Header Background

Litigation

Snam is involved in civil, administrative and criminal cases and legal actions related to its normal business activities. According to the information currently available and considering the existing risks, Snam believes that these proceedings and actions will not have material adverse effects on its consolidated financial statements. The following is a summary of the most significant proceedings; unless indicated otherwise, no allocation has been made for the litigation described below because the Company believes it improbable that these proceedings will have an unfavourable outcome or because the amount of the allocation cannot be reliably estimated.

Criminal cases

Snam Rete Gas S.p.A. – Judiciary investigations into gas metering

In 2006, the public prosecutor at the Milan Court opened a criminal case on the issue of gas metering and the legitimacy and reliability of what are referred to as Venturi meters. This case involved several companies in the gas sector, including Snam Rete Gas (investigated pursuant to Articles 24 and 25-ter of Legislative Decree 231/2001). The notice of conclusion of preliminary investigations was served in November 2009. Some managers and department heads (including persons no longer employed by the Company) were placed under further investigation with regard to various matters.

The period under investigation was a time span that, in total, covered the years from 2003 to 2007, relating, in addition to the issues mentioned above, primarily to annual natural gas consumption reports and to assessment and/or payment of excise duties on natural gas, as well as to possible obstruction of supervisory duties. On 24 January 2012, the preliminary hearing judge ruled that there was insufficient evidence to proceed to a trial of any of those under investigation and simultaneously ordered the release from seizure of the meters. The public prosecutor at the Milan Court filed an appeal against certain parts of this ruling at the Court of Cassation.

On 11 February 2013, the Court of Cassation partially annulled (with remand) the sentence applied only to the violation of Article 40, paragraph 1, letter b) of Legislative Decree 504/95. The Court rejected the rest of the appeal. As a result, the indictments pursuant to Article 472, paragraphs 1 and 2 of the Italian Criminal Code and Article 2638, paragraph 1 of the Italian Civil Code, as well as the indictment pursuant to Legislative Decree 231/2001, no longer applied.

Following the remand implemented by the Court of Cassation, the new preliminary hearing opened on 12 December 2013. On 24 January 2014, with reference to the aforementioned Article 40, paragraph 1, letter b) of Legislative Decree 504/95, the preliminary hearing judge ordered committal to trial only for 2006 and 2007.

The hearing is scheduled to begin on 18 April 2014; in the meantime, the defence has filed an appeal with the Court of Cassation.

Snam Rete Gas S.p.A. – Tresana incident

The public prosecutor at the Massa district court has initiated criminal proceedings against unknown persons in relation to an incident that occurred on 18 January 2012 in the Municipality of Tresana (MS). The event in question was a fire resulting from a gas leak, presumably caused by a broken dielectric fitting. The fire resulted in the death of a manual worker who was working for the contracting company and injuries to 10 people, as well as damage to houses and possessions.

The part of the plant affected by the fire and the surrounding area have been seized following an order from the public prosecutor at the Court of Massa, who has also appointed a court expert witness. Snam Rete Gas has appointed its own party expert witnesses.

The court expert witness filed their opinion on 29 November 2012. Following an application by the Company, the public prosecutor ordered the release from seizure of the aforementioned area on 11 November 2013.

Without prejudice to the ascertainment of liability, Snam Rete Gas promptly took action to satisfy, via its insurance company, the initial demands made by the municipal authorities and private parties.

Competition Authority

Italgas S.p.A. – Investigation of the gas distribution segment in Italy

On 13 October 2010, the Competition Authority started an investigation to determine whether Italgas had abused its dominant position, obstructing the Municipalities of Rome and Todi in preparing their calls for tenders for the contracting of gas distribution services.

The decision was taken in light of indications sent to the regulator by two local entities accusing the Company, as gas distribution service concessionaire, of having delayed or refused to give the necessary information to the authorities to prepare calls for tenders for contracting the service.

Italgas contested the charges, justifying its behaviour, both with regard to the delay and the refusal to send certain data and information, and with reference to the existence of a plan to shut out its competitors.

Through measures taken on 14 December 2011, the Competition Authority imposed a penalty on Italgas of approximately €5 million, for having conducted supposedly abusive practices in the context of tenders for the allocation of the gas distribution services held by the Municipality of Rome and the Municipality of Todi.

Under the terms and conditions of law, Italgas paid the fine it was given and, contrary to the order, sought an appeal before the administrative courts. Furthermore, on 16 March 2012 data on private contributions received were submitted to the municipality of Todi, proof of which was subsequently provided to the Competition Authority.

