Second Civil Section of the Court, Single Judge Mr. Lorenzo Pontecorvo. The first appearance hearing was set for November 30, 2011 and the judge deferred decision concerning the legitimacy of the failed Consortium to establish a case.
144
On this occasion, Ergosud S.p.A. and A2A S.p.A. were not able to make any cross-claims as the competence for this lies with the bankruptcy judge.
S.F.C. S.A. filed a notice of joinder on November 8, 2011 pursuant to article 105 CPC (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 legitimacy of S.F.C. S.A. is independent with respect to that of the Consortium, the original claimant, and should it be found that the request of the Consortium may not proceed further for lack of grounds (or because of the bankruptcy that has occurred), the judgment would continue between S.F.C. S.A. and Ergosud S.p.A.. In this scenario, A2A S.p.A. could ask to be excluded since no request would have been raised against the company, but for the purpose of simplicity the judge would probably remit the question to the final sentence.
Within the term set for the first hearing, the lawyers formulated conclusions on behalf of Ergosud S.p.A. in respect of the request made by S.F.C. S.A., then counter-claiming in a more complete manner in the subsequent preliminary pleadings pursuant to article 183, paragraph VI of the civil procedure code.
The judge found the bankruptcy was legitimate as S.F.C. S.A. and therefore set the end of the proceedings and the hearing for December 19, 2012, declaring the need to execute an expert opinion on a number of points, indicating the questions to put to the expert and 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. The start of the experts' work was scheduled as June 18, 2013, with a deadline of 180 days after that date. A2A S.p.A. and Ergosud S.p.A. appointed as their experts Prof. Massardo and Eng. Mr. Gioffrè, persons who over the years have already drawn up reports on the matters to which the questions refer. The deadline for the expert's filing was postponed. The court experts Messrs. Pompili and Caroli submitted their reports within the term set for their observations, confirming the defensive reasoning of Ergosud S.p.A. and A2A S.p.A.; the parties' experts had until June 30, 2014 to submit their observations and their reports were filed with the court on July 31, 2014. The hearing date was fixed for January 22, 2015 to review the expert's report and then postponed to April 1, 2015. At said hearing, the hearing for clarification of conclusions has been scheduled for November 30, 2016.
This matter regards the usage of electricity for auxiliary services. According to the Electricity, Gas and Water Authority (AEEGSI), self-consumption by certain types of plant (waste-toenergy) should be considered in the same way as consumption for auxiliary services.
With Sentences December 30, 2014 no. 6430 and December 1, 2014 no. 5946, the State Council confirmed the acts adopted by the AEEGSI respectively towards Ecolombardia 4 and A2A Ambiente (formerly Ecodeco) aimed at the return of a portion of CIP 6/1992 incentives, as attributable - according to the non-shared reading of the AEEGSI and of State Council - to consumption for ancillary services (which do not merit incentive).
At the request of the Electricity Sector Equalization Fund (CCSE), on June 30, 2015, the two companies mentioned above paid the sums allegedly paid in excess. Before proceeding with the payment, the two companies nonetheless conducted verifications on the calculations and prescriptions partially defaulted. As the amounts paid do not correspond (by default) to the exact ones of the CCSE. In any case, the payment was made subject to full repetition, also in correlation to the possibility of initiating other litigations on the matter. Those disputes are still being studied by consultants.
This proceeding involves the Union Temporal De Impresas (UTE), set up by the company that is now A2A Ambiente S.p.A., Azhar and Teconma, to build and manage an ITS treatment and disposal plant and composting line in Castellon de la Plana (Spain) as the result of being awarded the tender called by Zone 1 Consortium of Castellon. The Municipality of Calig, neighboring with Castellon, has appealed against the amendment to the agreement between the consortium and the UTE which provided for an increase in the fee of 121 million euro and 140 million euro for adjusting the plants to the specifications required in the AIA, requesting that it be annulled. In the sentence of the court of the first instance of May 21, 2013, the court upheld the appeal of the Municipality of Calig, additionally ordering, besides upholding the requests of the counterparty, the annulment of the original awarding of the tender to the UTE, with the resulting requirement for the consortium to find a new supplier.
Despite the fact that A2A Ambiente S.p.A. holds an interest of 1% in the UTE, under Spanish law, UTEs are characterized by the joint liability of their members.
The UTE, defended by the law firm Urìa Mendez, has filed an appeal against the court's sentence of June 12, 2013.
The internal legal department believes that the risk of the annulment of the original award of the tender to the UTE is remote (it was not even one of the counterparty's requests) and that the risk of losing in the matter concerning the amendment of the agreement between the consortium and the UTE, which provided for an increase in the fee as above, is possible. Losing the case would lead to a maximum potential risk for the UTE of 19 million euro. A2A Ambiente S.p.A., a member of the UTE with a 1% interest and jointly responsible, could be called to respond not only for its own interest but potentially also for a larger figure if the other members are insolvent towards the bank (it should be remembered that the UTE obtained a loan to build the plant). The figure of 19 million euro could then be further revised in the light of the conclusions of the appeal filed by the UTE against this sentence of the Regional Administrative Court.
To complete this matter trade and financial receivables of approximately 3.6 million euro due from the UTE were recognized in the financial statements of A2A Ambiente S.p.A. at June 30, 2015, which in the case of losing could become uncollectable.
146
In November 2011, the Trieste Judicial Authority took restrictive action against several individuals in the Veneto, Friuli Venezia Giulia and Lombardy regions, including an employee of the Monfalcone thermoelectric plant, for criminal association aimed at defrauding the state and private persons and conceptual falsity, as well as activities organized for illegal trafficking in waste.
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 - guaranteed the disposal of special waste by illegal trafficking and 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.
A2A S.p.A., the owner of the production site, ordered the precautionary suspension of the employee concerned and a freezing of the payments of the invoices issued by the biomass suppliers, which, to its knowledge, are involved in the investigations.
Nevertheless the A2A Group, and in particular A2A Trading S.r.l., may incur damages, at its sole expense, arising from the qualitative and quantitative differences in the biomasses, since there is the risk for the latter, as toller and in charge of the plant's dispatch, that on the completion of the preliminary stage it may incur increased costs for the biomasses not delivered and increased costs for incorrectly stating the calorific value of the biomasses, delivered and not delivered.
147
To this should be added that 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 environmental allowances recognized with respect to the real income or allowances (the reference here is to Green Certificates). In fact for 2009 and 2010 the company may have filed declarations generating environmental allowances that are greater than those actually produced, as the calculation may have been affected by considering biomass energy to conventional source energy ratio that is mistakenly higher than the real figure.
If this were the case, the company would have to file corrections to the above-mentioned past declarations and reimburse the income relating to environmental allowances that may have additionally been recognized.
Further, in accordance with the procedures and modalities required, A2A Trading S.r.l. has filed a request with the GSE 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 increase of 20% in the calorific values of such. Despite the fact that the GSE has acknowledged the correctness of the calculations made by A2A Trading S.r.l. for 2011, as of today the abovementioned 2011 Green Certificates have not yet been issued.
It was notified that the investigation had been completed.
After a previous referral, on June 29, 2015, a preliminary hearing was held during which the preliminary hearing judge (GUP) admitted to the plea agreement two of the defendants, postponing the trial for the others scheduling a hearing on October 8, 2015 before the Court of Gorizia.
At the moment, there is no information to identify the effects on the financial statements of the company of any proven illegal conduct on the part of biomass suppliers of the plant. A2A Trading S.r.l. and A2A S.p.A. conferred mandate to establish a civil party in the proceedings. The establishment has occurred.
148
On March 29, 2013, Pessina Costruzioni notified A2A S.p.A. of the appointment of the arbitrator and the deposition with the arbitrators to initiate the arbitration, in fulfilment of the shareholders' agreements signed in August 2007, with the scope of having A2A S.p.A. ordered to pay compensation for damages for the non-fulfillment of its obligations under the agreements.
A2A S.p.A. appointed its arbitrator within the established term of 20 days, rejecting the requests.
After discussion on the appointment, and after a request for the appointment of a sole arbitrator made by Pessina to the Court of Novara, the parties signed an agreement concerning the formation of the arbitration board.
The appointed arbitrators are the Lawyers Bruna Gabardi Vanoli, Marco Praino (designated by Pessina) and Salvatore Sanzo (designated by A2A S.p.A.); the hearing for the formal constitution of the board is set for July 1. After this preliminary fulfilment, the parties will specify the applications for arbitration. As a result of the hearing, by means of a summary order, the board fulfilled the requirements for it to be formally established and be able to commence work, setting the deadlines for briefs and preliminary motions and the date of the first hearing. The dates set are October 15 and December 20, 2013 and February 21, 2014 for the submission of briefs and March 5, 2014 for the first hearing. By order of October 8, 2013, the arbitration board postponed the deadline for the submission of briefs respectively to October 9, January 21, 2014 and March 25, 2014. Consequently, the hearing set for March 2014 was postponed to April 10, 2014. The arbitration will take place in the offices of the chairman of the arbitration board in Milan. At the hearing of April 10, 2014, preceded by the submission of the parties' briefs, the Board set three new deadlines for the briefs (May 20 for A2A, June 17 for Pessina and June 26 for A2A) and set the date of the merit hearing as July 11, 2014. During the hearing, the claimant requested to fix a hearing for conclusions that by order outside the hearing filed on July 22 was set for September 16, 2014. At that hearing, the board set the terms for the filing of the final statements and the date of final hearing; at the request of the parties, such terms were postponed to December 3 and January 7, 2015 for the briefs and February 3, 2015 for the hearing. At that hearing, the board ordered an extension of the deadline for filing the arbitration to 120 days. At the end of May 2015, A2A, having had news of habitual familiarity and commensality elements between the Chair of the Arbitration Board and the lawyer of the claimant, filed at the court of Milan application for recusal of the Chair of the Arbitration Board.
In view of the news of the appeal, with Ordinance 6 issued outside the hearing on June 3, 2015, the Board suspended the filing of the arbitration until the end of the proceeding, or until the day following the notification of the outcome of the proceeding conducted by the most diligent party.
The Delegated Chair issued an order rejecting the request condemning A2A to litigation costs to the Chair of the Board and to Pessina.
On June 30, 2015, Pessina notified the Board, in execution of Ordinance 6/15 requesting the board to summarize the pending arbitration process.
On June 30, 2015, the Board, with the dissenting opinion of the arbitrator appointed by A2A filed its arbitration 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 arbitration pursuant to art. 829 CPC before the Milan Court of Appeal. The appeal concerns 1) nullity of the arbitration for violation of art. 829, paragraph 1, no. 2, CPC, in light of the lack of impartiality of the chair of the arbitration board, the lawyer Bruna Gabardi Vanoli; 2) the nullity of the arbitration, pursuant to art. 829, no. 4, CPC, as the arbitration board pronounced outside the limits of the arbitration agreement; 3) nullity of the arbitration for violation of the adversarial principle, pursuant to art. 829, no. 9 CPC, in so far as the arbitration board based its decision on art. III of the Shareholders' Agreement; 4) failure to state reasons under art. 829, no. 5 and 823, no. 5 CPC, and violation of the adversarial principle pursuant to art. 829, no. 9 CPC, as the arbitration board took its decision, excluding, for no reason, the evaluation of the documentation filed in court by A2A; 5) nullity of the arbitration for violation of the adversarial principle, pursuant to art. 829, no. 9 CPC, as the arbitration board decided on the basis of accepting the importance of the office of an equitable settlement of the damage, without submitting the issue to a hearing of the parties; 6) nullity of the arbitration pursuant to art. 829, no. 5 and 823, no. 5 CPC, as the arbitration board assessed the damages on an equitable basis pursuant to art. 1226 Civil Code, without justifying the existence of the condition for the applicability of said provision, and without justifying the existence of the damage; 7) nullity of the arbitration pursuant to art. 829, no. 3, as the arbitration board assessed the damages on an equitable basis pursuant to art. 1226 Civil Code, without the necessary conditions, in violation of public order.
Simultaneously, A2A filed an appeal for suspension of enforcement of the arbitration. The Court of Appeal by a decree issued by the Chair of the 1st Civil Section on July 10, 2015, without hearing the parties, suspended the enforceability of the arbitration until the hearing before the Board set for September 15, 2015.
The Group has taken into account the outcome of the arbitration in the establishment of appropriations to provisions for future risks and charges, despite the firm conviction of its positions.
150
By way of Regional Law no. 22/2011 the Lombardy Region effectively doubled the fee for public water for use for hydroelectric purposes, without prejudice however to the ISTAT revisions for inflation (in particular the regional law provides that starting from 2012 the unit amount of the fee due to the Region for public water utilities, as per paragraph 1, is set at 30 euro per Kilowatt of average annual nominal power).
Faced with the payment demands made by the Region for 2012 and 2013, Edipower S.p.A. considered the increase prescribed by law to be exorbitant and 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. appealed against these injunctions before the competent court.
Faced with the payment demand made by the Region for 2014, Edipower S.p.A. paid the fee considering solely the increase arising from the planned inflation rate as compared to the previous year. The Region has not yet issued an injunction for the payment of the difference.
For the Asta Liro plant, the Lombardy region has issued an injunction to pay the fees for derivations for hydroelectric use allegedly due for 2008 for Asta Liro and Fiume Mera. The company filed an appeal against this injunction with the Milan Regional Court of Public Waters (hereafter the Milan TRAP); the Milan TRAP partially rejected this appeal in the section in which the company asked for a ruling stating that it has no obligation to pay the fee for hydroelectric use for the amount mistakenly calculated by the Region and that the payment it has made is satisfactory. The sentence issued by the TRAP on the other hand partially upheld the request made by Edipower S.p.A. to rule as to its entitlement to settle the water use fee in an amount reduced by 10% by way of the non-applicability of the regional resolution introducing the regional surcharge. For the dispute in question the TRAP considered Regional Resolution no. 8/5775 of 2007 to be illegitimate, in that it simulated an increase in the fee due for the derivation by in reality incorporating an amount of a fiscal nature (the "regional surcharge") in a charge (the derivation fee).
A similar dispute is also taking place for a number of plants in the Valtellina.
Edipower S.p.A. filed a petition before the competent court applying to establish the correct calculation of the surcharges on hydroelectric fees due pursuant to article 1 of Law no. 959/1953, by way of the non-applicability of the ministerial decrees that prescribed a revision to these fees on an annual basis (instead of every two years).
151
For the Mese plant, Edipower S.p.A. lost the cases it brought before the Milan TRAP opposing the payment demands for the above surcharges on the fees raised by the Province and the Consortium of Municipalities of the Mountain Catchment Basin (BIM) of Lake Como and the rivers Brembo and Serio. The company has decided not to file an appeal against the TRAP's sentences.
Edipower S.p.A. filed a petition before the competent court applying to establish the correct calculation of the surcharges on hydroelectric fees due pursuant to article 1 of Law no. 959/1953, by way of the non-applicability of the ministerial decrees that prescribed a revision to these fees on an annual basis (instead of every two years).
The TSAP rejected the appeal filed by the company opposing the sentence of the Regional Court of Public Waters (hereafter TRAP) of Venice which had rejected the appeal of Edipower S.p.A. against the payment demand raised by the Pordenone Livenza Bacino Imbrifero Montano (BIM). The deadline for appeal to the Court of Cassation is currently pending.
The TSAP rejected the appeal filed by the company opposing the sentence of the Venice TRAP which had rejected the appeal of Edipower S.p.A. against the payment demand raised by the Consortium of Tagliamento BIM Municipalities in the provinces of Udine and Pordenone. The deadline for appeal to the Court of Cassation is currently pending.
Half-yearly financial report at June 30, 2015 Other information
The TSAP rejected the appeal filed by the company opposing the sentence of the Venice TRAP which had rejected the appeal of Edipower S.p.A. against the payment demand raised by the Province of Udine. The deadline for appeal to the Court of Cassation is currently pending.
152
The investigations that led to the sequestration of the Brindisi bunker (owned by Enel) have been formally closed; the head of the Brindisi power station has been sent for trial amongst others. Having civil responsibility, Edipower S.p.A. has been implicated in the relative court case by the parties instituting the action. A release notice for the seized areas was notified on May 13, 2010 as part of the criminal proceeding. In a ruling of March 8, 2013, the court acquitted the head of Edipower S.p.A.'s power station for the offence with which he was charged "because there is no case to answer".
On September 3, 2013 the public prosecutor at the Brindisi Court issued a notification that an appeal had been filed against the sentence of the Brindisi Court. On May 29, 2015, the Court of Appeal of Lecce confirmed the acquittal sentence issued by the Court of Brindisi.
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.
153
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 does not quantify the damages allegedly suffered by Carlo Tassara as a result of these transactions, referring for their determination to the outcome in the course of proceedings. The first hearing was scheduled for December 1, 2015.
The following information is provided in connection with the main litigation of a fiscal nature.
* * *
On January 20, 2014 the Regional Department of the Lombardy Tax Revenue Office – Milan Large Taxpayers Section – initiated a general audit of A2A S.p.A. for IRES, IRAP and VAT purposes for fiscal 2010. This audit was completed on December 15, 2014. The findings are related to violations exclusively regarding direct taxation. On January 14, 2015, the company also requested a report of facts ascertained, and following notification of the tax assessments by the Tax Authorities, on March 31, 2015, adhered to the tax claim.
On December 27, 2011 the Municipality of Milan served payment notices for COSAP (a fee paid for occupying public spaces and areas) for the years 2003 to 2011. An application was filed for annulment of these notices by internal revocation, which the Municipality rejected. The company filed a summons with the Court of Milan against this rejection on July 11, 2012 and on September 25, 2012 filed an appeal with the regional administrative court. In December 2014, payment notices were served for the years 2012-2014. In February 2015, a settlement agreement was entered into with the Municipality of Milan for the final conclusion of the COSAP litigation for the years 2003 to 2011 and a claim was filed before the Regional Administrative Court of Milan against the payment notices for the years from 2012 to 2014.
On January 24, 2013 the Finance Police - Brescia Unit commenced a general tax audit of Aprica S.p.A. (now A2A Ambiente S.p.A.) for IRES, IRAP and VAT purposes for fiscal 2009 and for fiscal 2010, an audit only to ensure that the requirements of Decree Law no. 78/2009 (the "Tremonti ter") had been fulfilled. This audit was completed on March 25, 2014. The findings mainly related to violations regarding direct taxation. On July 31, 2014 an assessment was served for 2009 which the company accepted, paying the amount due on August 29, 2014 and thereby putting a final end to the authorities' claim. For the year 2010, no assessment notices have yet been notified.
154
On September 4, 2014, the Tax Revenue Office - Brescia Provincial Department - began a general tax audit of Partenope Ambiente S.p.A. (now A2A Ambiente S.p.A.) for fiscal 2011 for IRES, IREP and VAT purposes. This audit was completed on October 6, 2014. The findings mainly related to violations exclusively regarding direct taxation. On July 7, 2015, a notice of assessment was served for the year 2011. The company is assessing the action to be taken.
On March 7, 2013, the Brescia Customs Agency commenced a technical audit of the Brescia waste to energy plant owned by Aprica S.p.A. (now owned by A2A Ambiente S.p.A.). The audit was completed on January 16, 2014 with the serving of a formal notice of assessment for the years 2008 to 2011. For 2008 and 2009, the Customs Authority served payment notices on May 7 and 21, 2014 together with the respective penalties. The company appealed against these two demands in July 2014. For the year 2009, in December 10, 2014, the company signed a conciliation agreement with the Customs Agency of Brescia for the final closure of the dispute and the consequent termination of the proceedings. For 2008, the litigation of first instance ended favorably for the company. On August 5, 2014, the Customs Authority served formal notices of assessment for 2012 and 2013. The company is assessing the action to be taken.
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.
155
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 favorable 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. filed a cross-appeal on November 9, 2012.
The outcomes of the 2002 and 2003 disputes were also favorable 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. For 2003 the appeal made by the Tax Revenue Office was discussed on November 7, 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. For 2001 and 2002, the hearing dates for discussion before the Supreme Court have not yet been set.
On December 23, 2009 the Milan Tax Revenue Office served A2A Trading S.r.l. with a VAT tax assessment regarding fiscal 2004. This notice cited the company's failure to invoice taxable transactions and required the company to pay additional VAT as well as penalties and interest amounting to a total of 3.3 million euro.
In particular, under this assessment the Tax Revenue Office served a penalty on A2A Trading S.r.l. for not having invoiced the tollee (Edipower S.p.A.) for the Green Certificates allegedly transferred between the two.
After appropriate examination, which also included the other tollers, it was considered that the Tax Revenue Office's conclusions could not be accepted. In fact under tolling arrangements tollers are on the one hand the owners of the raw materials, including fuel, that they supply to the tollees to produce electricity, and on the other are the "ab origine" owners of the electricity produced. The delivery of Green Certificates to tollees by tollers can in no way be considered to be the transfer of title of such.
A2A Trading S.r.l. has therefore not committed any breach of law and accordingly no provision has been made in the financial statements for this matter.
156
On December 16, 2010, the Milan Tax Revenue Office served notice of a VAT tax assessment regarding fiscal 2005 and on October 31, 2011 notice of a VAT tax assessment regarding fiscal 2006 for the same reasons, with the resulting demands for additional value added tax plus penalties and interest totalling 5.2 million euro and 11.2 million euro respectively. As in the case of 2004, A2A Trading S.r.l. has not committed any breach of law and accordingly no provision has been made in the financial statements for this matter.
A2A Trading S.r.l. has filed an appeal with the relevant bodies against both notices, requesting that the claim for additional taxes be fully annulled.
The Milan Provincial Tax Commission upheld the company's appeals for all years under dispute.
On March 12, 2013 the Tax Revenue Office stated its acceptance, for 2006, of the sentence for the part relating to the dispute regarding the green certificates and filed an appeal with respect to the remaining findings (283,454.16 euro). The Regional Tax Commission rejected the appeal and the Office filed an appeal against this decision with the Supreme Court on August 5, 2014, which was followed by a cross appeal by the company. On May 6, 2013 the Tax Revenue Office notified that it was waiving its appeal and applying for a dismissal of the case for 2004 and 2005.
Note that following the request for documentation regarding Green Certifications for the same tolling contract in tax years from 2007 to 2010, on October 28, 2011 the Italian Guardia di Finanza - Milan Office served notice of the Report on Findings, highlighting the same failure to bill taxable transactions for the years 2007, 2008 and 2010. No assessment notices have yet been notified.
The Group had an excess of environmental certificates (Green Certificates and White Certificates) at June 30, 2015.
The application of Resolution no. 447/13 of the AEEGSI could lead to benefits for the Group in future years, although the amount is currently not quantifiable.
* * *
In response to Consob Recommendation no. 61493 published in July 2013, the A2A Group has carried out detailed analyses which have led to the identification of the hydroelectric production sector as the area applicable to the Group.
157
The investments made in this sector in 2013 were of a marginal amount and due to ordinary maintenance.
In addition, the A2A Group plans to make investments in the hydroelectric sector in the coming years and in particular to incur expenditure for maintenance and for increasing the energy efficiency of plants located in Lombardy and Calabria.
* * *
The company has availed itself of the possibility permitted by article 70, paragraph 8 and article 71, paragraph 1-bis of the Issuers' Regulations, and hence of derogating from the requirement to publish an information document in the event of significant mergers, spinoffs, share capital increases by means of the contribution of assets in kind, acquisitions and disposals.
Attachments to the notes to the Half-yearly financial report
| Tangible assets | Net book | First | Changes during the period | ||
|---|---|---|---|---|---|
| Millions of euro | value at 12 31 2014 |
consolidation Bellisolina/SED and Bergamo Servizi |
Investments | Changes in category |
|
| Land | 270 | 2 | |||
| Buildings | 949 | 2 | 1 | 5 | |
| Plant and machinery | 4,136 | 1 | 31 | 40 | |
| Industrial and commercial equipment | 20 | 1 | |||
| Other assets | 52 | 6 | 2 | ||
| Landfills | 30 | ||||
| Construction in progress and advances | 109 | 56 | (47) | ||
| Leasehold improvements | 57 | 7 | |||
| Leased assets | 2 | ||||
| Total tangible assets | 5,625 | 5 | 102 | - |
| Tangible assets | Net book | Changes during the year | |||
|---|---|---|---|---|---|
| Millions of euro | value at 12 31 2013 |
Investments | Changes in | Other changes | |
| category | Gross value |
Accumulated depreciation |
|||
| Land | 245 | 26 | |||
| Buildings | 986 | 3 | 11 | (4) | 1 |
| Plant and machinery | 4,438 | 83 | 75 | 67 | (56) |
| Industrial and commercial equipment | 40 | 5 | (24) | 3 | |
| Other assets | 57 | 9 | 3 | (5) | 2 |
| Landfills | 27 | 1 | 23 | (13) | |
| Construction in progress and advances | 107 | 107 | (96) | (8) | |
| Leasehold improvements | 24 | 30 | 6 | 3 | (1) |
| Leased assets | 6 | (55) | 52 | ||
| Total tangible assets | 5,930 | 237 | - | 23 | (12) |
Half-yearly financial report at June 30, 2015
1 - Statement of changes in tangible assets
| Changes during the period | Changes during the period | |||||||
|---|---|---|---|---|---|---|---|---|
| Investments Changes in |
Other changes | Disposals/Sales | Total | value at 06 30 2015 |
||||
| category | Gross value |
Accumulated depreciation |
Asset value |
Accumulated depreciation |
changes for the period |
|||
| (1) | (1) | 271 | ||||||
| 5 | (20) | (14) | 937 | |||||
| (2) | (3) | 2 | (132) | (64) | 4,073 | |||
| 1 | (2) | - | 20 | |||||
| 1 | (3) | 3 | (7) | 2 | 54 | |||
| (3) | (3) | (6) | 24 | |||||
| 1 | 10 | 119 | ||||||
| (3) | 4 | 61 | ||||||
| - | ||||||||
| (2) | - | (6) | 5 | (168) | (69) | 5,561 |
| Net book | Changes during the year | ||||||
|---|---|---|---|---|---|---|---|
| Total at 12 31 2014 |
Write-downs Depreciation Disposals/Sales |
||||||
| changes for the year |
Accumulated depreciation |
Asset value |
|||||
| 25 | (1) | ||||||
| (37) | (42) | (6) | |||||
| (302) | (311) | 5 | (13) | (152) | |||
| (20) | (4) | ||||||
| (5) | (14) | 2 | (2) | ||||
| 3 | (8) | ||||||
| 2 | (1) | ||||||
| 33 | (4) | (1) | |||||
| (4) | (1) | ||||||
| (305) | (385) | 7 | (16) | (159) |
| Intangible assets | Net book | First | Changes during the period | ||
|---|---|---|---|---|---|
| Millions of euro | value at 12 31 2014 |
consolidation Bellisolina/SED and Bergamo Servizi |
Acquisitions | Changes in category |
|
| Industrial patent and intellectual property rights |
34 | 2 | |||
| Concessions, licences, trademarks and similar rights |
766 | 25 | 1 | ||
| Goodwill | 482 | ||||
| Assets in progress | 15 | 4 | (1) | ||
| Other intangible assets | 21 | ||||
| Total intangible assets | 1,318 | - | 31 | - |
| Intangible assets | Net book | Changes during the year | Changes during the year | Net book value |
|||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Millions of euro | value at 12 31 2013 |
Acquisitions | Changes in | Reclassifications/Other changes | Disposals/Sales | Write-downs | Amortization | Total | at 12 31 2014 | ||||||||
| category | Gross value |
Accumulated amortization |
Asset value |
Accumulated amortization |
changes for the year |
||||||||||||
| Industrial patent and intellectual | |||||||||||||||||
| property rights | 36 | 5 | 11 | (1) | (17) | (2) | |||||||||||
| Concessions, licences, trademarks and similar rights |
748 | 48 | 12 | 1 | (4) | 3 | (42) | 18 | |||||||||
| Goodwill | 482 | ||||||||||||||||
| Assets in progress | 21 | 17 | (23) | (6) | |||||||||||||
| Other intangible assets | 19 | 4 | (2) | 2 | |||||||||||||
| Total intangible assets | 1,306 | 70 | - | 4 | (4) | 3 | - | (61) | 12 |
Half-yearly financial report at June 30, 2015
2 - Statement of changes in intangible assets
| Intangible assets Net book First Changes during the period |
Changes during the period | |||||||
|---|---|---|---|---|---|---|---|---|
| Millions of euro value consolidation Acquisitions Changes in at 12 31 2014 Bellisolina/SED |
Disposals/Sales Reclassifications/Other changes |
Write-downs | Amortization | value at 06 30 2015 |
||||
| category and Bergamo |
Gross | Accumulated | Asset | Accumulated | changes for the period |
|||
| Servizi | value | amortization | value | amortization | ||||
| Industrial patent and intellectual | ||||||||
| property rights 34 2 |
(7) | (5) | 29 | |||||
| Concessions, licences, trademarks and similar | ||||||||
| rights 766 25 1 |
1 | (3) | 2 | (23) | 3 | 769 | ||
| Goodwill 482 |
- | 482 | ||||||
| Assets in progress 15 4 (1) |
(1) | 2 | 17 | |||||
| Other intangible assets 21 |
(14) | (1) | (15) | 6 | ||||
| Total intangible assets 1,318 - 31 - |
(14) | - | (3) | 2 | - | (31) | (15) | 1,303 |
| Intangible assets Net book Changes during the year |
Changes during the year | |||||||
|---|---|---|---|---|---|---|---|---|
| Millions of euro value Acquisitions Changes in Reclassifications/Other changes at 12 31 2013 |
Disposals/Sales Write-downs |
Amortization | Total | value at 12 31 2014 |
||||
| category Gross Accumulated |
Asset | Accumulated | changes for the year |
|||||
| value amortization |
value | amortization | ||||||
| Industrial patent and intellectual | ||||||||
| property rights 36 5 11 (1) |
(17) | (2) | 34 | |||||
| Concessions, licences, trademarks and similar | ||||||||
| rights 748 48 12 1 |
(4) | 3 | (42) | 18 | 766 | |||
| Goodwill 482 |
482 | |||||||
| Assets in progress 21 17 (23) |
(6) | 15 | ||||||
| Other intangible assets 19 4 |
(2) | 2 | 21 | |||||
| Total intangible assets 1,306 70 - 4 |
(4) | 3 | - | (61) | 12 | 1,318 |
| Company name | Registered office | Currency | Share capital (thousands) |
|
|---|---|---|---|---|
| Scope of consolidation A2A Reti Gas S.p.A. |
Brescia | Euro | 445,000 | |
| A2A Reti Elettriche S.p.A. | Brescia | Euro | 520,000 | |
| A2A Calore & Servizi S.r.l. | Brescia | Euro | 150,000 | |
| Selene S.p.A. | Brescia | Euro | 3,000 | |
| A2A Servizi alla Distribuzione S.p.A. | Brescia | Euro | 2,000 | |
| A2A Energia S.p.A. | Milan | Euro | 2,000 | |
| A2A Trading S.r.l. | Milan | Euro | 1,000 | |
| A2A Logistica S.p.A. | Brescia | Euro | 250 | |
| A2A Ciclo Idrico S.p.A. | Brescia | Euro | 70,000 | |
| A2A Ambiente S.p.A. | Brescia | Euro | 220,000 | |
| Aspem Energia S.r.l. | Varese | Euro | 2,000 | |
| A2A Montenegro d.o.o. | Podgorica (Montenegro) | Euro | 100 | |
| Mincio Trasmissione S.r.l. | Brescia | Euro | 10 | |
| Assoenergia S.p.A. in liquidation | Brescia | Euro | 126 | |
| Abruzzoenergia S.p.A. | Gissi (CH) | Euro | 130,000 | |
| Retragas S.r.l. | Brescia | Euro | 34,495 | |
| Aspem S.p.A. | Varese | Euro | 174 | |
| Varese Risorse S.p.A. | Varese | Euro | 3,624 | |
| Ostros Energia S.r.l. in liquidation | Brescia | Euro | 350 | |
| Camuna Energia S.r.l. | Cedegolo (BS) | Euro | 900 | |
| A2A Alfa S.r.l. | Milan | Euro | 100 | |
| Plurigas S.p.A. in liquidation | Milan | Euro | 800 | |
| SEASM S.r.l. | Brescia | Euro | 700 | |
| Proaris S.r.l. | Milan | Euro | 1,875 | |
| Edipower S.p.A. (*) | Milan | Euro | 1,139,312 | |
| Ecofert S.r.l. in liquidation | S. Gervasio Bresciano (BS) | Euro | 100 | |
| A3A S.r.l. | Brescia | Euro | 10 | |
| Ecodeco Hellas S.A. | Atene | Euro | 60 | |
| Ecolombardia 18 S.r.l. | Milan | Euro | 378 | |
| Ecolombardia 4 S.p.A. | Milan | Euro | 13,515 | |
| Sicura S.r.l. | Milan | Euro | 1,040 | |
| Sistema Ecodeco UK Ltd | Canvey Island Essex (UK) | GBP | 250 | |
| Vespia S.r.l. in liquidation | Milan | Euro | 10 | |
| A.S.R.A.B. S.p.A. | Cavaglià (BI) | Euro | 2,582 | |
| Nicosiambiente S.r.l. | Milan | Euro | 50 | |
| Bioase S.r.l. | Sondrio | Euro | 677 | |
| Montichiariambiente S.r.l. | Brescia | Euro | 10 | |
| Aprica S.p.A. | Brescia | Euro | 20,000 | |
| Amsa S.p.A. | Milan | Euro | 10,000 | |
| Bellisolina S.r.l. | Montanaso (LO) | Euro | 10 | |
| SED S.r.l. | Robassomero (TO) | Euro | 1,250 | |
| Bergamo Servizi S.r.l. | Sarnico (BG) | Euro | 10 | |
| Elektroprivreda Cnre Gore AD Niksic (EPCG) | Niksic (Montenegro) | Euro | 907,108 | |
| EPCG d.o.o. Beograd | Beograd (Serbia) | Dinar RSD | 3,101 | |
| Zeta Energy d.o.o. | Danilovgrad (Montenegro) | Euro | 14,240 |
(*) The percentage does not take into account the possibility that the put option may be exercised.
3 - List of companies included in the consolidated financial statements
| Valuation method | Shareholder | Shareholding % |
% of shareholding consolidated by Group at 06 30 2015 |
|---|---|---|---|
| Line-by-line consolidation | A2A S.p.A. | 100.00% | 100.00% |
| Line-by-line consolidation | A2A S.p.A. | 100.00% | 100.00% |
| Line-by-line consolidation | A2A S.p.A. | 100.00% | 100.00% |
| Line-by-line consolidation | A2A S.p.A. | 100.00% | 100.00% |
| Line-by-line consolidation | A2A Reti Gas S.p.A. | 100.00% | 100.00% |
| Line-by-line consolidation | A2A S.p.A. | 100.00% | 100.00% |
| Line-by-line consolidation | A2A S.p.A. | 100.00% | 100.00% |
| Line-by-line consolidation | A2A S.p.A. | 100.00% | 100.00% |
| Line-by-line consolidation | A2A S.p.A. | 100.00% | 100.00% |
| Line-by-line consolidation | A2A S.p.A. | 100.00% | 100.00% |
| Line-by-line consolidation | A2A Energia S.p.A. | 100.00% | 100.00% |
| Line-by-line consolidation | A2A S.p.A. | 100.00% | 100.00% |
| Line-by-line consolidation | A2A S.p.A. | 100.00% | 100.00% |
| Line-by-line consolidation | A2A S.p.A. | 97.76% | 97.76% |
| Line-by-line consolidation | A2A S.p.A. | 100.00% | 100.00% |
| Line-by-line consolidation | A2A S.p.A. (87.27%) A2A Reti Gas S.p.A. (4.33%) |
91.60% | 91.60% |
| Line-by-line consolidation | A2A S.p.A. | 90.00% | 90.00% |
| Line-by-line consolidation | Aspem S.p.A. | 100.00% | 100.00% |
| Line-by-line consolidation | A2A S.p.A. | 80.00% | 80.00% |
| Line-by-line consolidation | A2A S.p.A. | 74.50% | 74.50% |
| Line-by-line consolidation | A2A Trading S.r.l. | 70.00% | 70.00% |
| Line-by-line consolidation | A2A S.p.A. | 70.00% | 70.00% |
| Line-by-line consolidation | A2A S.p.A. | 67.00% | 67.00% |
| Line-by-line consolidation | A2A S.p.A. | 60.00% | 60.00% |
| Line-by-line consolidation | A2A S.p.A. | 79.50% | 79.50% |
| Line-by-line consolidation | A2A S.p.A. | 47.00% | 47.00% |
| Line-by-line consolidation | A2A S.p.A. | 100.00% | 100.00% |
| Line-by-line consolidation | A2A Ambiente S.p.A. | 100.00% | 100.00% |
| Line-by-line consolidation | A2A Ambiente S.p.A. | 98.86% | 98.86% |
| Line-by-line consolidation | A2A Ambiente S.p.A. | 68.58% | 68.58% |
| Line-by-line consolidation | A2A Ambiente S.p.A. | 96.80% | 96.80% |
| Line-by-line consolidation Line-by-line consolidation |
A2A Ambiente S.p.A. A2A Ambiente S.p.A. |
100.00% 99.90% |
100.00% 99.90% |
| Line-by-line consolidation | A2A Ambiente S.p.A. | 70.00% | 70.00% |
| Line-by-line consolidation | A2A Ambiente S.p.A. | 99.90% | 99.90% |
| Line-by-line consolidation | A2A Ambiente S.p.A. | 70.00% | 70.00% |
| Line-by-line consolidation | A2A Ambiente S.p.A. | 100.00% | 100.00% |
| Line-by-line consolidation | A2A Ambiente S.p.A. | 100.00% | 100.00% |
| Line-by-line consolidation | A2A Ambiente S.p.A. | 100.00% | 100.00% |
| Line-by-line consolidation | A2A Ambiente S.p.A. | 100.00% | 100.00% |
| Line-by-line consolidation | A2A Ambiente S.p.A. | 80.00% | 80.00% |
| Line-by-line consolidation | Aprica S.p.A. | 100.00% | 100.00% |
| Line-by-line consolidation | A2A S.p.A. | 41.75% | 41.75% |
| Line-by-line consolidation | EPCG | 100.00% | 100.00% |
| Line-by-line consolidation | EPCG | 51.00% | 57.86% |
| Company name | Registered office | Currency | Share capital (thousands) |
Shareholding % |
Shareholder at 06 30 2015 (thousands) |
Carrying amount |
Valuation method | |||
|---|---|---|---|---|---|---|---|---|---|---|
| Shareholdings in companies carried at equity | ||||||||||
| PremiumGas S.p.A. | Bergamo | Euro | 120 | 50.00% | A2A Alfa S.r.l. | 3,129 | Equity | |||
| Ergosud S.p.A. | Roma | Euro | 81,448 | 50.00% | A2A S.p.A. | - | Equity | |||
| Ergon Energia S.r.l. in liquidation | Milan | Euro | 600 | 50.00% | A2A S.p.A. | - | Equity | |||
| Metamer S.r.l. | San Salvo (CH) | Euro | 650 | 50.00% | A2A Energia S.p.A. | 1,710 | Equity | |||
| SET S.p.A. | Toscolano Maderno (BS) | Euro | 104 | 49.00% | A2A S.p.A. | 902 | Equity | |||
| Azienda Servizi Valtrompia S.p.A. | Gardone Val Trompia (BS) | Euro | 6,000 | 49.15% | A2A S.p.A. (48.77%) A2A Reti Gas S.p.A. (0.38%) |
4,874 | Equity | |||
| Ge.S.I. S.r.l. | Brescia | Euro | 1,000 | 44.50% | A2A S.p.A. | 1,931 | Equity | |||
| Centrale Termoelettrica del Mincio S.r.l. | Ponti sul Mincio (MN) | Euro | 11 | 45.00% | A2A S.p.A. | 3 | Equity | |||
| Serio Energia S.r.l. | Concordia sulla Secchia (MO) | Euro | 1,000 | 40.00% | A2A S.p.A. | 850 | Equity | |||
| Visano Soc. Trattamento Reflui S.c.a.r.l. | Brescia | Euro | 25 | 40.00% | A2A S.p.A. | 10 | Equity | |||
| LumEnergia S.p.A. | Lumezzane (BS) | Euro | 300 | 33.33% | A2A Energia S.p.A. | 214 | Equity | |||
| Sviluppo Turistico Lago d'Iseo S.p.A. | Iseo (BS) | Euro | 1,616 | 24.29% | A2A S.p.A. | 833 | Equity | |||
| ACSM-AGAM S.p.A. | Monza | Euro | 76,619 | 21.94% | A2A S.p.A. | 35,244 | Equity | |||
| Futura S.r.l. | Brescia | Euro | 2,500 | 20.00% | A2A Calore & Servizi S.r.l. | 638 | Equity | |||
| Prealpi Servizi S.r.l. | Varese | Euro | 5,451 | 12.47% | Aspem S.p.A. | 897 | Equity | |||
| COSMO Società Consortile a Responsabilità Limitata | Brescia | Euro | 100 | 52.00% | A2A Calore & Servizi S.r.l. | 69 | Equity | |||
| G.Eco S.r.l. | Treviglio (BG) | Euro | 500 | 40.00% | Aprica S.p.A. | 3,400 | Equity | |||
| Bergamo Pulita S.r.l. | Bergamo | Euro | 10 | 50.00% | A2A Ambiente S.p.A. | - | ||||
| Tecnoacque Cusio S.p.A. | Omegna (VB) | Euro | 206 | 25.00% | A2A Ambiente S.p.A. | 242 | ||||
| Rudnik Uglja Ad Pljevlja | Pljevlja (Montenegro) | Euro | 21,493 | 39.49% | A2A S.p.A. | 19,067 | Equity | |||
| Total shareholdings | 74,013 |
Half-yearly financial report at June 30, 2015
4 - List of shareholdings in companies carried at equity
| Carrying amount at 06 30 2015 (thousands) |
Shareholder | % | Shareholding | Valuation method |
|---|---|---|---|---|
| 3,129 | A2A Alfa S.r.l. | 50.00% | Equity | |
| - | A2A S.p.A. | 50.00% | Equity | |
| - | A2A S.p.A. | 50.00% | Equity | |
| 1,710 | A2A Energia S.p.A. | 50.00% | Equity | |
| 902 | A2A S.p.A. | 49.00% | Equity | |
| 4,874 | A2A S.p.A. (48.77%) A2A Reti Gas S.p.A. (0.38%) |
49.15% | Equity | |
| 1,931 | A2A S.p.A. | 44.50% | Equity | |
| 3 | A2A S.p.A. | 45.00% | Equity | |
| 850 | A2A S.p.A. | 40.00% | Equity | |
| 10 | A2A S.p.A. | 40.00% | Equity | |
| 214 | A2A Energia S.p.A. | 33.33% | Equity | |
| 833 | A2A S.p.A. | 24.29% | Equity | |
| 35,244 | A2A S.p.A. | 21.94% | Equity | |
| 638 | A2A Calore & Servizi S.r.l. | 20.00% | Equity | |
| 897 | Aspem S.p.A. | 12.47% | Equity | |
| 69 | A2A Calore & Servizi S.r.l. | 52.00% | Equity | |
| 3,400 | Aprica S.p.A. | 40.00% | Equity | |
| - | A2A Ambiente S.p.A. | 50.00% | Equity | |
| 242 | A2A Ambiente S.p.A. | 25.00% | Equity | |
| 19,067 | A2A S.p.A. | 39.49% | Equity | |
| 74,013 |
| Company name | Shareholding % |
Shareholder | Carrying value at 06 30 2015 (thousands) |
|---|---|---|---|
| Available-for-sale financial assets (AFS) | |||
| Infracom S.p.A. | 0.44% | A2A S.p.A. | 155 |
| Immobiliare-Fiera di Brescia S.p.A. | 5.83% | A2A S.p.A. | 642 |
| Azienda Energetica Valtellina e Valchiavenna S.p.A. (AEVV) | 9.39% | A2A S.p.A. | 1,846 |
| Other: | |||
| Alesa S.r.l. | 6.01% | A2A Reti Gas S.p.A. | |
| AQM S.r.l. | 7.52% | A2A S.p.A. | |
| AvioValtellina S.p.A. | 0.18% | A2A S.p.A. | |
| Banca di Credito Cooperativo di Calcio e Covo Società Cooperativa | n.s. | A2A S.p.A. | |
| Brescia Mobilità S.p.A. | 0.25% | A2A S.p.A. | |
| Cavaglià Sud S.r.l. in liquidation | 1.00% | A2A Ambiente S.p.A. | |
| Consorzio DIX.IT in liquidation | 14.28% | A2A S.p.A. | |
| Consorzio Ecocarbon | n.s. | A2A Ambiente S.p.A. | |
| Consorzio Italiano Compostatori | n.s. | A2A Ambiente S.p.A. | |
| Consorzio L.E.A.P. | 10.53% | A2A S.p.A. | |
| Consorzio Milano Sistema in liquidation | 10.00% | A2A S.p.A. | |
| Consorzio Polieco | n.s. | A2A Ambiente S.p.A. | |
| Emittenti Titoli S.p.A. | 1.85% | A2A S.p.A. | |
| E.M.I.T. S.r.l. in liquidation | 10.00% | A2A S.p.A. | |
| Guglionesi Ambiente S.c.a.r.l. | 1.01% | A2A Ambiente S.p.A. | |
| INN.TEC. S.r.l. in liquidation | 11.45% | A2A S.p.A. | |
| Isfor 2000 S.c.p.a. | 4.94% | A2A S.p.A. | |
| S.I.T. S.p.A. | 0.26% | Aprica S.p.A. | |
| Stradivaria S.p.A. | n.s. | A2A S.p.A. |
5 - List of available-for-sale financial assets
| Company name | Shareholding % |
Shareholder | Carrying value at 06 30 2015 (thousands) |
|---|---|---|---|
| Tirreno Ambiente S.p.A. | 3.00% | A2A Ambiente S.p.A. | |
| Prva banka Crne Gore A.D. Podgorica (*) | 19.76% | EPCG | |
| DI.T.N.E. | 1.45% | Edipower S.p.A. | |
| SIRIO S.C.P.A. | 0.02% | Edipower S.p.A. | |
| ORIONE S.C.P.A. | 0.22% | Edipower S.p.A. | |
| Total other financial assets | 6,199 | ||
| Total available-for-sale financial assets | 8,842 |
(*) It is noted that the shareholding in Prva banka Crne Gore A.D. Podgorica, also taking into account the preference shares with no voting rights amounts to 24.10% of share capital.