On 11 October 2013, the Lazio regional administrative court handed down a ruling reducing the fine issued to Italgas to a total of around €1.5 million. Now this ruling has become definitive, the Company has taken steps to recover some of the money it has already paid.

Electricity and Gas Authority

Snam Rete Gas S.p.A. – Investigation into violations on the subject of natural gas metering with regard to Snam Rete Gas S.p.A and request for information

Through Resolution VIS 97/11, notified on 15 November 2011, the Electricity and Gas Authority started proceedings to look into whether there were any violations with regard to natural gas metering, relating to alleged irregularities in gas metering with reference to 45 facilities.

Through its subsequent Resolution 431/2012/S/gas of 25 October 2012, the Electricity and Gas Authority opened further proceedings to determine whether there had been violations with regard to natural gas metering, simultaneously joining with the aforementioned investigative proceedings.

Snam Rete Gas S.p.A. has submitted proposals in relation to the alleged conduct, as well as an update on the situation at the regulating and metering facilities in question.

The Electricity and Gas Authority has yet to rule on the admissibility of the proposals.

Snam Rete Gas S.p.A. – Investigation into violation of the regulation on availability of natural gas higher heating value measurements

As a result of the Formal Investigation opened by Resolution VIS 85/09, the Electricity and Gas Authority, by way of Resolution VIS 12/11, issued a fine of €580,000 against Snam Rete Gas for violating the rules imposed on gas transportation companies with respect to the proper measurement and use of natural gas higher heating values (hereinafter HHV). This parameter is needed to determine the actual energy provided to operators on the market or individual sellers.

The Electricity and Gas Authority saw fit to penalise temporary interruption, in limited cases, of the mechanical and chemical reading of the HHV. The Electricity and Gas Authority also found that the violation did not involve any billing infraction and, when determining the amount of the fine, it took into consideration the corrective actions taken by Snam in order to improve the measurement service and to avoid similar negative reflections on its operations in the future.

As well as paying the fine, Snam has appealed to the courts to have the order reviewed. A date is yet to be set for a merit hearing before the Lombardy regional administrative court.

Snam Rete Gas S.p.A. – Resolution 145/2013/R/gas – Proceedings to determine the share of costs arising from outstanding receivables owing to the gas balancing supervisor

By way of Resolution 145/2013/R/gas of 5 April 2013, the Electricity and Gas Authority began “proceedings to determine the share of costs arising from outstanding receivables owing to the gas balancing supervisor for the period 1 December 2011 - 23 October 2012”.

The proceedings in question arose from the findings of the exploratory investigation, opened by way of Resolution 282/2012/R/gas, into the methods for regulating the economic aspects of balancing and the steps taken to protect the system relating to the period 1 December 2011 - 31 May 2012. By way of Resolution 444/2012/R/gas, the Electricity and Gas Authority extended the period under review for the exploratory investigation up to 28 October 2012. Through Resolution 351/2012/R/gas, the Authority also identified measures for managing the costs declared by Snam Rete Gas, determining the share of costs owing to the balancing supervisor on the basis of the outcome of the exploratory investigation.

This investigation was concluded by way of Resolution 144/2013/E/gas, and the Electricity and Gas Authority used Resolution 145/2013/R/gas to rule that dedicated proceedings should be opened to determine the share of the costs owing to Snam Rete Gas with regard to “fully outstanding receivables” and to monitor the situation going forward.

We await the results of the Electricity and Gas Authority’s investigations.

The Company has made an allocation to the provision for risks and charges.

Snam Rete Gas S.p.A. – Exploratory investigation into gas balancing service provision methods

Through Resolution 282/2012/R/gas of 6 July 2012, the Electricity and Gas Authority opened an exploratory investigation into balancing service provision methods for the period from 1 December 2011 to 31 May 2012. By way of Resolution 144/2013/E/gas, the Electricity and Gas Authority closed the investigation and mandated the heads of the relevant organisational units to conduct their respective follow-up work.

Italgas S.p.A. – Investigation into breaches with regard to information flows relating to gas metering data

With Resolution VIS 73/11 of 13 July 2011, the Electricity and Gas Authority commenced proceedings against three distribution companies, including Italgas, to investigate an alleged breach of provisions on providing information on attempted collections of metering data to the sellers, impose the relevant fines and adopt the necessary prescriptive actions.

On 28 March 2013, by way of Resolution 134/2013/S/gas, the Electricity and Gas Authority confirmed a breach by Italgas and handed down a €58,000 fine for failing to make metering data available to sellers within the agreed time frame. The Company paid this fine within the prescribed deadline.