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.
172
Legislative Decree no. 79/1999 (hereafter the Bersani decree) liberalized energy production: with the objective of encouraging competition in the market it prescribed that from January 2003 no producer may generate or directly or indirectly import more than 50% of the total electricity produced and imported in Italy.
In addition, the Bersani Decree set the requirement to give priority to the use (dispatch priority) of electricity produced from renewable energy sources (in addition to that produced by cogeneration) when transmitting and dispatching electricity.
With effect from 2001, importers and entities in charge of plants which in any one year import or produce more than 100 GWh of electricity from non-renewable sources are required to put into the national electricity grid, in the following year, a proportion of electricity produced by renewable source plants, excluding cogeneration, self-consumption at the plant and exports, initially equal to 2% of the total produced/imported. These entities may also meet this requirement, wholly or in part, by buying the equivalent proportion or the relative allowances (Green Certificates, which attest the production of a specific quantity of electricity certified as produced from renewables) from other producers or from the GRTN (now the GSE).
By way of Legislative Decree no. 387/03, implementing Directive 2001/77/EC and relating to the encouragement of electricity produced from renewable energy sources in the internal electricity market, additional requirements on the matter were subsequently set out, including:
• regulation by the Electricity, Gas and Water Authority of local exchange services for plants fuelled by renewable sources having a power not exceeding 20 kW (the right to the service was subsequently extended by Law no. 244/07 to plants having a power not exceeding 200 kW) and of dedicated services for the withdrawal (by the GSE) of the electricity produced by plants fuelled by renewable sources having a power less than 10 MVA and by plants having any power fuelled by renewable wind, solar, geothermic, wave power, tidal power and hydraulic power sources, limited in the latter case to flowing water plants;
• the introduction of specific measures to encourage the use of solar power (in the form of an incentive tariff of decreasing amount having a duration such as to ensure a fair remuneration of the investment and usage costs), which then led to the Energy Account.
In addition, by way of Law no. 244/07 (the 2008 Finance Law), an All-Inclusive Tariff was introduced which acts as an incentive mechanism, an alternative to Green Certificates, reserved for IAFR qualified plants (plants fuelled by renewable sources), having an average annual nominal power not exceeding 1 MW or 0.2 MW for wind plants. This law also revised a number of provisions regarding Green Certificates.
Implementing the requirements of Directive 2009/28/EC, Legislative Decree no. 28/2011 governs the criteria for setting up incentive regimes designed to achieve the renewable production targets for the period up to 2020, then implemented by the Ministerial Decree of July 6, 2012. The provisions set out in the decree are applicable for electricity production plants fuelled by renewable sources other than photovoltaic plants, having a power not less than 1 kW, to which incentive tariffs are recognized for which they have direct access for power levels below the thresholds set by the law, or as the result of tender procedures for power levels above these. The decree additionally grants a net production incentive for plants which produce electricity from renewable sources which began operations by December 31, 2012 and which have acquired the right to use Green Certificates for the entitlement period remaining after 2015.
173
Changes in legislation over the past few years have in real terms led to the continuation by the present holders of the use of existing concessions even if they have formally expired, including certain of these held by A2A S.p.A., having introduced regulations to enable tenders to be called. More specifically, article 37, paragraph 4 of Law 134/2012 converting Decree Law no. 83/2012, the "Growth Decree", confirmed the period of 5 years before the expiry of the concession as being the time limit within which a tender must be called for reassignment and set the term of new concessions in 20 years, extendible to 30 years depending on the size of the investments granted according to the criteria established by an implementing Ministerial Decree, not yet issued. In addition, a special transitional regime (accelerating) has been provided for calling tenders for concessions which have already expired or which expire on Half-yearly financial report at June 30, 2015 Generation and Trading Business Unit
or before December 31, 2017 (those which were unable to comply with the 5 year period for calling the tender). These tenders must be called within two years of the effective date of the above implementing Ministerial Decree. The new concession must start at the end of the fifth year following the original expiry date and in any case no later than December 31, 2017. The failure to issue, to date, Ministerial Decree Tenders and the expected compressibility of the related duration, constitutes an inevitable extension de facto of the management from existing concessionaires, even for these derivations that have already expired, beyond the deadline of the end of 2017, according to the provision of paragraph 8 bis article 12 of Legislative Decree 79/1999, according to which until the new contractor takes over, the concession is automatically - continued by the proprietor under unchanged conditions, and with no need for additional administrative measures.
In terms of the pass of the concession from the outgoing to the incoming operator, the legislator (art. 37 cit., paragraphs 5 and 6) has opted for the sale of the business unit used for the concession against the payment of a price which has been previously established and agreed between the outgoing operator and the granting administration, which is published in the tender offer. The task of defining the technical and economic parameters to determine the fee and the amount payable to the outgoing concessionaires (respectively for the dry and wet works) is entrusted to Ministerial Decree Tenders, after consulting with the AEEGSI. If no agreement can be reached between the outgoing concessionaire and the granting administration on the size of the consideration and the amount, an arbitration procedure comes into play.
174
In September 2013, the European Commission sent the Italian government a default notice stating that certain of the provisions just referred to (in particular the timing of the tender and the means by which the business should be transferred) and recently introduced by the Italian legislator (by way of Law no. 134/2012 converting Decree Law no. 83/2012 the "Development Law"), as well as certain rules in the legislation of the autonomous provinces of Trento and Bolzano, are inconsistent with the principles and laws of community law (freedom of establishment; article 12 of the "Bolkestein Directive" 2006/123/EC). Despite the evaluation of pro-competitiveness made by the Constitutional Court (Sent. 28/2014) on the rules introduced by art. 37 (defined as provisions that "are designed to simplify access for economic operators to the energy market under uniform conditions across the country by regulating the relative published procedures with regard to the timing of the bids and the contents of the tenders"), the Italian Government has recently decided to report to the European Commission a possible amendment to said regulations, as part of an overall regulatory reorganization of the sector.
In terms of regional regulations, the Lombardy Region, first by Law no. 19/2010 and then by Law no. 35/2014 amended Regional Law no. 26/2003, inserting article 53-bis, which governs the temporary continuation of the exercise for expired concessions, contemplating the possibility for the Region to impose, with subsequent resolutions - not taken to date - an additional fee to be paid as of January 1, 2011. On February 20, 2015, said regulations were appealed by the Government before the Constitutional Court, thus the related verdict of the Consulta is pending.
Moreover, by way of executive decree 11849 of December 5, 2014, the unit amounts of regional State fees applicable to small and large derivations have been updated to 2015 (respectively 15.44 €/kW and 31.09 €/kW). A Decree of November 22, 2013, set the amount at which the additional BIM fees are to be paid by entities awarded hydroelectric derivation concessions for motive-power generation for the two-year period from January 1, 2014 to December 31, 2015. In particular, for each kW of average nominal power granted or recognized, said measure is increased:
175
By way of sentence of the State Council of March 20, 2015 no. 1532, the resolutions of the Authority 342/2012/R/eel and 285/2013/R/eel have been cancelled for lack of reasoning on the urgency and lack of consultation. By way of said resolutions, the Authority had adopted urgent measures concerning containment of dispatching charges due to systematic distortion of imbalance prices. However, by way of the same sentence, the State Council denied the possibility for the sector Authority to adopt a general act regulating matters of imbalances, as well as dispatching charges.
The organic reform of the rules governing the imbalances will be adopted by the Authority in the coming months, also in order to ensure full compatibility of the national regulatory framework with the provisions of the future European Grid Code for balancing (Balancing Network Code), for which entry into force is expected in 2016 and which will require a comprehensive review of the current dispatching rules.
Law no. 116/14 of August 11, 2014, converting Decree Law no. 91/04 ("Competitiveness Decree Law"), among the other measures designed to reduce electricity bills for end customers with a low and medium voltage supply (article 23) the legislation provided (paragraph 3-bis) that until the 380 kV "Sorgente-Rizziconi" power line connecting Sicily with the mainland becomes operational, as well as the other measures aiming to achieve a significant increase in the interconnection capacity between the Sicilian electricity network and that of the mainland, all the electricity production units having power exceeding 50 MW situated in Sicily, with the exclusion of non-programmable renewable plants, shall be considered to be essential resources for the safety of the electricity system, with the requirement for offering on the market of the previous day.
As of January 1, 2015 until the date of entry into operation of the power line (scheduled originally for June 30, 2015), the bid and remuneration procedures of these units were therefore defined by the AEEGSI respectively by way of Resolutions nos. 521 (defining Scheme 91/14) and 500/2014/R/eel.
In particular, for the purpose of defining scheme 91/14, the Authority proposed adopting the cost reintegration approach (article 65 Resolution no. 111/06), which allows a timely recognition of costs, including the fair return on invested capital.
On December 30, 2014, Terna S.p.A. published the list of plants essential for the safety of the electricity system valid for the year 2015, also confirming for the following year the inclusion of the plants in San Filippo del Mela 150 and 220 kV among the units essential for the operation of the electricity market.
176
The mechanism currently in force in Italy for the remuneration of production capacity is the Capacity Payment that was introduced by Legislative Decree no. 379 of 2003 as a transitional system and regulated by the Authority in 2004. It is an administered mechanism whose purpose is to ensure the adequacy of the electricity system in the face of overall national demand especially in the days, defined as critical, where the difference between supply and demand could be at minimum levels.
The current regulation provides for the Authority to define ex ante an amount that is paid for the existing production capacity and enabled for the provision of dispatching services.
Aforementioned Legislative Decree no. 379 of 2003 establishes that the remuneration of the capacity at regime should be based on a market mechanism regulated by Resolution ARG/elt 98/11: an auction system in which operators awarded acquire the right to receive a bonus (in €/MW/year) and the obligation to offer all the capacity awarded in the energy and services markets and return to the counterparty (Terna) the difference between the benchmark prices and the strike prices.
Initially, the Capacity Market involved three-year auctions with a four-year planning horizon, the first auction was expected for 2017. However, by way of Resolution 95/2015/I/eel, the Authority proposed to the Ministry of Economic Development (MSE) to anticipate the first auction already at the end of 2015 with delivery period already in 2017 and with a contract with one-year duration (First implementation phase).
As part of the procedure initiated by way of Resolution 6/2014/R/eel, with Resolution 320/2014/R/eel, the AEEGSI has extended to the Ministry of Economic Development (MSE) a proposal for the integration of the rules of the electricity production capacity remuneration transitional mechanism, in accordance with the provisions of the Stability Law, in force since January 1, 2014, related to the provision of flexibility services.
By way of Resolution 63/2015/R/eel, the Authority settled the amounts resulting from the application of the compensatory mechanism on the average 2004 CCT charge, following the sentence of the State Council no. 463/15.
177
In particular, it is established that Terna and GSE implement the provisions set out in Resolution 299/2012/R/eel concerning the regulation of the economic items pertaining to the application of the CCT compensatory mechanism requiring Terna, no later than March 31, 2015, to pay to the GSE the amount of 9.8 million euro in order to pay the amounts due to the operators: the group companies concerned collected a total of 1,623,564 euro.
By way of Resolutions 45/2015/R/eel and 52/2015/R/eel, the Authority introduced provisions for the management of market coupling with reference to the borders with France, Austria and Slovenia for 2015, initiated on February 24, 2015.
178
By way of Decree of February 6, 2015, the Ministry of Economic Development defined the quantities and criteria for the allocation of storage capacity with reference to the period from April 2015 to March 2016, confirming the competitive auction as procedure for the allocation of said capacity.
By way of Resolution 49/2015/R/gas, the Authority, following the provisions of the aforementioned Decree, defined the relative criteria for conducting the auctions for the awarding of the storage capacity and the procedures for determining the fees applied to the services pursuant to Legislative Decree 130/10.
Said capacity was fully conferred (the last uniform modulation capacity available was allocated as part of the auction procedure on June 16).
Lastly, the Ministry confirmed, even for the period April 2015 - March 2016, the level of strategic storage equal to 4,620 billion cubic meters.
Following the approval in December 2014 by the EU Commission, in January 2015, Execution Regulation no. 1348/2014 entered into force concerning the integrity and transparency of the market.
The Regulation establishes the rules governing the transmission of data to the Agency for the Cooperation of European energy regulators (Acer) and defines the detailed information to be reported in relation to wholesale energy products and basic data. It also indicates the channels for data reporting and timing and frequency of their reporting. These obligations will be effective from October 7, 2015 with respect to information related to the contracts concluded on organized markets, and from April 7, 2016 in relation to other types of transactions considered (OTC, basic technical data concerning infrastructure).
Instead, the following are currently excluded from the present reporting requirements: intragroup contracts, contracts for physical delivery of electricity produced by production units with capacity equal to or less than 10 MW, contracts for the physical supply of gas produced by a single production plant with capacity equal to or less than 20 MW and contracts for balancing services.
In compliance with the provisions of the Regulation, the Authority by way of Resolution 86/2015/E/com set up the National Register of market operators (REMIT Register). The recording obligation is required to be fulfilled by all operators subject to the reporting obligation, and thus market operators (or entities acting on their behalf) that perform operations on wholesale energy markets, the TSO and production infrastructure managers (>10 MW), transport, storage, LNG, as well as consumption units above 600 GWh/year (or entities acting on their behalf).
Article 1, paragraph 1 of Decree Law no. 145/2013 ("Destination Italy"), converted into Law no. 9/2014, establishes that the AEEGSI must update the criteria for determining the reference prices for supplies to end users not served by the open market, taking account of the changes in the actual hourly price trend of electricity on the market.
By way of Resolution no. 170/2014/R/eel the AEEGSI also confirmed the criteria for determining the energy component of the economic conditions for greater protection and accordingly also the previously mentioned payment scheme, considering that it is too early to make structural changes as the dynamics in the setting of electricity market prices are still evolving.
By way of Resolution 549/2014/R/gas, the Authority updated the mechanism parameters related to the mechanism for encouraging the renegotiation of long-term natural gas supply contracts, pursuant to Resolution 447/2013/R/gas.
On February 20, 2015, the Council of Ministers approved the annual Bill for the market and competition (Competition Bill), currently being converted into Law, which includes a number of regulations also in relation to the energy sector. In detail, the Bill provides for the overcoming of the regime of protection and greater protection with effect from January 1, 2018, as well as regulations concerning the separation of brand communication policies between vertically integrated companies (brand unbundling).
In this regard, the Authority, by Resolution 296/2015/R/com of June 23, ordered:
Local public services are now regulated not only by the relevant industry regulations (such as Legislative Decree 164/00 or Legislative Decree 152/06 amended as far as integrated water services are concerned by Decree Law 133/14 converted with Law November 11, 2014 no. 164) by article 34, paragraphs 20-26 of Decree Law of October 18, 2012 no. 179 on "Further urgent measures for the country's growth" ("Growth Decree 2.0"), converted by Law no. 221 of December 17, 2012 and amended by Law no. 9/2014 and Law no. 15/14. In particular, this legislation requires that direct assignments agreed at October 1, 2003 for publicly held companies already listed at that date and for subsidiaries of these pursuant to article 2359 of the Italian civil code should cease at the expiry date specified in the service agreement or other documents governing the relationship. On the other hand assignments not having an expiry date terminate on December 31, 2020, without the possibility for any extension and without the need for the body to adopt a specific resolution.
182
Legislative Decree no. 152 of April 3, 2006 ("Regulations on environmental matters") as subsequently amended, most recently by Legislative Decree no. 205/10 which dictates measures implementing Directive 2008/98/EC on waste, acts as the reference legislation for the environment sector. The most recent substantial amendment to parts II, III, IV and V of Legislative Decree 152/2006 was made by Legislative Decree March 4, 2014 no. 46 on provisions on industrial emissions implementing Directive 2010/75/EU and Integrated Pollution Prevention and Control (IPPC). In particular, AIA activities have been extended and the decree envisages, as specified in Ministerial Decree no. 272 of November 13, 2014, the obligation, if the preliminary Subsistence Verification requires so, to prepare a report with reference to any request for new activity or any substantial authorization changes, that depict the situation of the impacts on the environment and health of the activity, in order to assess the status of the production site before, during and at the end of activities. It should be noted that in this regard, the Note was recently released of the Ministry of Environment of June 17, 2015, no. 12422 - Integrated environmental authorization (AIA) - Additional criteria on application of the guidelines in light of the amendments to Legislative Decree 46/2014.
Article 14 of Decree Law no. 201 of 2011 (the "Save Italy Decree") introduced a new system of paying for urban waste disposal and inseparable services with effect from January 1, 2013 which went by the name of TARES.
As of January 1, 2014 TARES has been replaced by TARI, a part of the IUC, the Single Municipal Tax introduced by the Letta government in the 2014 Finance Law (Law no. 147 of December 27, 2013 on "Provisions for the formation of the State's annual and long-term budget").
183
Legislative Decree March 4, 2014 no. 46 on provisions on industrial emissions implementing Directive 2010/75/EU (also referred to as IED – Industrial Emission Directive) introduced new regulations having an effect on all industrial plants, with new limits on atmospheric emissions and increased and tighter controls. By way of implementing this provision, starting in 2016, also the regulations to be followed by waste-to-energy plants, currently dictated by Legislative Decree no. 133/05, will be introduced by Legislative Decree no. 152/06 in the text dictated by Legislative Decree 46/14.
By way of Decree Law no. 150 of December 30, 2013 ("Thousand Extensions Decree"), a further extension, to December 31, 2014, was introduced for disposing of special urban waste with PCI > 13,000 kj/kg in a landfill.
In December, a decision and two EU regulations were issued that impact the classification methods of waste at European level:
• EU Commission Regulation 1342/2014/EU on persistent organic pollutants with amendment of Annexes IV and V of Regulation 850/2004/EC.
The impacts specifically relate to the procedures for the attribution of waste hazard classes (corrosivity, irritation, harmfulness, etc.), the application limits of the same that chemical laboratories shall consider and the consequent application of H risk phrases (substituting R phrases) regarding ecotoxicity. Currently, as already in place at national level with regard to references to the ADR agreement remains applicable.
We also report the DPCM of December 17, 2014 approving the Environmental Declaration Form (MUD) for the year 2015 and the Guidelines of the Lombardy Region of October 7, 2014 on the planning and sustainable management of landfills. It shall be noted that the resolution is being prepared for new landfills; however, it also implements additions related to the management of existing landfills, introducing greater controls in the design phase and provides precise indications of sites in place for verifications relating to the management.
Lastly, we note the entry into force on June 1st of EU Regulation 1357/2014 and EU decision 955/2014.
184
The Official Journal no. 212 of September 12, 2014 published Decree Law 133/2014 ("Unblock Italy" Decree) on "Urgent measures for the opening of worksites, the construction of public works, the digitalization of the country, bureaucratic simplification, the emergency of hydrogeological instability and a pick-up in industrial activities". Among the provisions of interest is article 35 regarding waste-to-energy plants, which requires a prime minister's decree to be issued within 90 days identifying the plants for the recovery of energy and the disposal of urban and special waste and some categories of special waste, already existing or yet to be constructed, which are needed to implement a modern integrated system for managing this waste which can achieve national security in self-sufficiency, in order to supersede the infringement procedures for the failure to implement European legislation for the sector.
These plants will constitute infrastructure of pre-eminent national interest. For existing plants the legislation provides that it will be necessary to plan to work at thermal load saturation, with the resulting amendment of the authorizing provisions where this is not already prescribed. The new plants must be constructed to comply with the classification of energy recovery plants (energy efficiency formula for R1 activities).
Finally, since there are no catchment area restrictions, priority will be given as far as energy recovery plants are concerned to the processing of urban waste for the specific region, while urban waste produced in other regions will only be processed up to the authorized residual availability.
Law May 22, 2015, no. 68 introduces new offences in environmental matters.
In summary, the measure includes in the Penal Code the new Title VI-bis "Provisions on crimes against the environment", which includes, among other things, the following new offences: environmental pollution, environmental disaster, traffic and abandonment of high radioactivity material, control impediment, non-reclamation.
Other new additions include environmental aggravating, applicable to all the facts already included as offences and the so-called active repentance, which involves a reduction of the sentence for one who takes action concretely for the safety, reclamation and where possible, restoration of the condition of the premises.
By way of Provision no. 6 of 1992 the Interministerial Price Committee introduced incentives for the production of electricity from plants fuelled by renewable and similar sources. The provision guaranteed that ENEL would buy electricity (then the GRTN and now the GSE) at a price made up of the following two components:
As is known under the 2007 Finance Law access to the incentive was restricted to plants fuelled by renewable sources, without prejudice to the existing situation. Law no. 310 of December 30, 2008 moreover returned to the subject, admitting the recognition of the incentive to plants fuelled by similar sources allowed access to such for reasons connected with a waste emergency declared by the Prime Minister.
Following the expiry of the Snam/Confindustria "Long-term agreement for the supply of gas for the production of electricity for sale to third parties", the reference point for updating the withdrawal price for the component covering avoided costs (the CEC), the Electricity, Gas and Water Authority, as permitted by the legislator by article 2, paragraph 141 of Law no. 244/07 and article 30, paragraph 15 of Law no. 99/09, intervened with provisions no. 249/06 and ARG/elt no. 158/04 (the subject of litigation which continued for so long that at the end of 2013 the Authority made a proposal to operators to review the means of calculating the Avoided Fuel Cost component applicable for the electricity withdrawn in 2008), and finally with the publication of opinions sent to the Ministry concerning the most suitable means of updating the reference formula.
By way of Decree Law no. 69 of June 21, 2013 ("Decreto del Fare"), converted by Law no. 98 of August 9, 2013, the government set the value of the CEC for 2013 and following years.
From 2014, the value of the CEC – as far as the gas CEC is concerned – must be updated quarterly on the basis of the procurement cost of natural gas on the wholesale markets, as determined in Deliberation no. 196/2013/R/GAS as amended.
As far as the waste management cycle is concerned, for waste-to-energy plants situated in emergency areas the value of the CEC must on the other hand be calculated on the basis of the basket as per Law no. 99/2009, with oil products having a weight of 60% until the completion of the eighth year of activities.
By way of Opinion no. 503/13/I/eel, the Authority reported to the Ministry of Economic Development the guidelines used to calculate the CEC for 2013 and subsequent years, implementing the provisions of the decree.
In compliance with the proposed decisions, the balance due for CEC in 2013 and the advance for the first quarter of 2014 were established by means of the Decree of January 31, 2014. Specifically, the decisions were found to be:
The Ministry has also provided for the simplification of the procedure for establishing the relevant advance and settlement values for the operators included in the convention, leaving the Authority the task of calculating and publishing them on its website, subject to prior notification to the MSE, starting from the second quarter of 2014.
Pursuant to the provisions of the decree, in communications of May 5, 2014 and July 30, 2014 and lastly October 24, 2014, the Electricity, Gas and Water Authority subsequently published the quantification of the values of the CEC as per Section II point 2 of provision no. 6/92 of the CIP on account (respectively) for the second, third and fourth quarters of 2014 for waste-toenergy plants that have been in service for not more than eight years and for plants situated in waste emergency areas, as well as for plants not falling in these categories, with reference to the relative period of entry into service. In February 2015, the GSE provided the update of CIP6 sale prices for 2014 (balance) and for the first quarter of 2015 (advance payment), specifying that for plants commissioned in the two-year period 2001-2002 and subsequent (which are subject to the provisions of article 5, paragraph 5 of Decree Law 69/2013) the CEC value to be paid amounts to 7.01 €/kWh for 2014 and 6.46 €/kWh for the first quarter of 2015.
On the completion of inspections carried out by the AEEGSI at a number of the Group's subsidized plants a request was made for the return of a part of the subsidies received, a portion considered unduly credited in the years in which the relative withdrawal conventions were in force. The companies involved appealed against the repayment request but the Regional Administrative Court turned down the appeals. The operators have accordingly filed an appeal with the Council of State.
With Sentence no. 06537 of December 1, 2014, the State Council issued an opinion on the merits, confirming the obligation for A2A to return part of the CIP 6 incentives disbursed to the subsidiary Ecodeco S.r.l., now A2A Ambiente S.p.A., related to the calculation of auxiliary plant consumption.
In addition to the above, reference should also be made to the framework of laws and regulations set out in the introduction to the information provided for the Generation and Trading Business Unit for matters concerning the production of electricity by biogas fuelled plants, and more specifically the provisions on Green Certificates.
In accordance with Ministerial Decree of December 5, 2013 on "Incentives for biomethane injected into the natural gas grid," by Resolution 46/2015/R/gas, the Authority approved the guidelines for the connection of biomethane plants to the natural gas networks, to which Half-yearly financial report at June 30, 2015 Environment Business Unit
network operators shall be required to adapt their network codes, and the provisions on determining the amount of biomethane eligible for the incentive.
Subsequently, by Resolution 210/2015/R/gas, it then approved the first directives on market processes relating to the placing of biomethane in networks for transport and distribution of natural gas, regulating the allocation of injections and withdrawals of biomethane as well as those for dedicated withdrawal of the same by the GSE as an alternative to the direct sale on the market and limited to plants with a production capacity of up to 500 Scm/h.
At the end of June 2014, the Italian cabinet approved on a final basis the legislative decree implementing European Directive 2012/27/EU on energy efficiency which amends Directives 2009/125/EC and 2010/30/EU and repeals Directives 2004/8/EC and 2006/32/EC.
Among the provisions adopted which have importance for the Heat and Services Business Unit are a series of measures regulating the district heating service which require the AEEGSI to establish:
By way of Resolution 411/2014/R/com, the Authority accordingly initiated a proceeding for the implementation of the legislator's provisions falling under its responsibility regarding the regulation and control of the sector consisting of district heating, district cooling and hot water for domestic use, focusing the priority action areas with subsequent resolution 19/2015/R/tlr.
In order to remedy the restrictive definition of district heating contained in the aforementioned Legislative Decree Energy Efficiency, with Law no. 164/2014 converting Decree Law no. 133/2014 ("Unblock Italy" Decree Law) the legislator amended this definition, thus resolving the inconsistency with as mentioned in the same EU Directive of reference.
190
By way of Resolution 514/2013/R/gas, the Authority approved the regulation for the tariff of the transportation service for the IV Regulatory Period (2014-2017). The most important points to be found in the new regulatory framework include the determination of the remuneration rate for fixed capital, set at 6.3% (with a regulatory lag of +1% for future investments), the reformulation of incentivized investments and the maintenance of a capacity and commodity tariff articulation, but with the addition of an equalization mechanism for the variable part. Lastly, it provides for the phasing out of the regional fee reduction applied to points located within 15 km of the national network, introduced pursuant to Resolution ARG/gas no. 184/09.
Meanwhile in June, the State Council, accepting an appeal by Enel Trade, stated the unconstitutionality of transport tariffs for the 2010-2013 period, as penalizing for some importers, and therefore annulling at the same Resolutions ARG/gas 184/09, 192/09, 198/09 and 218/10.
Following the reform of the means of allocating the natural gas distribution service, 177 "Minimum Territorial Ambits" were defined (the Ministerial Decree of January 19, 2011 and the Ministerial Decree of October 18, 2011), for which tenders will be called for the allocation of the service in accordance with the requirements of the tender regulation (Ministerial Decree November 12, 2011 no. 226, as subsequently integrated and amended). Regulations have also been adopted to protect the jobs of the employees of the operators involved in the restructuring of the sector (the Ministerial Decree April 21, 2011). In recent years, several provisions have intervened amending Legislative Decree 164/2000 and Ministerial Decree 226/2011 with particular reference to the procedures for determining the reimbursement to be paid to the outgoing manager and calling tenders. In particular, by way of the Ministerial Decree May 22, 2014 guidelines have been approved regarding the criteria and means of application for determining the reimbursement value of the natural gas distribution plants, while Ministerial Decree May 20, 2015, no. 106 has modified Ministerial Decree 226/11 in order to implement the new regulations with regard to the calculation of the redemption value of the plants, especially with regard to the treatment of contributions and the application of the guidelines, the economic offer, and in particular with regard to fees and offers relating to investments in energy efficiency, as well as procedural additions concerning the management of tenders by the Contracting Stations.
191
As part of the responsibilities assigned by the legislator to the regulator, after regulating the procedure for analyzing the tender documentation that the bodies in charge of the tender must send to the Authority in Resolution no. 155/2014/R/gas, the Authority identified the procedure and the methodology for analyzing cases where there is a difference exceeding 10% between the plant reimbursement value and the value recognized for tariff purposes in Resolution no. 310/2014/R/gas. Lastly, by way of Resolution 571/2014/R/gas, the Authority amended the service contract scheme for the distribution of natural gas, originally defined in Resolution 514/2012/R/gas and approved by the Ministry of Economic Development on February 5, 2013.
Reference should be made to the following paragraphs for an analysis of the provisions on the regulation of the tariffs for distribution and metering services related to territorial management for the period 2014-2019.
By way of Resolutions 573/2013/R/gas and 574/2013/R/gas the Authority approved the regulation of the tariff for municipal and supra-municipal management and the quality Half-yearly financial report at June 30, 2015 Networks Business Unit
of the service for the distribution and metering of gas for the IV regulatory period (2014- 2019). Subsequently, by way of Resolution 367/2014/R/gas, the Authority integrated the tariff regulation introducing the provisions applicable to area management. The provisional values of the 2015 tariffs were approved by way of Resolution 147/2015/R/gas.
As in previous regulatory periods, the tariff system for the IV period also provides for tariff decoupling between the reference tariff, in order to determine the allowed revenues of the individual operator, and the mandatory tariff, actually applied to end users at a macroarea tariff level. The differences arising between the revenues admitted and those actually obtained are then eliminated through appropriate equalization mechanisms. The reference tariff is calculated in such a way as to ensure: 1) that net invested capital is remunerated; 2) that depreciation is covered, calculated on the basis of the useful lives valid for regulatory purposes; and 3) that operating costs are covered, calculated on a parametric basis and updated through a price-cap method using an X-factor depending on the size of the company. The invested capital remuneration rate for 2014-2015 has been set at 6.9% for the distribution service and 7.2% for the metering service; these values will be updated at the end of 2015 applying the new calculation method and updating the WACC, the subject of the document for Consultation 275/2015/R/com. Furthermore, to minimize the time lag with which remuneration of the investments is recognized the tariffs have been determined also bearing in mind the pre-closing value of the investments for the year t-1. Unlike the previous regulatory period the incentives for certain types of investment are recognized as part of the regulation of quality.
192
Finally, by way of Resolution 631/2013/R/gas as last amended by Resolution 651/2014/R/gas, the Authority modified the obligations regarding installation and commissioning previously established by Resolution 28/12/R/gas of the smart gas meters and introduced some additional specifications relating to the recognition methods of said assets in the tariff.
By Resolution 117/2015/R/gas and in accordance with Legislative Decree 102/2014 (Energy Efficiency), the Authority has taken steps to reform the regulation of the measure of the delivery points of the distribution network. In particular, a further consumption range has been introduced, characterized by values between 1,500 and 5,000 Scm/year, for which there is the obligation to perform at least 3 attempts per year for collection of the measurement data and a new system has been introduced for the determination of the frequency of detection of the same, based on reference time periods for the individual ranges and a percentage of minimum coverage of said period that the measure attempts must ensure. New provisions were then introduced on recognition and management of remote meter reading and new methods and timing for detection and provision of switching readings.
By way of Resolution ARG/elt 199/11, the AEEGSI adopted the Consolidated Text of provisions to regulate the transmission and distribution of electricity (TIT) and the Consolidated Text of provisions regulating the supply of the Electricity Metering Service (TIME) for the IV regulatory period (2012-2015).
In relation solely to the tariff adjustment for metering services, variations with respect to the previous regulatory period were included in the value of the X-factor (set at 7.1% per annum) and in revenue equalization for low voltage metering services. With reference to the distribution service, many of the tariff regulation schemes already in force during the previous regulatory period were maintained, in particular:
By way of Resolution no. 607/2013/R/eel the Authority revised the capital remuneration rate, which for the 2014-2015 tariffs will be 6.4% (+1% for investments made after 2012 to cover the regulatory lag). In addition, the same resolution amended the treatment of grants (in particular lump sum grants) which, unlike the past, will be deducted from the invested capital and not from the recognized operating costs.
In view of the expiry of the regulatory period, the Authority, by way of Resolution 483/2014/R/ eel, has initiated the procedure for defining the tariff regulation in Regulatory Period V, within the scope of which consultation documents 5/2015/R/eel and 335/2015/R/eel were published, containing the guidelines of the Authority on the matter; this procedure will include, as expressly provided in Resolution 597/2014/R/eel, the update process of the methodology and criteria for the calculation of the rate of return on invested capital that will be applied to all network services, both in the electricity and gas sectors, regulated by the Authority, in respect of which the Authority expressed its initial guidelines with Consultation 275/2015/R/com.
By Resolution 146/2015/R/eel, the Authority determined the updating of reference tariffs for the electricity distribution service for the year 2015. For the company A2A Reti Elettriche S.p.A., a decrease of about 2.3% is expected of the constraint for eligible revenues. By consultation 202/2015/R/eel, the Authority then presented its final guidelines on the loss factors related to low voltage and medium voltage networks as well as the equalization mechanism of the difference between standard and actual losses. The equalization mechanism proposed confirms the Authority's intention to consider an initial level of efficiency in line with the transition period.
By Resolution 268/2015/R/eel, the Authority lastly approved the Network Code Type for the electricity transport service with reference to issues of contractual guarantees and the administrative aspects of billing and payment of fees associated with the transport service and provision of measurement data.
194
By Resolution 296/2015/R/com of June 23, the Authority approved the new provisions on functional separation (TIUF).
With respect to the previous provisions of the TIU (annexed to Resolution no. 11/07), in addition to the separation of the brand (for which reference shall be made to the specific paragraph in the section dedicated to the Commercial Business Unit), the biggest addition is the introduction of the obligation, for functionally separated parties, to appoint the Head of Compliance. This figure, already in the case of TSO (Ref. Resolution ARG/com153/11), which must meet the same independence requirements of the Independent Manager and have adequate powers for the tasks assigned to it by regulation, must verify the appropriateness for the purposes of functional separation of the measures and company procedures adopted by the IM and the existence of critical areas and the actions carried out by the IM to overcome them. To this end, it shall be required to verify the implementation of the Compliance Plan (drafted by the IM) and draft an annual report, to be submitted to the Authority, outlining, among other things, the relevant verifications carried out. Finally, it is authorized to make communications to the Authority regarding functional separation without prior information to the Independent Manager or to the Vertically Integrated Company.
Among the measures adopted by the Legislative Decree implementing European Directive 2012/27/EU on energy efficiency, in addition to the provisions adopted on district heating the following matters are noted, being of particular importance for the Networks Business Unit:
By way of Resolution 6/2015/R/idr, the Authority initiated the procedure for defining the Water Tariff Method for the second regulatory period (from January 1, 2016), also combining the proceedings pursuant to Resolution 374/2014/R/idr and identifying a single term for the conclusion of the proceedings scheduled for December 31, 2015.
Following the referendum, which took place on June 12 and 13, 2011 the legislative provisions referred to in the questions involved were repealed, including article 23-bis of Decree Law no. 112/2008 on the assignment of local public services of economic importance.
As concerns the existing management, as specified by article 34 of Decree Law no. 179/12, converted into Law no. 221/12, the services allocated to in-house providing public companies which meet the requirements set by community jurisprudence (control over the operator to be the same as that carried out over internal bodies, performance of activities mostly for the administration or the administrations of shareholders, wholly publicly-held capital) remain active until their natural expiry date.
By way of Resolution 643/2013/R/idr, in fulfillment of the provisions previously adopted for the first regulatory period 2012-2015, the Authority determined the Water Tariff Method (MTI) for 2014 and 2015 and established the means and timing of the approval of the tariffs for 2012 and 2013, with reference to operators for which approval has not yet been formally resolved (which include the companies of the A2A Group) due to non-fulfillment on the part of the territorial entities.
To calculate the costs recognized in the tariff, a specific scheme ("regulatory scheme") is included in the MTI which provides for four alternative methods of calculation (quadrants):
Lastly, on January 21, 2015, the Ambit Office informed Managers that, pursuant to Resolution AEEGSI 643/2013, the Board of Directors determined by way of Resolution no. 12/2014 the theta tariff multipliers for the years 2014 and 2015 and transmitted the value of the theta tariff multiplier for the year 2015 and the new tariff structure, applied with effect from January 1, 2015. The Province of Brescia, Government Entity of the ATO, has approved the proposal of the Board of Directors of the Area Office no. 12/2014 with Resolution of the Provincial Council no. 13/2015, passed on March 30, 2015. This act formally completes, for the first phase, the obligations as regards the Government Entity of the ATO of the Province of Brescia in terms of tariff adjustment.