Italgas S.p.A. – Investigation into breaches regarding gas distribution service quality

On 18 September 2009, by way of Resolution VIS 92/09, the Electricity and Gas Authority opened a formal investigation into alleged breaches regarding gas distribution service quality. Specifically, the alleged breach, on the part of the distributors operating networks with cast-iron pipes featuring hemp- and lead-sealed joints (not yet reconditioned), was failing to replace, renew or decommission a minimum of 30% of said networks by 31 December 2008.

Following the investigation, Resolution VIS 41/11 of the Electricity and Gas Authority, published on 24 March 2011, (i) confirmed that Italgas had complied with its replacement obligation across Italy, but (ii) found that the Company was responsible for failing to comply with said obligation in relation only to the distribution network in Venice, and imposed a fine of €51,000.

Italgas believes it was justified in not complying with the obligation in relation to the Venice network. It has made provision for payment of the fine subject to an appeal, which was submitted to the Lombardy regional administrative court. A date is yet to be set for the merit hearing.

Italgas S.p.A. – Breaches regarding gas distribution service quality

By way of Resolution 33/2012/S/gas of 9 February 2012, the Electricity and Gas Authority ordered the “Opening of four proceedings to impose financial penalties in relation to gas distribution service quality” to verify whether there had been breaches of Article 2, paragraph 1 and Article 12, paragraph 7, letter b) of Resolution ARG/gas 120/08 by four natural gas distribution companies, including Italgas S.p.A.

In particular, the Authority claims that, with regard to its Venice plant the Company had failed to comply with the obligation, pursuant to the aforementioned Article 12, paragraph 7, letter b), to renew or replace, by 31 December 2010, at least 50% of the cast-iron pipes with hemp and lead-sealed joints in operation as at 31 December 2003.

We await the results of the Electricity and Gas Authority’s investigations.

Stogit S.p.A. – Resolution 91/2013/S/gas – Proceedings for the adoption of prescriptive measures against Speia S.p.A. and Stogit S.p.A. in relation to possible anomalies in the management of gas withdrawals from strategic reserves

With Resolution 91/2013/S/gas, published on 7 March 2013, the Electricity and Gas Authority initiated “proceedings for the adoption of prescriptive measures against Speia S.p.A. and Stogit S.p.A. in relation to possible anomalies in the management of gas withdrawals from strategic reserves in the 2010-2011 storage thermal year”.

The proceedings resulted from the exploratory investigation that was launched with Resolutions 282/2012/R/gas and 444/2012/R/gas, defined through Resolution 144/2013/E/gas of 5 April 2013, relating to anomalies recorded on the balancing market during the period 1 December 2011 - 23 October 2012, and from the need for an in-depth investigation without prejudice to the right of both companies to defend themselves.

The purpose of the proceedings was to ascertain the facts concerning withdrawals of strategic gas by Speia during the 2010 storage thermal year and for the Authority to adopt prescriptive measures to protect one company or the other through sanctions, notwithstanding applicable regulations and in order to avoid irregular expense and consequences for end users.

The proceedings were brought to a close on 22 October 2013 with the publication of Resolution 463/2013/R/gas, through which the Electricity and Gas Authority ruled that there was no need to take any action against Stogit.

Tax cases

Stoccaggi Gas Italia S.p.A. – Registration

On 30 November 2012, the Milan branch of Italy’s Revenue Agency served the Company with notice of a tax assessment for the value adjustment of the transfer by Saipem Energy Services S.p.A. to Stogit of its plant operating maintenance business unit. The assessed transfer value was greater than the declared value owing to a higher goodwill calculation, resulting in an additional €88,000 (approximately) in registration tax, plus fines and interest.

Pursuant to Article 12 of Legislative Decree 218/1997, the Company responded to this order by submitting a tax settlement proposal with a view to establishing whether the grounds exist to definitively resolve the matter. This proposal was not accepted.

The Company has submitted a joint appeal with Saipem S.p.A. to the Milan provincial tax commission, opposing the Milan branch of the Revenue Agency.

The Company has made an allocation to the provision for risks and charges.

Italgas S.p.A. – Direct and indirect taxes

The 2009 general tax audit performed by officials of the Revenue Agency (Piedmont branch, Audit and Collection Sector, Large Taxpayer Office), which ended on 7 December 2012 with the release of the official audit report, resulted in around €1 million of additional IRES, IRAP and VAT, plus penalties and interest. The Company is still working with the Revenue Agency to define the taxable income subject to assessment.

The Company has made an allocation to the provision for risks and charges.