One of the energy policy objectives of the Montenegro government is an increase in the use of renewable energy by the country.
More specifically, in September 2011 the government introduced an incentivizing tariff (by way of the "Decree on the Tariff System for the Establishment of Preferential Prices of Electricity from Renewable Sources of Energy and Efficient Co-generations") to support the production of energy from renewable energy sources (FER). Power Purchase Agreements with the market operator CGES having a 12 year term are envisaged for purchasing the energy produced, at prices annually adjusted for inflation. In October 2012, with the approval of provisions designed to implement Directive 2009/28/EC by the Energy Community, Montenegro also accepted the setting of a binding objective of 33% for the production of energy from renewable sources as a percentage of total consumption.
197
At the end of 2011, the Energy Regulatory Agency (RAE), the autonomous and independent body having the function of regulating the energy sector, approved the method to be used for calculating electricity transmission and distribution tariffs, together with the means for establishing energy prices for sales to end customers.
The new method introduces regulatory elements into Montenegro law that are similar to those in force in the principal European countries, such as the establishment of multi-year regulatory periods, the introduction of capital valuation methods and a remuneration rate and the means of making the sector more efficient through the use of price caps.
The first regulatory period started on August 1, 2012 and has a three-year term. For the first year, a WACC (weighted average cost of capital) of 6.8% is applied to net invested capital (meaning the value of the assets in use at the end of year t-1, stated less of any grants received and revalued for inflation). Capital is updated annually on the basis of investment plans approved by the Agency, while depreciation is charged over the useful lives included in the documents sent to the Agency on making the request for approval of the tariffs. Operating costs are calculated by applying a profit-sharing logic, starting from the figures sent by the company to the Agency.
At the present moment, the tariffs calculated for the third year of the new regulatory period, which began on August 1, 2014 and was originally to have ended on July 31, 2015, are in force. The duration of this final year of the new regulatory period (as well as the regulatory period itself) has however been extended to the end of 2015 in order to align the new period beginning on January 1, 2016 to the calendar year.
Finally, at the end of December 2013 the RAE unexpectedly approved a provision to amend the current tariff methodology, impacting the method of calculating the fees for using the electricity transmission grid borne exclusively by the generation operators, with effect originally planned for the period between January 1, 2014 and July 31, 2015 but recently extended to December 31, 2015 (as seen for the term of the third year of the tariff regulatory period as well as the regulatory period itself). EPCG has filed an appeal for the annulment of this decision, which it believes is based on premises which are not in line with the principles of transparency and non-discrimination that should form the basis of the regulation, and which appear to be extremely detrimental to the economic and financial balance of the company. This appeal was upheld in the first instance, although the RAE has opposed this judgment. A final ruling by the courts is currently awaited in this respect.
200
World economic growth in the first half of 2015 was lower than as recorded in the second half of 2014. In terms of geographic area, the industrialized countries are still showing economic trends better than the emerging areas. The United States, in particular, remain at the top in terms of growth despite recent signs of weakness. The Chinese economy grew by 7% in the second quarter of 2015, above the forecasts, which expected a halt at 6.8%.
In the first quarter of 2015, Eurozone economic activity has maintained a positive trend (GDP +0.4%). Gross domestic product is forecast to grow at the same pace of the second quarter of 2015 and accelerate moderately in the second half to +0.5% (source: ISTAT).
For Italy, as reported in the monthly Istat note of July 3, 2015, there was a more modest recovery in the second quarter of 2015 compared to the first quarter. In this regard, it should be noted that GDP growth in the first quarter amounted to +0.3% in comparison with the fourth quarter of 2014, and the change in GDP expected by Istat for the second quarter of 2015 is estimated at +0.2%. Instead, the employment market has not improved and there has not yet been a stable recovery. However some positive signs foreshadow more favorable developments in the coming months.
With regard to inflation, in the Eurozone the consumer price index was 0.2% in June 2015, compared to 0.3% recorded in May (source: Eurostat). The average inflation in the first half of 2015 was -0.1%.
With regard to Italy, in June 2015, the national index of consumer prices for the entire community (NIC) recorded an increase of 0.2% (the preliminary estimate was +0.1%), showing a slight acceleration compared to the growth trend recorded in May (+0.1%). The average inflation acquired for the first half of 2015 was -0.1%. Deflation pressures are declining, even if the difficulties of the labor market and consumer demand limit the recovery in prices.
The euro exchange rate against major currencies has remained broadly stable in the first half of 2015, even if between early March and mid-April it depreciated overall on some of the major currencies and showed a volatility slightly higher than in previous months, in line with the changing assessments of the outlook on the trend of interest rates in the Eurozone compared to other major economies. In the second quarter of 2015, the average value of the EUR/USD stood at 1.1047 compared to a level recorded in the previous quarter of 1.1270.
In the first half of 2015, the ECB left interest rates stable at a record low of 0.05%. Rates on marginal lending facilities and deposits also remained unchanged respectively at 0.30% and -0.20%.
The world economy continues to expand following a profile of uneven recovery. Advanced countries recorded an improvement in the outlook, as the negative aspects of the deleveraging and fiscal consolidation attenuate. By contrast, the positive conditions in some emerging economies (Latin America, Africa and South-east Asia) have deteriorated and world trade has slowed. The significant decline in oil prices that has taken place in the first half of 2015, despite the recent recovery, should stimulate the growth of the global economy. The International Monetary Fund, in the update published July 9, 2015, expects a substantially stable situation for the world economy in 2015. World GDP is expected to grow by 3.3%, with an increase marginally lower than in 2014 (+3.4%), encouraged by the moderate recovery in the advanced economies and negatively affected by a slowdown in emerging economies, while growth forecasts for 2016 remain anchored at 3.8%. Estimates for US growth were reduced, which is expected to reach 2.5% this year and 3.0% in 2016 (-0.6 and -0.1 percentage points respectively compared to April estimates).
201
With reference to the Eurozone, the International Monetary Fund (IMF) confirmed a forecast growth in 2015 of 1.5%, identical to that of April, not considering as significant the contagion effects from the Greek case, also in relation to recent developments. It has revised upward to 1.7% the forecast for 2016 and 2% for 2017. The economic recovery in the Eurozone continued to show a gradual consolidation, the labor market has improved and a number of factors have recently provided increasing support for the area activities. The foregoing is as reported by the ECB in the Economic Bulletin of June, which notes that the decline in oil prices is strengthening real disposable income and supporting private consumption. The recent depreciation of the euro exchange rate is also promoting exports. Since the beginning of 2015, the Eurozone countries are also benefiting from the improvement in financing conditions thanks to the effects of the monetary policy through "quantitative easing".
Prospects also improve for the Italian economy, according to forecasts of the International Monetary Fund. The IMF has indeed raised the growth estimate for Italy bringing it to 0.7% for 2015 and +1.2% for 2016 (0.5% and 1.1%). The International Monetary Fund has noted very positive momentum of the Italian economy, partly due to external factors such as the depreciation of the euro and the drop in oil prices, partly because of the reforms made by the government.
In the face of global inflation that for 2015 is expected at a low level, reflecting the drop in energy prices, in perspective, a gradual increase is estimated. It is indeed expected that the effect of the drop in commodity prices will be exhausted in the short term leading, in the medium to long term, to a recovery in inflation.
In relation to the Eurozone, ECB experts have revised upwards their estimates for inflation, which is expected to increase gradually in the coming months, following the increase in oil prices, and reach 0.3% in 2015. In 2016 and 2017, the ECB expects a further increase, respectively 1.5% and 1.8%, as the domestic price pressures will strengthen in the form of growth in wages and profit margins as well as due to the ongoing external inflationary pressures.
Estimates on prices in Italy have been revised upwards by the EU Commission: there will be no deflation this year. In 2015, the consumer price index is expected to stand at 0.2%. Next year, price growth is expected to jump to 1.8% (1.5% the previous estimate). This estimate incorporates an additional increase in import prices, including energy, and the VAT increase planned by the 2015 Financial Authorities as a safeguard for the achievement of budget targets. Unemployment is expected to stand at 12.4% this year and in 2016, with a slight improvement compared to the February estimates.
Year to date, the euro has lost 8% against the dollar (from 1.2 to 1.12). However, the current rating is far from the lows reached at the end of March (1.04 dollars). Since then, in fact, the euro has started to appreciate with greater volatility against the dollar partly due to continuing US statements on the weight of the "super dollar". At this point, it is not clear whether equality will be reached (with the rise in interest rates in the USA within the year) as it appeared obvious to many estimates earlier this year.
At its meeting held July 16, 2015, the Board of Directors decided to leave unchanged the interest rates of the ECB. In the assessment of the Board of Directors of the ECB, it is necessary to maintain a stable monetary policy. The full implementation of all monetary policy measures is expected to provide the necessary support to the economy of the area and lead to lasting inflation to a level close to 2% over the medium term.
In the first half of 2015, the price of Brent recorded a trend characterized by a moderate volatility amounting to an average value of 59.4 \$/bbl (corresponding to 53.3 €/bbl). Compared to as recorded in the same period of 2014, the value was down approximately 45%.
Starting from the lows in January, well below 50 \$/bbl, after reaching the maximum in mid-May of the year of around 67 \$/bbl, there was a turn in prices that, throughout June, showed slight fluctuation around the threshold of 60 \$/bbl.
203
The scenario expected from now until year end may be formulated keeping in mind the situations that could most have an impact on the real market fundamentals. First, the slowdown of the Chinese economy; in the past decade in fact, China has been the main growth driver of oil consumption worldwide. Secondly, the positive outcome of the negotiations between the West and Iran, with regard to the nuclear issue, which is expected to lead to the placing on the international market an additional offer of nearly 1.0 million bbl/g; these volumes estimated with reference to the decline observed as a result of the sanctions imposed on Iran at the time by the United States and Europe. As to all the OPEC countries, it is expected that each of them will continue the strategy of defending their market share, from Iraq and Saudi Arabia, that are producing at record levels. Expectations are therefore of a price that can continue, subject to unforeseen events, to fluctuate around 60 \$/bbl from now to year end.
Coal was affected by a still weak demand. The average price of coal with delivery to the Amsterdam-Rotterdam-Antwerp ports (Coal CIF ARA) was 59.4 \$/tonne in the first half of 2015, a fall of around 22.4% over the same period the previous year. The recovery in February and March 2015 is modest: the price remains below the average 2014 value of over 15 \$/tonne.
As far as the national electricity scenario is concerned, in the first half of 2015, there was a net requirement of 153,239 GWh (source: Terna), substantially in line with the volumes of the same period the previous year of 153,680 GWh.
In June, the demand for electricity in Italy was 26,260 GWh (source: Terna), broadly unchanged over the same month the previous year (-0,1%).
Net production of electricity remains weak, amounting to 131,244 GWh, down 1.2% over the first half of 2014. The normalization of water availability led to a sharp fall in production from hydroelectric sources, which stood at 23,289 GWh, a decrease of 23.0% compared to the same period in 2014. The production of thermoelectric energy benefited from this decline, which increased by 4.1% over the first half of the previous year. Production from renewable sources also increased: wind (+9.6%), photovoltaic (+10.1%), geothermal (+5.6%). Average hours of operation estimated at national level for all thermoelectric technologies for the first half of 2015 were up 2% compared to the same period in 2014.
National production, excluding pumping, accounted for 85% of the demand for electricity, while net imports satisfied the remainder.
In terms of prices, the Base Load PUN (Single National Price) in the the first half increased by 0.9%, amounting to 49.9 €/MWh against 49.5 €/MWh in the first half of 2014. Downward trend for the price in peak hours (-2.7% for the Peak Load PUN 54.7 €/MWh), while the price in low load hours recorded an increase of 2.1% in the first half of 2015 compared to the same period the previous year (+3.3% for the Off-Peak PUN at 47.25 €/MWh).
204
In the first half of 2015, the demand for natural gas increased by 7.9% compared with the corresponding period in 2014, amounting to 35,247 Mcm (source: Snam Rete Gas). The colder temperatures (on average 2.5°C lower in February and 2°C in March) remain the main driver for the residential and commercial segment, which rose by 10.7% compared to the first half of 2014. The growth was also supported by the thermoelectric sector, which recorded an increase of 9.0% to 9,119 Mcm, while industrial consumption recorded a decrease of 1.2%.
Imports accounted for approximately 90% of demand, net of the storage trend, while domestic production covered the remainder, amounting to 3,236 Mcm (-5.8% over the first half of 2014) with values falling to lows.
Half-yearly financial report at June 30, 2015 Energy market trends
The gas price on the PSV (the benchmark spot market for gas in Italy) for the first half of 2015 was 23.3 €/MWh, slightly up (+0.5%) over the first half of 2014, while the gas price on the TTF (the benchmark spot market for gas in northern Europe) was 21.2 €/ MWh, a decrease of 2.2% over the same period the previous year. This discordant trend resulted in an increase in the differential between the PSV price and the TTF price reaching the half year average of 2.1 €/ MWh.
Results sector by sector
From January 1, 2015, the Group undertook a process of organizational change in order to make the organization effective and oriented to achieve results with dedicated Business Units. This resulted in a shift from an organizational structure based on sector to an organizational structure based on Business Units. In particular, the following Business Units were identified:
The reorganization resulted in, among other things, a review of reporting flows under which the Management defines and adopts the main strategic decisions by managing the businesses of reference. This reorganization was also reflected in the preparation of the 2015-2019 Strategic Plan that was approved by the Board of Directors on April 9, 2015.
Half-yearly financial report at June 30, 2015 Results sector by sector
The A2A Group operates in the following "Business Units":
The activities of the Generation and Trading Business Unit are related to the management of the generation plant portfolio(1) of the Group. The "Generation" sector has the specific goal of maximizing plant availability and efficiency, minimizing operating and maintenance (O&M) costs. Instead, the "Trading" sector has the task of maximizing the profit from the management of the energy portfolio through the purchase and sale of electricity, fuel (gaseous and non-gaseous) and environmental certificates on domestic and foreign wholesale markets. This Business Unit also includes the activity of trading on domestic and foreign markets of all energy commodities (gas, electricity, environmental certificates).
The activities of the Commercial Business Unit Sales are aimed at the retail sale of electricity and natural gas to customers in the free market and sale to customers served under protection scheme.
This Business Unit's activity relates to the whole waste management cycle, which ranges from collection and street sweeping to the treatment, disposal and recovery of materials and energy.
In particular, collection and street sweeping mainly refers to street cleaning and the collection of waste for transportation to its destination.
Instead, waste treatment is an activity that is carried out in dedicated centers to convert waste in order to make it suitable for the recovery of materials.
Lastly, disposal of urban and special waste in combustion plants or landfills ensures the possible recovery of energy through waste to energy or the use of biogas.
This Business Unit's activity is mainly the sale of heat and electricity produced by cogeneration plants (mostly owned by the Group). Cogenerated heat is sold through district heating networks. The Business Unit also ensures the operation and maintenance of cogeneration plants and district heating networks, as well as management services of heating plants owned by third parties (heat management services).
This Business Unit's activity consists of the technical and operational management of networks for the distribution of electricity, the transport and distribution of natural gas and the management of the entire integrated water cycle (water captation, aqueduct management, water distribution, sewerage network management, purification). Also included are activities relating to public lighting, traffic regulation systems, the management of votive lights and systems design services.
The Business Unit includes the activities carried out by the investee company Elektroprivreda Crne Gore AD Nikšic' (EPCG)(2) in relation to the production and sale of electricity in Montenegro and the operational technical management of the related electricity distribution networks.
Other services include video-surveillance, data transmission, telephony and internet access services.
Instead, Corporate services include the activities of guidance, strategic direction, coordination and control of industrial operations, as well as services to support the business and operating activities (ex. administrative and accounting services, legal services, procurement, personnel management, information technology, communications etc.) whose costs, net of amounts recovered from accrual to individual business units based on services rendered, remain the responsibility of the Corporate.
The following is a summary of the main quantitative and economic data relating to the Generation and Trading Business Unit.
| GWh | 06 30 2015 | 06 30 2014 | Changes | % 2015/2014 |
|---|---|---|---|---|
| SOURCES | ||||
| Net production | 5,993 | 5,701 | 292 | 5.1% |
| - thermoelectric production | 3,713 | 2,657 | 1,056 | 39.7% |
| - hydroelectric production | 2,278 | 3,043 | (765) | (25.1%) |
| - photovoltaic production | 2 | 1 | 1 | n.s. |
| Purchases | 19,205 | 20,016 | (811) | (4.1%) |
| - exchange | 3,727 | 3,569 | 158 | 4.4% |
| - wholesalers | 2,806 | 4,769 | (1,963) | (41.2%) |
| - Trading/Service portfolio | 12,672 | 11,678 | 994 | 8.5% |
| TOTAL SOURCES | 25,198 | 25,717 | (519) | (2.0%) |
| USES | ||||
| Sales to Group Retailers | 2,727 | 2,908 | (181) | (6.2%) |
| Sales to other wholesalers | 5,365 | 4,121 | 1,244 | 30.2% |
| Sales on the exchange | 4,434 | 7,009 | (2,575) | (36.7%) |
| Trading/Service portfolio | 12,672 | 11,679 | 993 | 8.5% |
| TOTAL USES | 25,198 | 25,717 | (519) | (2.0%) |
Note: the sales figures are stated gross of any losses.
The Group's electricity output in the first half of 2015 amounted to 5,993 GWh, to which should be added purchases of 19,205 GWh for a total availability of 25,198 GWh.
Production grew by 5.1% over the first half of the previous year. In particular, the reduction in hydroelectric production (-25.1%) due to the extraordinary water availability in the first half of the previous year was more than offset by an increase in thermoelectric production (+39.7%) also thanks to higher intermediation on the dispatching services market.
During the reporting period, purchases of electricity amounted to 19,205 GWh, a decrease of 4.1% compared to the same period the previous year, mainly due to lower forward purchases on wholesale markets.
In the same period, forward sales growth on wholesale markets (+30.2%) more than offset the reduction in sales to the Commercial Business Unit (-6.2%), resulting in less exposure on the spot markets (-36.7%). The amount of electricity traded in the trading context recorded an increase of 8.5%.
Taken as a whole, electricity sales made by the Generation and Trading Business Unit reached a total of 25,198 GWh (25,717 GWh at June 30, 2014).
| Millions of cubic metres | 06 30 2015 | 06 30 2014 | Changes | % 2015/2014 |
|---|---|---|---|---|
| SOURCES | ||||
| Procurement | 1,136 | 1,122 | 14 | 1.2% |
| Withdrawals from stock | 114 | 26 | 88 | n.s. |
| Internal consumption/GNC | (7) | (5) | (2) | 40.0% |
| Trading/Service Portfolio | 585 | 626 | (41) | (6.5%) |
| TOTAL SOURCES | 1,828 | 1,769 | 59 | 3.3% |
| USES | ||||
| Commercial Business Unit uses | 638 | 674 | (36) | (5.3%) |
| Thermoelectric uses | 343 | 259 | 84 | 32.4% |
| Heat and Services Business Unit uses | 58 | 61 | (3) | (4.9%) |
| Wholesalers | 204 | 149 | 55 | 36.9% |
| Trading/Service Portfolio | 585 | 626 | (41) | (6.5%) |
| TOTAL USES | 1,828 | 1,769 | 59 | 3.3% |
Quantities are stated at standard cubic meters at an HCV of 38100 MJ on delivery.
In the first half of 2015, volumes of gas sold totalled 1,828 million cubic meters, an increase of 3.3% over the first half of 2014 (1,769 million cubic meters), which had been marked by a particularly mild climate.
The higher sales volumes for thermoelectric uses (+32.4%) and the increase in sales on the wholesale markets (+36.9%) more than offset the decline in sales in the Commercial Business Unit (-5.3%).
The volumes decreased slightly also of gas traded within the Trading Portfolio (-6.5%).
Gas sales to the Group's other Business Units (Heat and Environment) were substantially in line with the first half of the previous year.
| Millions of euro | 01 01 2015 06 30 2015 |
01 01 2014 06 30 2014 |
Changes | % 2015/2014 |
|---|---|---|---|---|
| Revenues | 1,381 | 1,488 | (107) | (7.2%) |
| Gross operating income | 192 | 193 | (1) | (0.5%) |
| % of revenues | 13.9% | 13.0% | ||
| Depreciation, amortizations, provisions and write-downs |
(82) | (121) | 39 | (32.2%) |
| Net operating income | 110 | 72 | 38 | 52.8% |
| % of revenues | 8.0% | 4.8% | ||
| Investments | 28 | 15 | 13 | 86.7% |
The Generation and Trading Business Unit generated revenues of 1,381 million euro in the first half of 2015 (1,488 million euro at June 30, 2014). This performance was mainly due to lower volumes of electricity and gas sold to the Commercial Business Unit, the reduction of electricity sales on the IPEX platform, as well as the trend of lower energy prices in recent years.
Gross operating income amounted to 192 million euro, substantially in line over the first half of 2014 (193 million euro at June 30, 2014).
In comparison with the previous year, the first half of 2015 benefited from lower costs for mobility for about 11 million euro, while it was impacted, for about 21 million euro, by the effect of positive non-recurring income components recorded mainly in the first half of 2014.
Excluding these effects, the gross operating income of the Generation and Trading Business Unit increased by approximately 9 million euro compared to the same period of 2014: higher sales of environmental certificates, savings from the operational efficiency plan, as well as the good performance in the thermoelectric segment, due to an improvement in spreads on gas and coal and higher volumes traded by gas combined cycles on secondary markets, more than offset the decline in margins in the hydroelectric segment due to the exceptional water availability in 2014.
Depreciation, amortization, provisions and write-downs totalled 82 million euro (121 million euro at June 30, 2014). The reduction of 39 million euro is mainly due to lower amortization of combined cycle plants, as a result of the review, at the end of 2014, of their technical economic life, as well as the effects of the write-downs from impairment recorded at the end of the previous year.
As a result of the above changes, net operating income amounted to 110 million euro (72 million euro in the first half of 2014).
During the reporting period, investments amounted to 28 million euro and mainly concerned 13 million euro for extraordinary maintenance at the hydroelectric units in Mese, Udine and Valtellina, 12 million euro for environmental interventions (DeNOx) of the thermoelectric coal plant in Monfalcone and about 1 million euro for extraordinary maintenance of the combined cycle thermoelectric plant in Gissi.
The following is a summary of the main quantitative and economic data relating to the Commercial Business Unit.
| 06 30 2015 | 06 30 2014 | Changes | % 2015/2014 | |
|---|---|---|---|---|
| Electricity sales | ||||
| Electricity sales Free Market (GWh) | 2,485 | 2,698 | (213) | (7.9%) |
| Electricity sales under Greater Protection Scheme (GWh) |
994 | 1,093 | (99) | (9.1%) |
| Total electricity sales (GWh) | 3,479 | 3,791 | (312) | (8.2%) |
| 06 30 2015 | 06 30 2014 | Changes | % 2015/2014 | |
|---|---|---|---|---|
| Gas sales | ||||
| Gas sales Free Market (Mcm) | 308 | 294 | 14 | 4.8% |
| Gas sales under Greater Protection Scheme (Mcm) |
318 | 371 | (53) | (14.3%) |
| Total gas sales (Mcm) | 626 | 665 | (39) | (5.9%) |
The amounts of sales are stated net of losses.
In the first half of 2015, there was a reduction in both sales of electricity (-8.2%) and gas sales (-5.9%) compared to the first half of the previous year.
The decline in both sectors is due not only to the lower number of customers served under the protection scheme, but also the strategic decision of the company to focus on a different mix of customers on the free market, characterized by lower consumption but higher unit margins.
| Millions of euro | 01 01 2015 06 30 2015 |
01 01 2014 06 30 2014 |
Changes | % 2015/2014 |
|---|---|---|---|---|
| Revenues | 699 | 803 | (104) | (13.0%) |
| Gross operating income | 54 | 47 | 7 | 14.9% |
| % of revenues | 7.7% | 5.9% | ||
| Depreciation, amortizations, provisions and write-downs |
(8) | (7) | (1) | 14.3% |
| Net operating income | 46 | 40 | 6 | 15.0% |
| % of revenues | 6.6% | 5.0% | ||
| Investments | 1 | 3 | (2) | n.s. |
In the reporting period, the Commercial Business Unit reported revenues of 699 million euro (803 million euro at June 30, 2014), a decrease compared to the first half of 2014 due to lower volumes of electricity and gas sold to end customers (also following the different mix of customers served on the free market) and, as mentioned above, the trend of lower energy prices recorded in recent years.
Gross operating income of 54 million euro rose by 7 million euro over the same period of the previous year.
However, the 2014 result included non-recurring negative income components amounting to 8 million euro. Excluding these charges, gross operating income of the Business Unit is substantially in line with the first half of 2014 despite the higher costs incurred for the acquisition of new customers.
Depreciation, amortization, provisions and write-downs totalled 8 million euro, substantially in line with the first half of 2014.
As a result of the above changes, net operating income amounted to 46 million euro (40 million euro in the first half of the previous year).
In the first half of 2015, investments of the Commercial Business Unit amounted to approximately 1 million euro and mainly concerned development and evolution maintenance on hardware and software platforms to support marketing and invoicing activities.
The following is a summary of the main quantitative and economic data relating to the Environment Business Unit.
| 06 30 2015 | 06 30 2014 | Changes | % 2015/2014 | |
|---|---|---|---|---|
| Waste collected (Kton)* | 470 | 465 | 5 | 1.1% |
| Waste disposed of (Kton) | 1,326 | 1,304 | 22 | 1.7% |
| Electricity sold (GWh) | 665 | 704 | (39) | (5.5%) |
| Heat sold (GWht)** | 650 | 564 | 86 | 15.2% |
(*) Waste collected in the municipalities of Milan, Brescia, Bergamo and Varese.
(**) Quantities at the plant entrance.
In the first half of 2015, the amount of waste collected was substantially in line with the same period of the previous year.
Instead, the amount of waste disposed of show an increase (+22 thousand tons) compared to June 30, 2014 mainly due to the commissioning of the glass treatment plant in Asti (as of July 2014) and greater disposals made at the landfill in Montichiari. The production of heat by the waste-to-energy plants (+86 thermal GWh) also increased over the same period in 2014 due to the increased quantities required by the district heating sector, while the quantity of electricity sold amounted to 665 GWh (704 GWh in the first half of 2014).
Environment Business Unit
| Millions of euro | 01 01 2015 06 30 2015 |
01 01 2014 06 30 2014 |
Changes | % 2015/2014 |
|---|---|---|---|---|
| Revenues | 406 | 401 | 5 | 1.2% |
| Gross operating income | 110 | 115 | (5) | (4.3%) |
| % of revenues | 27.1% | 28.7% | ||
| Depreciation, amortizations, provisions and write-downs |
(32) | (40) | 8 | (20.0%) |
| Net operating income | 78 | 75 | 3 | 4.0% |
| % of revenues | 19.2% | 18.7% | ||
| Investments | 23 | 21 | 2 | 9.5% |
In the reporting half year, the Environment Business Unit posted revenues of 406 million (401 million euro at June 30, 2014).
Gross operating income amounted to 110 million euro (115 million euro in the first half of the previous year).
217
The reduction, amounting to 5 million euro, is mainly due to lower revenues from the sale of electricity of the Acerra waste-to-energy plant (following the reduction of the CIP 6 tariff determined by the decrease in fuel prices of reference) and the other waste-to-energy plants of the Group (due to lower electricity prices).
This performance was partially offset by higher margins resulting from higher volumes disposed of at the glass plant in Asti and the Montichiari landfill.
Depreciation, amortization, provisions and write-downs amounted to 32 million euro (40 million euro in first half of the previous year). The decrease in this item, amounting to about 8 million euro, was mainly due to higher provisions for risks related to tax and legal disputes in first half of the previous year.
As a result of these changes, net operating income totalled 78 million euro (75 million euro at June 30, 2014).
Investments for the reporting period totalled 23 million euro and related to maintenance and development work on waste-to-energy plants (12 million euro), treatment plants and landfills (1 million euro) and the purchase of collection vehicles and containers (10 million euro).
The following is a summary of the main quantitative and economic data relating to the Heat and Services Business Unit.
| GWht | 06 30 2015 | 06 30 2014 | Changes | % 2015/2014 |
|---|---|---|---|---|
| SOURCES | ||||
| Plants in: | 677 | 579 | 98 | 16.9% |
| - Lamarmora | 292 | 256 | 36 | 14.1% |
| - Famagosta | 87 | 85 | 2 | 2.4% |
| - Tecnocity | 42 | 31 | 11 | 35.5% |
| - Other plants | 256 | 207 | 49 | 23.7% |
| Purchases from: | 846 | 751 | 95 | 12.6% |
| - Third parties | 186 | 176 | 10 | 5.7% |
| - Other Business Units | 660 | 575 | 85 | 14.8% |
| TOTAL SOURCES | 1,523 | 1,330 | 193 | 14.5% |
| USES | ||||
| Sales to end customers | 1,334 | 1,149 | 185 | 16.1% |
| Distribution losses | 189 | 181 | 8 | 4.4% |
| TOTAL USES | 1,523 | 1,330 | 193 | 14.5% |
Notes:
The figures only refer to district heating. Sales relating to heat management are not included.
Purchases include the quantities of heat purchased from the Environment Business Unit.
In the first half of 2015, sales of heat to end customers showed an increase of 14.5% compared to the first half of the previous year, which was marked by a particularly mild climate.
The production and purchase of heat grew by 98 thermal GWh and 95 thermal GWh respectively.
| Millions of euro | 01 01 2015 06 30 2015 |
01 01 2014 06 30 2014 |
Changes | % 2015/2014 |
|---|---|---|---|---|
| Revenues | 146 | 146 | - | - |
| Gross operating income | 47 | 39 | 8 | 20.5% |
| % of revenues | 32.2% | 26.7% | ||
| Depreciation, amortizations, provisions and write-downs |
(16) | (15) | (1) | 6.7% |
| Net operating income | 31 | 24 | 7 | 29.2% |
| % of revenues | 21.2% | 16.4% | ||
| Investments | 23 | 25 | (2) | (8.0%) |
Revenues amounted to 146 million euro in the first half of 2015, in line compared to June 30, 2014.
Gross operating income, amounting to 47 million euro, increased by 8 million euro compared to first half of 2014. The increase, mainly driven by a more favorable climate trend over the same period of the previous year and effective business development (in particular in the city of Milan), was partly offset by lower results achieved in the markets of environmental certificates.
Depreciation, amortization, provisions and write-downs totalled 16 million euro, substantially in line with first half of 2014.
As a result of the above changes, net operating income amounted to 31 million euro (24 million euro in the same period the previous year).
Investments for the period amounted to 23 million euro and related mainly to maintenance and development work on district heating networks (13 million euro, of which 9 million euro in the city of Milan) and new cogeneration plants (10 million euro), mainly in the Milan, Brescia, Bergamo and Varese areas.
The following is a summary of the main quantitative and economic data relating to the Networks Business Unit.
220
| 06 30 2015 | 06 30 2014 | Changes | % 2015/2014 | |
|---|---|---|---|---|
| Electricity distributed (GWh) | 5,522 | 5,405 | 117 | 2.2% |
| Gas distributed (Mcm) | 1,068 | 1,020 | 48 | 4.7% |
| Gas transported (Mcm) | 205 | 190 | 15 | 7.9% |
| Water distributed (Mcm) | 29 | 30 | (1) | (3.3%) |
Electricity distributed in the first half of 2015 amounted to 5,522 GWh, a slight increase (+117 GWh) compared to the same period of 2014, mainly as a result of a recovery in industrial consumption.
The temperatures recorded in the first half of 2015 compared to the same period in 2014 resulted in an increase in the quantities of gas distributed and transported respectively of 4.7% and 7.9%.
Water distributed amounted to 29 million cubic meters (30 million cubic meters in the first half of the previous year).
| Millions of euro | 01 01 2015 06 30 2015 |
01 01 2014 06 30 2014 |
Changes | % 2015/2014 |
|---|---|---|---|---|
| Revenues | 351 | 360 | (9) | (2.5%) |
| Gross operating income | 136 | 138 | (2) | (1.4%) |
| % of revenues | 38.7% | 38.3% | ||
| Depreciation, amortizations, provisions and write-downs |
(44) | (44) | - | - |
| Net operating income | 92 | 94 | (2) | (2.1%) |
| % of revenues | 26.2% | 26.1% | ||
| Investments | 48 | 44 | 4 | 9.1% |
During the reporting period, revenues of the Networks Business Unit amounted to 351 million euro (360 million euro in the same period the previous year).
Gross operating income of the Networks Business Unit equalled 136 million euro, a decrease of 2 million euro compared to the first half of 2014. Regarding the various subsectors:
221
Depreciation, amortization, provisions and write-downs totalled 44 million euro, in line with the first half of 2014.
As a result of the above changes, net operating income amounted to 92 million euro (94 million euro in the first half of the previous year).
Investments for the reporting half year amounted to 48 million euro and regarded:
Half-yearly financial report at June 30, 2015
The following is a summary of the main quantitative and economic data relating to the EPCG Business Unit.
| GWh | 06 30 2015 | 06 30 2014 | Changes | % 2015/2014 |
|---|---|---|---|---|
| SOURCES | ||||
| Production | 1,494 | 1,460 | 34 | 2.3% |
| - thermoelectric production | 610 | 590 | 20 | 3.4% |
| - hydroelectric production | 884 | 870 | 14 | 1.6% |
| Imports and other sources | 470 | 522 | (52) | (10.0%) |
| - import | 441 | 518 | (77) | (14.9%) |
| - other sources | 29 | 4 | 25 | n.s. |
| TOTAL SOURCES | 1,964 | 1,982 | (18) | (0.9%) |
| USES | ||||
| Domestic market consumption | 1,410 | 1,340 | 70 | 5.2% |
| Distribution losses | 241 | 221 | 20 | 9.0% |
| Transmission losses | 67 | 61 | 6 | 9.8% |
| Other uses | 10 | 18 | (8) | (44.4%) |
| Export | 236 | 342 | (106) | (31.0%) |
| TOTAL USES | 1,964 | 1,982 | (18) | (0.9%) |
The total availability of the EPCG Group in the first half of 2015 was 1,964 GWh (1,982 GWh at June 30, 2014).
The EPCG Group produced a total of 1,494 GWh (+2.3% over the first half of 2014), of which 610 GWh from thermoelectric sources and 884 GWh from hydroelectric sources.
In the reporting period, there was an increase in both thermoelectric production (+3.4%), due to less days of shutdown of the plant in Pljevlja, and hydroelectric production (+1.6%), due to the higher level of water basins recorded in the early months of 2015. Instead, imports and other purchases of energy decreased (-52 GWh) compared to the same period in 2014.
Compared to the first half of 2014, sales of electricity on the domestic market grew by 5.2%, while the electricity exported recorded a decrease of 106 GWh.
| 06 30 2015 | 06 30 2014 | Changes | % 2015/2014 | |
|---|---|---|---|---|
| Electricity distributed (GWh)* | 1,054 | 986 | 68 | 6.9% |
(*) Data net of distribution losses
In the first half of 2015, the EPCG Group distributed electricity totalling 1,054 GWh on the low and medium voltage network in Montenegro (986 GWh at June 30, 2014).
| Millions of euro | 01 01 2015 06 30 2015 |
01 01 2014 06 30 2014 |
Changes | % 2015/2014 |
|---|---|---|---|---|
| Revenues | 118 | 119 | (1) | (0.8%) |
| Gross operating income | 32 | 30 | 2 | 6.7% |
| % of revenues | 27.1% | 25.2% | ||
| Depreciation, amortizations, provisions and write-downs |
(17) | (20) | 3 | (15.0%) |
| Net operating income | 15 | 10 | 5 | 50.0% |
| % of revenues | 12.7% | 8.4% | ||
| Investments | 7 | 12 | (5) | (41.7%) |
Revenues of the EPCG Business Unit amounted to 118 million euro in the first half of 2015 (119 million euro at June 30, 2014).
Gross operating income equalled 32 million euro, an increase of 2 million euro compared to the first half of 2014.
This performance, attributable to the energy sector for 1 million euro and the electricity distribution sector for 1 million euro, is substantially due to the higher volumes of energy sold to end customers.
Depreciation, amortization, provisions and write-downs equalled 17 million euro (20 million euro at June 30, 2014).
As a result of these changes net operating income amounted to 15 million euro, an increase of 5 million euro over the first half of 2014.
Half-yearly financial report at June 30, 2015 EPCG Business Unit
Investments in the half year amounted to about 7 million euro refer to work to replace traditional meters with remote controlled devices (3.4 million euro), extraordinary maintenance of the primary and secondary distribution network (1.2 million euro), as well as maintenance work on the thermoelectric plant in Pljevlja (1.4 million euro) and the hydroelectric plants in Perucica (0.1 million euro) and Piva (0.2 million euro). There have also been investments in information systems for 0.3 million euro.
| Millions of euro | 01 01 2015 06 30 2015 |
01 01 2014 06 30 2014 |
Changes | % 2015/2014 |
|---|---|---|---|---|
| Revenues | 89 | 95 | (6) | (6.3%) |
| Gross operating income | (9) | (11) | 2 | (18.2%) |
| % of revenues | (10.1%) | (11.6%) | ||
| Depreciation, amortizations, provisions and write-downs |
(49) | (2) | (47) | n.s. |
| Net operating income | (58) | (13) | (45) | n.s. |
| % of revenues | (65.2%) | (13.7%) | ||
| Investments | 3 | 4 | (1) | (25.0%) |
In the first half of 2015, revenues of Other Services and Corporate amounted to 89 million euro (95 million euro at June 30, 2014).
Gross operating income was negative for 9 million euro (negative for 11 million euro in the first half of 2014).
The result for the first half of 2015 was due to a few positive non-recurring income items for the previous year for approximately 2 million euro.
Depreciation, amortization, provisions and write-downs amounted to 49 million euro (2 million euro in the first half of 2014). This change is mainly attributable to the allocation in the first half of 2015, of higher provisions for risks for about 40 million euro.
After depreciation, amortization, provisions and write-downs there was a net operating loss of 58 million euro (a net operating loss of 13 million euro at June 30, 2014).
Investments for the period amounted to 3 million euro and mainly refer to investments in information systems.
The A2A Group has a risk assessment and reporting process which is based on the Enterprise Risk Management method of the Committee of Sponsoring Organizations of the Treadway Commission (CoSO report) and best risk management practice and is in compliance with the Corporate Governance Code as updated by Consob, which states: "…Each issuer shall adopt an internal control and risk management system consisting of policies, procedures and organizational structures aimed at identifying, measuring, managing and monitoring the main risks....".
228
This process requires a risk model to be set up that takes account of the Group's characteristics, its multi-business vocation and the sector to which it belongs. This model, is not a static reference, it is subject to periodic revision consistent with the evolution of the Group and the context in which it operates. The methodology adopted is characterized by the regular identification of the risks to which the Group is exposed. In this context an assessment process is carried out which, through the involvement of all its structures, allows the Group to identify the most important risks and establish the relative controls and mitigation plans. During this phase the involvement of the risk owners is essential through the use of operating methods that enable the risks regarding them, the relative causes and the way they should be managed to be clearly identified.
The methodology adopted is modular and leverages on the fine-tuning of the experience gained and methods of analysis used: on the one hand, it aims to develop the risk assessment further with specific reference to the consolidation of the mitigation process and on the other to develop and integrate risk management activities in business processes. This evolution is carried out consistent with the gradual increase in the awareness of management and the business structures about risk management issues, achieved among other things through the use of specific training support provided by the risk management department.
Set out below is a description of the main risks and uncertainties to which the Group is exposed.
Given the features of the sectors in which it operates, the Group is exposed to commodity price risk, namely the market risk linked to changes in the price of energy raw materials (electricity, natural gas, coal and fuel oil) and the exchange rates connected with these.
The Group has approved an Energy Risk Policy that regulates the procedures by which commodity risk are monitored and managed, or the highest level of variability to which the result is exposed with reference to the trend of prices of energy commodities.
229
Consistent with the provisions of the Policy, the commodity risk limits of the Group are defined and approved annually.
Market risk is managed by constantly monitoring the total net exposure of the Group's portfolio and addressing the main factors affecting the trend. Appropriate hedging strategies are defined, where necessary, designed to maintain this risk within the established limits.
The objective of stabilizing the cash flows generated by the asset portfolio and outstanding contracts is thus pursued through the use of physical contracts and derivative financial instruments, thus contributing to ensuring that there is economic and financial equilibrium in the Group.
The interest rate risk relates to the uncertainty associated to the performance of interest rates and is mainly associated with the components of financial debt at a floating rate. The volatility of financial expenses associated to the performance of interest rates is therefore 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.
In order to analyze and manage the risks relating to interest rate risk the Group has developed an internal model enabling the exposure to this risk to be calculated using the Montecarlo method, assessing the effect that fluctuations in interest rates may have on future cash flows.
230
Liquidity risk regards the Group's timely ability to meet its payment commitments. To cover this risk, the group ensures the maintenance of adequate financial resources, as well as a liquidity buffer sufficient to meet unexpected commitments. At June 30, 2015, the Group contracted revolving committed credit lines for 650 million euro, unused. It also has unused long-term bank financing for a total of 35 million euro and cash equivalents totalling 410 million euro.
Liquidity risk management is also pursued by directly accessing the capital market, particularly through the Bond Issue Program (Euro Medium Term Note Programme), extended to 4 billion euro, as approved by the Board of Directors on November 6, 2014.