Recovering receivables from users of the transportation system

The balancing service ensures that the network is safe and that costs are correctly allocated between the market operators. Balancing has both a physical and a commercial purpose. The physical balancing of the system consists of the set of operations through which the Dispatching department of Snam Rete Gas controls flow parameters (capacity and pressure) in real time in order to ensure that gas can move safely and efficiently from injection points to withdrawal points at all times. Commercial balancing consists of the activities required to correctly schedule, account for and allocate the transported gas, as well as the fee system that encourages users to maintain a balance between the volumes they inject into and withdraw from the network.

Pursuant to the current balancing regime, which was introduced by Resolution ARG/gas 45/11 and came into effect on 1 December 2011, in its role as Balancing Supervisor, Snam Rete Gas must ensure that it procures the quantities of gas required to balance the system and offered on the market by users through a dedicated platform of the Energy Market Operator, and, accordingly, it must financially settle the imbalances of individual users by buying and selling gas on the basis of a benchmark unit price (the “principle of economic merit”). The Company must also ensure that it recovers sums owed for the settlement of imbalances from any defaulting users.

The initial regulation laid down by the Electricity and Gas Authority with Resolution ARG/gas 155/11 stated that users had to provide specific guarantees to cover their exposure and, where Snam Rete Gas had performed its duties diligently and had not been able to recover the costs related to provision of the service, these costs would have been recovered through a special fee determined by the Electricity and Gas Authority. This Resolution, with reference to the income statement items pertaining to the balancing system, stipulated that the Balancing Supervisor would receive from the Electricity Equalisation Fund the value of receivables unpaid by the end of the month following the month in which notification was given29.

Through its subsequent Resolution 351/2012/R/gas, the Electricity and Gas Authority ordered, with effect from 1 October 2012, the application of the variable unit fee CVBL to cover uncollected receivables, and the payment of the expenses to be recovered in monthly instalments of up to €6 million over a minimum of 36 months.

Through Resolution 282/2012/R/gas, as subsequently amended, the Electricity and Gas Authority opened an exploratory investigation into balancing service provision methods for the period 1 December 2011 - 23 October 201230. The investigation was closed by Resolution 144/2013/E/gas of 5 April 2013, when the Electricity and Gas Authority: (i) adopted Resolution 145/2013/R/gas, through which it opened proceedings to determine the share of costs arising from uncollected receivables owing to the gas balancing supervisor for the period 1 December 2011 - 23 October 2012; we are awaiting the results of the Authority’s investigations; and (ii) opened six proceedings aimed at establishing whether there have been violations regarding the natural gas balancing service.

With reference to the period under investigation, Snam Rete Gas, having terminated the transportation contracts of six users either defaulting on payments or failing to comply with the balancing obligations set forth in the industry regulations and the Network Code, initiated steps to recover the receivables, as described in more detail below, relating to income statement items arising from commercial balancing operations entrusted to Snam Rete Gas in its capacity as balancing supervisor, and also relating to the transportation service.

We initiated steps to recover receivables from six transportation service users. Specifically, the competent legal authorities issued 11 provisional executive orders, of which six related to receivables arising from the balancing service and five to receivables arising from the transportation service. Having received these orders, Snam Rete Gas initiated the necessary executive proceedings, which resulted in the recovery of negligible amounts of the overall debt of the users, partly because of the bankruptcy procedures under way at some of these users.

Subsequently:

  • it was not possible to pursue the executive actions against two users because they were involved in bankruptcy procedures, in which Snam Rete Gas immediately participated. In relation to a third user, in addition to the appeals for an injunction, Snam Rete Gas has submitted a request for seizure. Moreover, the appeal, which was originally upheld by the Court, was subsequently overturned in light of the user opening proceedings for an arrangement with creditors, in which Snam Rete Gas immediately participated;
  • Snam Rete Gas has agreed repayment plans with two defaulting users for the full recovery of receivables. In addition, one of the users has stopped making the agreed repayments after its shareholders authorised the Company’s directors to file for a pre-bankruptcy agreement with creditors;
  • in 2013, Snam Rete Gas terminated the transportation contract of a user who had failed to pay outstanding balancing service invoices. The Court of Milan issued a provisional executive injunction ordering the user pay Snam Rete Gas a total of around €14 million, plus interest and expenses. No money has yet been recovered through these executive procedures.

The users in question have appealed against some of these injunctions. Specifically, as well as requesting the suspension of the provisional enforceability and the revocation and/or declaration as null and void of the injunctions themselves, four users have submitted counterclaims requesting that Snam Rete Gas be ordered to compensate them for alleged damage suffered.