At June 30, 2015, the parent company had bonds to the public for a total nominal value of 2,553 million euro as follows: 503 million euro falling due in November 2016; 750 million euro falling due in November 2019; 500 million euro falling due in January 2021; and 500 million euro falling due in January 2022; 300 million euro falling due in 2025.
A2A S.p.A. has also issued a bond of 14 billion yen falling due in 2036, in the form of a private placement, and as part of the EMTN Programme has issued a bond of 300 million euro falling due in December 2023.
The terms and conditions of these bond issues are in line with the market standard for this type of financial instrument. All the bonds issued by the parent company as part of the EMTN Programme (amounting in total to 2,350 million euro at June 30, 2015) contain a change of control put clause in favor of investors for any changes in control which lead to a resulting downgrading of the rating to sub-investment grade in the following 180 days. If the rating returns to investment grade within the 180-day period the put option is not exercisable.
The private bond in yen falling due in 2036 contains a put right clause in favor of the investor, which triggers if the rating falls below BBB- (sub-investment grade).
The loan agreements entered into with the European Investment Bank contain a credit rating clause guarding against a rating of below BBB- or equivalent level (sub-investment grade). In the event of a change in control of the parent company, the loan agreements entered into with the European Investment Bank falling due after 2024 (a total of 458 million euro at June 30, 2015) grant the bank the right to invoke early repayment of the loan on providing notice to the company containing an explanation of the underlying reasons.
The agreement entered into by the parent with Unicredit, brokered by the EIB, for which the term of the loan having an outstanding balance of 21 million euro at June 30, 2015 expires in June 2018, includes a credit rating clause that requires the company to maintain an investment grade rating throughout the duration of the loan. In the event of non-compliance there are a number of annual covenants to be respected based on the ratios of debt to equity, debt to gross operating income and gross operating income to interest expense.
The lines of revolving committed credit in Club Deal for 600 million euro expiring November 2019 and bilateral of 50 million euro signed recently with Cassa Depositi e Prestiti falling due June 2017, currently unused, 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. In addition, the revolving facility in Club Deal is subject to the financial covenant NFP/EBITDA.
231
The following can be found in the agreements for the bond loans, the loans mentioned above and the lines of revolving committed credit: (i) negative pledge clauses under which the parent company undertakes not to pledge, with exceptions, direct guarantees on its assets or those of its 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 Group companies.
With regard to subsidiaries the loan to Abruzzoenergia S.p.A. is backed by a secured guarantee (mortgage) for a maximum of 264 million euro and contains two covenants based on the ratios NFP to shareholders' funds and NFP to gross operating income.
With reference to the subsidiary EPCG, the loans granted by the EBRD (European Bank for Reconstruction and Development) in November 2010, which has been fully drawn down, and in April 2014, drawn down for 5 million euro at June 30, 2015, for a total of 65 million euro, and include some financial covenants.
As things currently stand, no companies in the A2A Group have defaulted.
232
The A2A Group operates in a highly regulated sector. As a consequence, one of the risk factors of the business is the constant and not always predictable evolution of the legislative and regulatory situation for the electricity and natural gas sectors, as well as for the sectors relating to the management of the water cycle and environmental services.
In order to deal with these risk factors the Group has adopted a policy of monitoring and managing legislative risk by having various levels of control, in order to mitigate the impact of this to the greatest extent possible.This involves collaborative dialogue with the institutions and with the bodies which govern and regulate the sector, active participation in trade associations and the work groups set up at these entities and a detailed review of changes in legislation and the provisions issued by the sector Authority.
It also involves constant dialogue with the Business Units affected by legislative changes in order to assess the potential effects in full.
The main topics involved in current changes in legislation are as follows:
For the above matters reference should be made to the section on "Changes in legislation" of this Report, under the various Business Units.
Regarding large hydroelectric concessions, the Lombardy Region, by way of Regional Law of December 30, 2014 no. 35 (published in BURL December 31, 2014), has made some amendments to article 53-bis Regional Law no. 26/2003, extending until December 31, 2017 the power of the Regional Council to allow the temporary continuation of the exercise of concessions expired or due to expire, and defining in more detail the possibility of applying an additional or retroactive fee parametrised to the manager's profit. These regional standards are currently being evaluated.
With regard to procedures for the award of concessions for gas distribution, it should be noted that A2A Reti Gas S.p.A. challenged before the Regional Administrative Court, Ministerial Decree May 22, 2014 establishing the guidelines on the criteria and application procedures for the determination of the redemption value of the plants, as well as its subsequent amendments. In fact, it is believed that these guidelines introduce provisions contrary to the provisions of art. 15, paragraph 5 of Legislative Decree no. 164/2000 and art. 5 of Ministerial Decree no. 226/2011, for which they should only define the application methods. The deduction provided for by the guidelines is also challenged regarding the contributions paid by individuals of the value of the reimbursement due to the outgoing concessionaire.
As far the forecasts of economic conditions for the supply of gas for the protected service are concerned, in addition to the information provided it should also be noted that A2A S.p.A. has filed an appeal against Resolution no. 447/2013/R/gas regarding the excessively subjective nature of the mechanism which this regulates. In addition, developments are still awaited in the dispute over Resolution no. ARG/gas89/10; by this resolution, the AEEGSI amended the way in which the price of the supply of gas for the protected service is updated by applying a reduction coefficient "k" to the indexed component of the raw material quota (QE) (a variable fee covering procurement costs): the Regional Administrative Court issued a sentence favorable to the petitioners in March 2013, a sentence against which the Authority has filed an appeal with the Council of State. In the face of the request for withdrawal submitted by the same Authority on October 24, the State Council has set the related merit hearing for October 27, 2015.
All of the Group's Business Units of activity involve managing production sites which are technologically and operationally complex (electric power stations, waste disposal plants, cogeneration plants, distribution networks, etc.), where a breakdown or accidental damage could lead to a lack of availability and in turn to financial losses and possibly harm to the Group's reputation due to the interruption of the services provided.
These risks are linked to a variety of factors which, in the case of certain plants, could what is more be accentuated by changes in the competitive context and in the reference markets. To the extent that the risk of unavailability of the plants may be considered an inherent part of the business and a risk that is impossible to eliminate entirely, the Group sets up preventive risk mitigation strategies at all of its Business Units to reduce the probability of such risks occurring and action strategies aimed at limiting any impact.
Safeguarding the Group's plants and infrastructure involves adopting and continuously updating procedures for scheduled maintenance, of both an ordinary and preventative nature, aimed at identifying and preventing potential critical situations, identified amongst other things on the basis of specific engineering analyses carried out by dedicated technical staff, all in line with best practices. It also involves periodically reviewing the plants and networks as well as providing specific training courses for technical personnel. In addition, the A2A Group makes widespread use of instruments for the control and remote control of technical parameters for the monitoring and timely detection of any anomalies as well as having a back-up of the components needed to guarantee operational continuity, where possible. The integration process between the specialist engineering teams in the A2A Group has led to a strengthening of the skills relating to plant performance analyses.
In addition, the progressive adoption of advanced software and sensors is planned at all of the Group's plants for calculating the actual yield of the plants, aimed at enabling an approach to be taken that is even more preventive compared to the past as far as the planning and performance of maintenance is concerned. The gradual adoption of the above controls is also envisaged in the case of the acquisition of new production sites, to facilitate their alignment to the Group's standards.
In view of the current context of the energy markets in which the energy production plants operate, with particular reference to thermoelectric plants, it is noted that activities and projects have been planned and undertaken to ensure operational flexibility, efficiency and availability at times when said requirements are requested of them, such as the programming of flexibilization investments of the combined cycle plants, modernization of plants and machinery or the redesign of plant parts that over time have highlighted structural problems, the renegotiation of service contracts with manufacturers of turbogas machinery, the integration and the constant recourse to specialized resources available within the Group, a program to reduce structural costs of thermoelectric plants.
Moreover, to control the risks arising from the present way in which the thermoelectric plants work, arising from trends in the energy markets, a process for revising, uniforming and fully adjusting the maintenance contracts and specific actions to rationalize the management of spare parts warehouses are currently in progress. Also regarding the production of energy from thermoelectric sources, it is noted that the Group pays particular attention, through a stable and cooperative dialogue with institutions, local authorities and communities, to the issues of risk regarding the manufacturing sites that use fossil fuels (Monfalcone, Brindisi, S. Filippo del Mela). This monitoring is designed to ensure a proper and positive perception of the plants as well as to pursue the possibility of a future realization of projects for adaptation and conversion. As for hydroelectric plants, a focal issue, with reference to operations structure, is related to unfavorable weather conditions; reduced rainfall throughout the year could potentially lead to lower production. In order to ensure the optimal use of water resources, there is an organizational monitoring consisting of the presence of business units dedicated to the development of analysis and engineering models to support the planning of hydroelectric plants, both medium and short term.
235
In the Environment Business Unit specific activities are in place and monitoring tools have been installed to prevent any possible risk of interruption to the waste transportation and disposal service. In particular, specific controls have been implemented to detect the presence of unsuitable substances in waste destined for incineration, as well as plants, systems and specific operating procedures for loading and output of materials deposited at storage sites and waste treatment aimed at limiting the risk of development of fire. The Business Unit is additionally introducing steps to optimize the management of certain sites in order to make the disposal process more efficient. Furthermore, it is noted that structural interventions Half-yearly financial report at June 30, 2015 Operating risks
were planned on all plants of the company, and in particular on the large waste-to-energy plants, designed to ensure a higher reliability and perspective of operability over time, such as the realization of electrical backup lines, replacing thermomechanical components that have reached the end of their technical life, renovation of structures designed to reduce deteriorations, the adaptation of plants to recover the remaining fractions of solid waste in view of their subsequent contribution to waste-to-energy plants. To mitigate any repercussions on the Group's reputation due to a temporary impossibility to transport waste, mutual assistance exists between the Group's plants and there is centralized coordination of planned stoppages for maintenance.
Within the transport and distribution networks of energy and gas, it is noted that interventions were planned and started designed to increase the reliability of services and to ensure the ongoing appropriateness of the infrastructure with the evolution and expansion of urban areas and territories served by the various Group companies, such as the implementation and expansion of automation systems and remote control of stations and cabins, the construction of new cabins for electricity and gas. As part of the operating activities of the electricity grids, the issue of continuity of service during periods of special climatic conditions with potential reputational risks arising from possible interruptions of service delivery is confirmed as particularly relevant. To deal with these situations, in addition to the usual maintenance activities, the Group has planned and started the enhancement of actions to streamline the meshing of electricity grids and extraordinary plans for reclamation of the components considered critical for the continuity of operation. There are also emergency response teams, operating remote control and advanced technical tools for safety. Also with reference to the networks, we highlight the risk issue linked to potential reputational damage for the Group arising from possible disruptions in the electricity supply network that may occur in 2015 during the EXPO event. In this regard, it is noted that a series of supervision actions have been planned (technical, organizational and coordination) including: remote control of all supply stations with laying of a fiber optic ring, particular realization configurations, physical check and thermal monitoring of the connection cable of the primary station with the EXPO area, installation of an antiintrusion system and permanent security guard also in anticipation of the possibility of having to perform rapid intervention manoeuvres, definition of operating agreements and regulations both with the Terna S.p.A., for the management of the primary station during the event, and with EXPO/Enel for site management.
236
Further potential risks for the Group are related to possible accidents in the management of traffic lights and street lighting that involve staff of the company or third parties. To mitigate this risk issue, activities have been planned for replacement of the most outdated electrical circuits, test campaigns and, if necessary, replacement of older supports, implementation of new systems for remote control of lighting points.
The Group takes an active part in projects for the development of the electricity network from a "smart grid" standpoint, meaning by this a network with which it is possible to exchange information on energy flows and manage demand peaks more efficiently, thus reducing the risk of interruption. In particular, the Networks Business Unit is engaged in the development of new solutions for the so-called smart grids, where through the introduction of digital technology new features are realized to address the increasing complexity resulting from the deployment of distributed generation sources connected to the LV networks and to better meet the demands of the Regulator and the expectations of customers.
Operative means of regulating the customer's consumption during specific time bands have been successfully tested in the district heating sector; these are designed to avoid excessive peaks in the use of installed power with the resulting possibility of critical matters arising regarding the optimal working of the networks. Actions are being studied to upgrade supply facilities of the district heating network that are most exploited, as well as construction of new heat transport routes for the improvement of the structural organization of the network. These operations are supplemented, as part of the maintenance of the network, by continuous engineering analysis supporting interventions for repairs. Measures to be implemented over the following three years and designed to ensure the continuity of the district heating service are also underway for situations in which there is a temporary interruption of the supply of heat to the network by the waste-to-energy plants of the Group. Lastly, we broadly note the risk issue represented by changes in temperature that may affect the level of use by end customers of the products/services offered.
237
A risk issue that is becoming increasingly important concerns the unauthorized access of external personnel to the Group's plants and infrastructure, which could impede the smooth running of operations, with potential impact on the safety of operating personnel, unauthorized third parties, the sites and their surroundings, as well as economic impacts resulting from the need to interrupt production activities. To mitigate these possible events, specific procedures have been implemented that govern the operating procedures for access to the plants and supervision services, also in coordination with the police, for control of sites that are more vulnerable to intrusions or which may be potential targets of acts of sabotage. Further interventions are also being evaluated such as studies on the situation of gas plants to increase the their safety level, improvement of existing passive fences, strengthening of anti-intrusion alarm system and the installation of control systems for badge access, infra-red cameras and systems.
Half-yearly financial report at June 30, 2015 Operating risks
Finally, the Group takes out insurance cover against any direct and indirect damage which may arise from other types of risk. The contractual conditions that characterize these policies were revised to align them to the way in which the plants work and to energy market conditions.
The risks associated with events that impact the environment or the health of the population living in the areas affected by the Group's activities are the object of increasingly close attention by public regulators and ever more stringent legislation. This type of risk covers all activities of the Group, with particular reference to the disposal of production waste, emissions resulting from the production processes, the management of the collection, storage, treatment and disposal of waste, the supply of basic goods such as drinking water, waste water treatment, the management of emptying and maintenance of the reservoirs for the collection of water resources for the production of electricity.
To monitor these potential risk events, the Group has implemented various actions: procedures for design and construction of storage sites of waste materials, monitoring systems and the presence of static and dynamic barriers enabling to detect pollution phenomena attributable to the same sites, systems for continuous detection and monitoring of emissions, systems for detection and abatement of polluting concentrations.
With reference to the issue of waste water treatment, actions are being studied for the upgrading and enhancement of existing infrastructure. With regard to the issue related to the management of the reservoirs, with specific reference to maintenance of the same and the corresponding possible negative effects on water and on the local area determined by emptying, it is noted that partial drainage of basins is being evaluated in relation to the type of interventions as well as the use of different methods for removal of the sediments.
Finally, we note the organization of Environment and Safety site structures that support employees, officers and management in the management of the HSE system for specific risks, monitoring of changes in legislation on environmental issues, as well as the ongoing dialogue and transparency in relations with authorities, the communities of reference and stakeholders, also made explicit through instruments such as the Sustainability Report.
The Group is significantly involved in preventing such risks and has adopted a policy document entitled "Policy for the Quality, Environment and Safety of the A2A Group" which is the tool which now sets out the Group's approach to such questions. This document, which is widely distributed both internally and externally, explains the values which underlie the Group's operations and which the Environment, Health and Safety Organizational Structure is committed to disseminating and sharing as guidance for the day-to-day work of all concerned. The Environment, Health and Safety Organizational Structure also supports senior management in establishing company policy in these areas, checking that this is implemented properly in compliance with the rules applicable in all areas and internal processes. The A2A Group is constantly committed to supporting dialogue aimed at a maximum collaboration with local bodies and communities on environmental issues.
The process of updating the Organizational and Management Model as per Legislative Decree no. 231/2001 for the introduction of environmental offenses is in progress, with specific emphasis on implementation at the individual Group companies. In addition, the Environment, Health and Safety Organizational Structure has been rearranged from both an organizational and procedural standpoint as the first stage in a process of revising and updating the way in which the risk issues in question are managed, and this will involve all of the Group's employees and business processes.
The Group carries out direct control of the way in which the risk issues in question are managed through the structures of the Environment, Health and Safety Organizational Structure at the individual sites, which provide the necessary support to employees, officers and management in running the HSE (Health Safety Environment) system.
The operational implementation of the policy is carried out through the use of an Environmental Management System (EMAS) by those operating entities of the Group which are more exposed to both direct and indirect potential environmental impact. This system provides for a program of progressive extension and upgrading to the standards of ISO14001 certification for the Group's main activities having a greater impact on the environment, as well as for obtaining EMAS certification for the Group's main plants. In order to arrive at a single model, a revision and updating process is currently taking place which will enable all the Group's operating companies to refer to a single integrated Quality, Environment and Safety management system.
With the aim of achieving constant improvement in control and moving in line with best practices, the Group takes part through industry associations in discussion groups held to draft BREFs (Best Available Techniques Reference Documents) for LCPs (Large Combustion Plants) and waste management.
Organizational control units have been set up which among other things carry out periodic environmental analyses together with regular audits to detect and prevent any conduct that does not comply with the environmental procedures established for all of the Group's operating companies. From the perspective of having a constant evolution of the systems controlling environmental risk, the Group has joined the ARPA (Regional Agency for the Protection of the Environment) Lombardy Project, whose purpose is to improve the efficiency of the system for controlling the more significant emissions, also in the light of technical developments in the sector, by connecting all the Emission Monitoring Systems (SMEs) to a single control center. The A2A Group has taken out insurance cover against damage arising from both accidental and gradual pollution in order to cover any residual environmental risk, meaning against events caused by a sudden and unpredictable fact, and against the environmental damage inherent in continuing operations.
Each year the Group publishes a Sustainability Report which reports key data and information on the environmental and social aspects connected with the Group's activities. The Sustainability Report conforms to standard GRI-G3.1 issued by the Global Reporting Initiative and since 2010 has been certified by the auditors.
240
The activities of the A2A Group are managed through ICT systems which support the main business processes: operational, administrative and commercial. Potential risk factors include the inadequacy, fragmentation of existing platforms of such systems or the failure to keep these updated compared to business needs, possible "downtime" making the systems unavailable and the inadequate handling of the aspects linked to the integrity and confidentiality of information.These risk factors are mitigated by controls governed by the Group Information & Communication Technology (ICT) Organizational Structure.
The process within the Group of integrating and consolidating its ICT systems, determined on the basis of the changes in corporate structures which have taken place in previous years, has led to a number of important objectives being reached. Following the integration of distribution support systems on a single platform, the program for the convergence of the main systems supporting commercial activities has also been completed. In areas where there is still fragmentation of systems and platforms used, in consequence of which there may be inefficiencies in the implementation of business processes such as billing and debt collection, it is noted that activities have been started for the definition and subsequent implementation of plans to standardize the platforms used. The Group will continue to develop its information system structure and improve its efficiency by drawing up a dedicated general architectural strategic plan.
The Group, in addition to defining outsourcing contracts for ICT services that envisage clearly defined service level agreements, has a Disaster Recovery procedure that, in case of unavailability of one of the two CEDs (Data Processing Centre), guarantees the recovery of Half-yearly financial report at June 30, 2015 Operating risks
data and information relating to business activities on the alternative CED. It is noted that additional activities are being initiated aimed at increasing the levels of reliability and continuity of provision of ICT services, such as the structuring of the Business Continuity Plan, which aims to be the tool through which the Group is preparing to deal with additional scenarios unavailability of services for areas considered most critical; the definition will be followed by the identification of specific implementation activities, strategies for definition of future outsourcing contracts for support to ICT services such as "Multivendor" and reinsourcing of responsibility in ICT. Considering the importance of the activities that are carried out every day on the Italian Power Exchange, particular attention is given to controlling the systems interfacing with the market. These systems have in fact been duplicated and are subject to specific management and maintenance procedures designed to protect their stability. A specific control was developed in 2012 to support trading activities.
Data confidentiality and security are subject to specific controls by the Group through the use of internal policies and by means of tools to segregate access to information, as well as through specific contractual agreements with any third parties who may have to access the information handled. In order to improve the existing control further, work has begun on checking the alignment between the organizational role model and the segregation of duties technical role model implemented in the systems. Consistent with this work, it is planned to gradually adopt identity management and access control tools designed to ensure increasingly effective control over the processing of data critical for the business. A team has been set up to prevent and monitor any possible hacking into the Group's information systems and specific applications solutions have been acquired to manage and control information security.
As a control of this specific risk issue the Group carries out annual vulnerability assessments, both internally and externally. Lastly, a multi-year master plan of safety initiatives approved by Top Management was conducted in 2014 and updated and expanded in 2015, which defines the actions to be taken to gradually improve the maturity level of safety up to making it adequate to the business services provided by the Group. In this regard, specific policies will be prepared on the use of mobile devices, which are increasingly used today for carrying out business activities.
A centralized support plan is also being evaluated for Group ICT, of systems for monitoring, infrastructure control and industrial processes (such as SCADA systems and networks) that, because of an increasingly driven integration with "IT" (Information Technology) systems, are potentially exposed to security and integrity risks.
The Group operates in a heterogeneous business environment characterized by a strong technology element and the presence of personnel at its plants and throughout its territory.
Certain Group activities are, by their nature, more exposed to the risk of "typically workrelated" accidents linked to the operational services in the territory and the performance of technical services and activities at the plants.
The prevention measures adopted aim for a "zero risk" objective through the Quality, Environment and Safety Policy (which provides for a program to upgrade the personnel safety management system to comply with ISO 14001 and OHSAS 18001 standards), encouraging a constant rise in the level of safety in the workplace. In particular, in this respect, the use of additional models for measuring the Environment, Health and Safety risk at the level of single plant is being started.
A central Prevention and Protection Service has been set up as part of the Quality, Environment and Safety Organizational Structure in order to harmonize the objectives of safety and protection in Group companies and to monitor that these standards are also being followed by contractors at both the prequalification stage and the execution stage at worksites. In this sense the model for controlling contracts from a health and safety standpoint is currently being developed further.
A gradual enhancement of the organizational control structure is planned, which among other things carries out specific inspections to monitor compliance with legislation as well as personnel update training. In this respect specific training plans have been established for each business position and responsibility and a start has been made to these training courses.
A project to revise the present organizational model is ongoing based on the establishment of guidelines, methodologies, instruments and controls provided by the Environment, Health and Safety Organizational Structure and assisted by the support of specific Environment, Health and Safety functions in each company and by the active involvement of the operating structures.
Finally, with the aim of constantly improving control, a process is planned to revise the present model for managing employee health supervision carried out by a team of doctors situated locally who perform regular health personnel assessments. As part of this revision process the Group plans to develop specific analysis and reporting tools regarding the results of the health supervision process.
Half-yearly financial report at June 30, 2015 Operating risks
A plan to refine the system of analyzing and controlling accidents and injuries has begun, in order to support the process of constant improvement in safety matters. This project provides for periodic reporting, which by means of increasingly detailed specific indices and information will provide support for identifying the causes of accidents and injuries and taking corrective and mitigating action.
Responsible management for sustainability
246
At June 30, 2015, the Group had 12,497 employees, of whom 2,492 work for the EPCG Group, an increase of 112, or 0.9%, over June 30, 2014.
These changes include the effects of certain extraordinary operations carried out during the year and in particular:
As a result, excluding the effect of these two events, the workforce fell by 346 employees, or 2.8%, over that at June 30, 2014.
The average labor cost per employee, net of EPCG, rose by 0.5% compared to the results for the first half of 2014, confirming the reduction trend of the effect of the growth dynamics linked to automatic contractual procedures (national collective bargaining agreement renewals and seniority increases) through cost efficiency measures.
In the first half of 2015, countless union agreements were signed that covered a variety of topics and that concerned all Business Units.
The main ones refer to:
particular reference to thermoelectric ones, continue to be affected by a particular crisis situation. In this regard, we note the agreements related to the hydroelectric plants in Mese and the one related to Monfalcone specifically aimed at identifying operational solutions for greater efficiency, as well as the agreements related to the hydroelectric plants in Valtellina and Chivasso which, also with the aim of pursuing objectives of operational efficiency, have identified new solutions and organizational operation models.
As part of intense trade union relations that involved all the companies in the first half of this year, the following are the main agreements:
agreement related to the management of the sweeping and waste collection service at the Expo site (the Plan envisages the hiring of 420 resources both for site activities and for the enhancement of all environmental services in the city), and the agreement which defined the harmonization of health and social services between the new sector health fund (Fasda) and the social assistance company fund (Fidas). As for A2A Ambiente, we note the agreement for reorganization of the district heating and logistics activities at the Silla 2 waste-to-energy plant, and the Agreement at the Acerra waste-to-energy plant intended to complete the Plan of mapping the operational roles of the site.
248
In the first half of 2015, within the Resource Development and Internal Communications Organizational structure, there was the creation of the Internal Communications function in order to ensure the implementation of an internal communication plan of the Group, promoting and designing transversal and change management initiatives, to accompany the evolution of the corporate culture. In particular, an Internal Communication plan has been started, in line with the people strategy and with the purposes of the Business Plan, which aims to improve and increase the Group's internal communication, also through the improvement of the language, the creation of new internal communication instruments and enhancement of coordination with the structures that manage Institutional and Territorial Communication and with the various Business Units.
A Convention has been organized dedicated to Management and Middle Management to disseminate content and messages of the 2015-19 Business Plan, presented previously to shareholders, investors and company parties.
Short and medium/long term actions have also been defined that involve the realization of the following "core" instruments:
the New Company House Organ;
As far as Group employee training courses are concerned(1), at June 30, 2015, a total of nearly 66,000 hours of training were provided with more than 17,000 attendances.
In particular, 64% of the hours was dedicated to worker safety; technical and managerial training weighed each about 9% of the total hours in half year.
Language training involved 240 people in half year for a total of 4,754 hours.
In a perspective of proximity to the needs of the various businesses, "ad hoc" managerial training courses were also provided for specific populations in the Group to support staff in achieving business objectives:
One of the digitization projects, realized in line with the guidelines of the Business Plan, required a training session which involved 157 people for a total of about 420 hours.
250
Regarding development activities in line with previous years, the Group Performance Management process is underway involving Executives, Managers and Employees. The new model of business skills was revised in the second half of 2014 with the aim of developing organizational conduct in line with new business challenges and simplifying the evaluation phase of performance for the year 2014.
The managers involved as appraisers received appropriate training over the years, both on the model adopted by the Group and on skill assessment and the feedback meeting.
In the first half of 2015, the use of the Job Posting tool increased with the activation of more than 40 positions.
Projects continued dedicated to specific population businesses/targets. Specifically, within the Project "Laboratorio delle Competenze" (Skills Laboratory), aimed at the enhancement of professional skills for the resources of the distribution companies (A2A Reti Elettriche S.p.A., A2A Reti Gas S.p.A., A2A Servizi alla Distribuzione S.p.A.), the phase "Self-classification of skills and know-how" that involved employees in the perimeter, has been completed. The aim of this project is to establish skill development paths, starting from the professionals in A2A, in order to foster the professional growth of staff as a means of preserving and developing the technical know-how and organizational conduct important for the business.
The project was developed by way of a partnership created between the Human Resources and Organization and the heads of the Companies involved, and saw their great commitment.
In the first half of 2015, the project "Futura2a" was started, an initiative dedicated to young graduates of the Group (approximately 250), which aims to create a virtuous circle of innovation in A2A, leveraging on collective intelligence, to generate ideas applied through the creation of an online community and the realization of "live" events.
Specifically, in the first quarter of 2015, a pilot phase was realized, which involved about 50 young people among the 250, engaged in the co-design of the online community. In the second quarter of 2015, the phase of Laboratory of Ideas was started, which involved all 250 participants in the idea innovation process on a platform dedicated to the generation of ideas in a shared and collaborative manner.
In the first half of 2015, the project "Gulliver" was started with the aim of developing a Succession Plan to guarantee the Group planning of the coverage of positions in the organization and encourage job rotation exploiting resources creating multi skill management roles for technical managerial figures and maintaining adequate levels of retention.
Within the Resources Development and Internal Communication Organizational structure, at the beginning of the year, the Employer Branding and Social Policy function was formed with the aim to strengthen and innovate partnership methods with academic and educational institutions in order to attract and retain the best resources.
Specifically in May, the initiative UNIversoA2A was launched to meet young graduates and newly graduates in scientific and economic subjects from the universities of Lombardy. The Universities involved in the initiative were Bocconi University, Università degli Studi of Brescia, Università Cattolica del Sacro Cuore, Politecnico di Milano, Università degli Studi di Milano Bicocca.
Numerous students welcomed the opportunity to have a closer look at the A2A Group's multibusiness reality, to approach the world of energy, dialogue with expert managers in the industry and consider the internship opportunities available. It was also a chance for a visit to the waste-to-energy plants in Brescia and Milan.
Employer Branding activities also continued at major universities (Bocconi, Università degli Studi di Brescia, Politecnico di Milano) and significant communication activities were developed on social networks to increase visibility of the initiatives and opportunities of the A2A Group in order to keep our followers constantly updated.
With regard to Social Policy activities, the "Melograno" (Pomegranate) project was launched dedicated to issues of "gender balance", which will be implemented in the second half of the year.
The objective of the project, in line with the guidelines of the Strategic Plan, is to promote change towards gender balance, encourage the development of a corporate culture aimed at the enhancement of female resources at the company and implementation of concrete welfare actions for the entire workforce.
In the area of Social Policies, our activities continue regarding enhancement of services for work-family balance. In May 2015, the agreement was renewed for the social and psychological assistance service aimed at all Group employees; due to the increase of the service recorded in 2014, for a total of 1,025 consultations provided, the company decided to extend the hours of presence of the psychologists in order to provide better oversight in the various regional offices.
252
In the first half of 2015, the Recruitment Plan was characterized on one hand, by the hiring of 15 young high school graduates to support the generational change necessary for the maintenance of technical specialist know-how and other of Operations and on the other, by the launch of an incoming project of figures expert in ICT, to support the digitization program and development envisaged in the new Business Plan.
In June 2015, A2A published its seventh Sustainability Report following, for the first time, the new international criteria of the Global Reporting Initiative (GRI.4 guidelines), which place more and more emphasis on the careful reading of the expectations of the company stakeholders, as the basis for identifying the significant issues to be reported.
This step engages perfectly in the line of evolution of A2A that, in April 2015, presented its new 2015-19 Strategic Plan, which aims, over a span of five years, to a radical transformation of the Group through return to its industrial vocation, rapprochement to the territory, relaunch of investments, balance of the business portfolio, technological and digital innovation, enhancement of human capital and, in particular, young people.
253
These same elements are confirmed by the facts and figures presented in the Sustainability Report.
The following are some of the projects and events in the terms of Corporate Social Responsibility, realized by A2A and Group companies in the first months of 2015:
Work started in Brescia for the new LED lighting in the city. As in Milan, also in Brescia A2A took action, in agreement with the City Council, to replace all 43 thousand lighting points with LED fixtures, by 2016. Thanks to the action, annual consumption will drop from 18 to 11 million kWh, with a saving corresponding to the average consumption of 5,000 apartments. A2A's investment amounts to 12 million euro. In Milan, the work will be completed by August 2015.
By 2015, the goal is to reach 2 micrograms/liter on the total amount of water delivered, concentration below the detection limit with the analytical methods currently used.
• In May 2015, A2A Ambiente S.p.A., the Nola Prosecutor and ARPAC signed a memorandum of understanding to further promote transparency in the management of the Acerra waste-to-energy plant and environmental monitoring. Specifically, the memorandum requires the ARPAC to guarantee that control activities regarding atmospheric emissions imposed on the manager by the Integrated Environmental Authorization (AIA) are regularly performed and intensified with the presence of its technicians. The ARPAC will also submit for knowledge to the Nola Prosecutor, the data acquired and the assessments on the results of the controls performed.
254
companies that have chosen to put at the service of the community and the territory the skills acquired through experience gained at the workplace.
• Since January 29, 2015, A2A is included in the Ethibel Pioneer Investment Register, developed by Forum Ethibel for socially responsible investments. The inclusion means that the company can be qualified as a sector leader in terms of Corporate Social Responsibility.
• A2A Ambiente and Apindustria Brescia signed an agreement for the integrated management of waste from associated companies. The associated companies can take advantage of the favorable and simplified service conditions through A2A Ambiente that acts as a single interface and ensures prompt qualified service to handle any issue relating to waste management and the resulting regulatory requirements, with particular attention to the activities of final treatment realized with high standards of quality and safety at plants mostly owned by A2A. The agreement is aimed at more than 1,000 potentially interested companies, with an estimated production of 10,000 tons of industrial waste per year.
leaves. The work bursaries are for people with severe social disadvantage followed by the Work Center of the Department for Social Policies of the Municipality of Milan. The 40 new candidates are added to the 48 people active as of December 2014, still at work in 13 areas of the city.
Projects related to environmental education in schools, implemented and promoted by A2A ended with the closure of the school year. Many awards events were held in the different territories: on May 22, the School Project of the territory of Como ended with the organization of a closing party of the initiative "Vesti tu la bottiglietta" (Dress the bottle), promoted by A2A and Aprica S.p.A., in collaboration with the Municipality of Como, Unindustria Como and Corepla, which was attended by about 3,800 students; "Energy and art", the competition proposed by Edipower S.p.A. (in Piacenza, Sermide, Chivasso, San Filippo del Mela, Mese) was attended by nearly one thousand young people; on June 5, the closing event was held at the Science City of Naples of the competition "Ecoreporter, rifiuti da prima pagina" (Ecoreporter, front page waste), promoted by A2A Ambiente S.p.A. - in collaboration with the associations ACSSA, Adiconsum, Amici della Terra (Friends of the Earth) and the Consumers League.
Aprica S.p.A. was the winner of the 2014 edition of the National Award on waste prevention, in the category of multi-utility and municipal waste management companies. The award to Aprica S.p.A. was assigned for the following five initiatives, implemented in collaboration with the Lombardy Region and the Municipality of Brescia, within the Regional Waste Plan (PARR): reduction of packaging in mass distribution; reduction of packaging in the sale of fruit and vegetables in short supply chain; farm delivery; distribution of surplus food; tap water.
257
The Group's Environmental Management System is based on the principles set out in the Group's Quality, Environment and Safety Policy and sector Environmental Policies, and has the aim of promoting a progressive and constant improvement in business performance in terms of effectiveness and efficiency in managing the environmental aspects connected with its activities. This system is adopted and implemented in a way that is integrated with the broader business management system, which also governs the other strategic matters regarding sustainability including those concerning quality and safety.
A proper implementation of the environmental management system is ensured by setting up various types of measures, such as the clear identification of principles, roles and responsibilities; the identification of activities whose management requires particular care; the assessment of areas where steps may be taken to seek improvement from an organizational or structural standpoint; the establishment of action strategies; and the means of working and operational control.
Regular internal audits are planned and carried out in order to check the efficiency and effectiveness of the Management Systems and their ability to ensure that improvement objectives are reached and that the adopted principles are being complied with. The adequacy of the systems is confirmed by the audits performed by independent third parties and is attested by the ISO 14001 certifications and the EMAS registration at the Group's leading companies.
At June 30, 2015, 24 plants of the A2A Group have EMAS Registration. For another plant, the registration process is still ongoing (AMSA - Site of Via Zama).
Following the extension of the scope of Legislative Decree 231/01 to environmental offences, the parent company has undertaken a review and revision of the Environmental Management System to align it to the new requirements. At the same time, a revision of the way, in which the activities connected with the risk that this type of offence may be committed are managed internally, has begun in the operating companies, and this is currently in progress. The alignment of the Environmental Management System with the 231 Model is therefore at an advanced stage of consolidation in several of the Group's companies.
The A2A Group carries out research and innovation activities that are consistent with the development programs of its business sectors. The recent establishment of the Business Units favors the focus of activities by sector albeit with attention to the opportunities of transversal research programs.
In particular, the Networks Business Unit is engaged in the development of new solutions for the so-called smartgrid, where through the introduction of digital technology new features are realized to address the increasing complexity resulting from the deployment of distributed generation sources connected to the distribution network and to better meet the demands of the Regulator and the expectations of customers.
In particular, the Smart Domo Grid project, financed by the Ministry for Economic Development, was completed; this saw A2A Reti Elettriche S.p.A. as project leader together with the Milan Politecnico University (Faculty of Energy) and Whirlpool as partners. The project included the design and implementation of a smartgrid solution with demand/response functionality, enabling the power grid of the Distributor to regulate the load of customers in terms of cost optimization opportunities and services for the benefit of both. The solution has been successful in terms of both the interest and the willingness by users, which were available for the test, and the benefits achieved (albeit under conditions of experimentation in regulatory context still underway). In an area of Brescia, the experimentation involved twenty-one families with new appliances, tools and training for their use thus able to become aware of their consumption and make choices to optimize spending on energy.
Projects for AEEGSI Resolution no. ARG/elt 39/10 are being completed as A2A Reti Elettriche S.p.A. has obtained the AEEGSI's approval to carry out two pilot projects: the first regards a primary cabin in Milan (Lambrate) and the second a primary cabin in Brescia (Gavardo) with different characteristics in the underlying network. Both set out to overcome the present limitations of the interface protection of generators connected to the medium-voltage grid, to introduce innovative voltage regulation functionalities and, potentially, to carry out local dispatch, only reporting summarized data to Terna S.p.A. of the production put into the MV grid. This will encourage the development of distributed generation and hence the use of renewable sources for the production of electricity. The Lambrate project also involves the experimentation of logic selectivity and automatic reconfiguration of some lines of the MV network to drastically reduce recovery time in the event of failure.
The WFM and IDMS projects are underway designed to improve network operational management processes through IT solutions. WFM focuses on the integration of the management of physical assets with the mapping system, also using GPS technology for the localization of facilities and operational teams available in the area, equipped with mobile devices for more effective and efficient management of operations. IDMS is a significant step forward in the management of all operational processes of network management, both during the conduction and planning stages. Its primary objectives also include the interoperability between the multi-service room in Brescia and the electrical control room in Milan, ultimately ensuring prompt disaster recovery between the two in the event of unavailability of one of the two sites.
A2A Reti Elettriche S.p.A. is carrying out the IDE4L Project (Ideal Grid for All), co-financed by the EU as part of the FP7 research and innovation program that capitalizes on the experience gained in the previous INTEGRIS project and sets as its objective the development and demonstration of a complete system for automating the management of the complete distributed energy resource (DER) active network, both in terms of real time (RT) management and medium-long term planning. The project concentrates on functionalities that are important for planning and running networks such as for example:
The three-year project will end in August 2016, and is therefore half-way. The first feedback provided by the evaluators of the European Commission has been highly positive.
Progetto Scuola (School Project) is underway that obtained the green light for the financing of the Lombardy Region and will end in the fall of 2015. Again focused on the issue of electric smartgrid, it addresses the design and implementation, in contexts divided by composition of consumption profiles and renewable generation, innovative solutions for energy efficiency, user engagement and service management. A2A is the leader of a partnership which involves the participation of large, small and medium-sized enterprises, important universities and research institutes strictly related to the territories in which A2A mainly operates.
The Brescia Smart Living project is being launched. It won first place in the ranking of evaluation by the MIUR Ministry of Education and with respect to the previous one, is highly multi-service, involving not only A2A Reti Elettriche S.p.A., but also other Group companies. The project can thus be more properly considered within the smart cities including among its content also social issues. Again A2A is the project coordinator and heads a consortium involving universities, research centers, large enterprises and SMEs.
In addition, testing continues in the field of Electrical Mobility through the e-moving project which has enabled public recharging columns to be set up in Milan and Brescia and the verification of operation of electric vehicles of multiple makes. This project will be completed in its present form intended by the AEEGSI by the end of 2015.
A2A has also sponsored the first Digital Islands, which are home to the charging of electric quadricycles, video surveillance services, Wi-Fi, info points and LED lighting. A2A has supported the installation of these new infrastructures within the city of Milan also to promote private electric mobility and car-sharing.
Even in the environmental sector the following projects are ongoing: Amsa S.p.A. participates in the innovative e-waste project for the collection of WEEE materials and the extraction of precious metals and rare earth elements that obtained the funding authorization by the Lombardy Region. The project is in progress.
An agreement was signed with the University of Brescia, which lays the foundation to carry out studies and projects for the analysis of air quality and evaluation models for the effects on the territory of any harmful substances and potential correlations with pathologies.
In all business sectors, the focus and commitment continue for the search for new solutions, both for optimizing processes and improving service quality and extending the offer. This involvement takes practical form in projects, which in some cases are funded by co-financing schemes, that are also triggered by the constant development and extension of relations with research bodies and universities and by participation in initiatives and conventions designed to gather needs and new ideas for grasping opportunities.
Certification of the condensed half-yearly financial statements pursuant to article 154-bis, paragraph 5 of Legislative Decree no. 58/98
Certification of the condensed half-yearly financial statements pursuant to article 154-bis, paragraph 5 of Legislative Decree no. 58/98
of administrative and accounting procedures for the preparation of the condensed halfyearly financial statements in the firts half of 2015.
2.1 the condensed half-yearly financial statements:
Milan, July 30, 2015
(For the Board of Directors) (Manager in charge of
Luca Camerano Andrea Eligio Crenna preparing the corporate accounting documents)
Independent Auditor's Report
Half-yearly financial report at June 30, 2015
Independent Auditors' Report
Building tools?
Free accounts include 100 API calls/year for testing.
Have a question? We'll get back to you promptly.