Snam Rete Gas, as stated in the provisional executive injunctions issued by the Court, has engaged in proper conduct and complied with the provisions of the transportation contract, the Network Code and, more generally, the applicable legislation.

Recovering receivables from users of the storage system

Withdrawals made from strategic storage, invoiced by Stogit and not replenished by the user under the terms specified by the Storage Code, ascribable to November and December 2010

On 15 June 2011, Stogit appealed to the Court of Milan for an injunction with provisional enforceability relating to invoices for the sale of strategic gas, modulation fees and penalties. The Court of Milan issued the user with an injunction for the amounted requested, plus interest and expenses, without allowing provisional enforceability. The debtor opposed the order. With the case under way, and overturning the decision made at the hearing of 29 June 2012, the Court of Milan applied provisional enforceability to the injunction, issuing an order on 28 August 2012 to reject the user’s appeal against this measure.

Using the order that applied provisional enforceability to the injunction, Stogit initiated executive proceedings.

In view of the withdrawals and non-replenishment of strategic gas in January, February and March 2011, Stogit filed a request with the Court of Milan on 30 September 2011 for a second injunction, which was also opposed by the debtor. By way of an order issued on 11 February 2013, the Court of Milan also applied provisional enforceability to this second injunction.

Lastly, following a request for summary proceedings for the replenishment of all gas withdrawn, which resulted in the conviction of the debtor, an order of 30 May 2012 rejected the user’s appeal against this conviction. By way of another order issued on 11 February 2013, the Court of Milan ordered the merging of this case, on account of association, with the others pending before the same judge between the same parties, adjourning the case until the hearing on 4 June 2013 and subsequently until 25 September 2013; at this latter hearing, the case was adjourned until 14 January 2014 for the preliminary statements. Owing to the declaration of bankruptcy brought about by ruling 28/2013 of 19 November 2013 of the Court of Asti, the Court of Milan closed the case at the hearing of 11 December 2013.

In September 2012, the Court of Asti admitted three users to proceedings for a pre-bankruptcy agreement with creditors.

Subsequently, at the request in March 2013 of the three Stogit debtors and other companies in the same group, on 29 March 2013, the Court of Asti revoked the aforementioned pre-bankruptcy procedure and ordered a new one for all the appellant companies.

Under the terms and conditions established by the court-appointed receiver, Stogit formally transmitted and documented the amounts of its receivables with these users, including the respective accrued contractual interest owed.

In addition to the bankruptcy declaration mentioned above, another user was declared bankrupt by the Court of Asti through ruling 31/2013 of 22 November 2013; the pre-bankruptcy procedure is going ahead for this user.

Withdrawals made from strategic storage, invoiced by Stogit and not replenished by the user under the terms specified by the Storage Code, ascribable to the thermal years 2010-2011 and 2011-2012

Stogit filed with the Civil Court of Milan for a payment injunction provisionally enforceable pursuant to Article 186-ter.

At present, following the partial restitution of gas in the wake of legal action brought because of improper withdrawals, Stogit is still owed approximately 23.6 million SCM.

At a hearing on 25 September 2013, the Court set the deadlines for filing testimonies pursuant to Article 183 of the Italian Code of Civil Procedure, and arranged the hearing for preliminary statements for 14 May 2014.

Withdrawals made from strategic storage, invoiced by Stogit and not replenished by the user under the terms specified by the Storage Code, ascribable to October and November 2011

Stogit filed with the Civil Court of Milan for a payment injunction provisionally enforceable pursuant to Article 186-ter.

At present, following the partial restitution of gas in the wake of legal action brought because of improper withdrawals, Stogit is still owed approximately 56.0 million SCM.

In light of the absence of the debtor, the case has been adjourned for a final hearing on 13 January 2015.

Environmental regulations

The risks related to the impact of the activities of Snam on the environment, on health and on safety are described in the “Operational risk” section of the Directors’ Report. In particular, with respect to environmental risk, while Snam believes that it operates in substantial compliance with the laws and regulations and considering the adjustments to environmental regulations and actions already taken, it cannot be ruled out that Snam may incur costs or liabilities, which could even be significant.

It is difficult to foresee the repercussions of any environmental damage, partially due to new laws or regulations that may be introduced for environmental protection, the impact of any new technologies for environmental clean-ups, possible litigation and the difficulty in determining the possible consequences, also with respect to other parties’ liability and any possible insurance compensation.

29 To be presented to the Electricity Equalisation Fund four months after the due date of unpaid invoices.

30 The initial end date of 31 May 2012 was extended to 23 October 2012 by Resolution 444/2012/R/gas.

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