9. Unbundling model
DPCM 25 maggio 2012
The Prime Ministerial Decree of 25 May 2012 provided for the creation by 25 September 2013 of an ownership unbundling system extended to all regulated natural gas transportation, distribution, storage and regasification activities, as well as for the sale by the then controlling shareholder, Eni, of its entire stake in Snam in light of its status as a producer and seller of energy.
Specifically, the Prime Ministerial Decree ordered Eni to sell to CDP in a direct deal, as quickly as market conditions allowed and in any event by 25 September 2013, in one or more instalments, a total stake of no less than 25.1% of Snam by means of direct negotiation. The Decree also ordered Eni, following the sale of at least 25.1% of Snam’s share capital to CDP, to sell its residual stake in the Company via a transparent, non-discriminatory sale procedure involving individual and institutional investors.
In accordance with these provisions, on 15 October 2012, CDP Reti S.r.l. (a wholly owned subsidiary of CDP) purchased from Eni 30% less one share of the share capital of Snam. At the time of writing, Eni retains a stake of 8.54% in Snam servicing a bond issued by Eni and convertible into Snam shares, maturing on 18 January 2016.
The Prime Ministerial Decree also states that CDP should guarantee separation between Eni and Snam40. To that end, Article 2 of the Prime Ministerial Decree provides that: (i) even if Snam is included in CDP’s “separate management” activities, all decisions relating to the management of equity investments in Snam shall be adopted by the Board of Directors of CDP as if the equity investment were part of its “ordinary management” operations, meaning the Ministry of Economy and Finance will have no power to guide such decisions and the members of the Board of Directors of CDP in charge of “separate management” activities will not be able to influence them; (ii) the members of the corporate bodies and the executives of Eni and its subsidiaries may not be part of the corporate bodies of or hold executive offices at CDP or Snam and their subsidiaries, nor may they enter into any direct or indirect professional or financial relationship with said companies, and vice versa.
As indicated in Section II, above, the Prime Ministerial Decree of 25 May 2012 also provides that the voting rights of Eni (or of other producers or suppliers of gas and/or electricity or of their parents, subsidiaries or associates) at Snam’s Shareholders’ Meeting shall be limited in accordance with Article 19 of Legislative Decree 93/2011.
Order C11695 of 8 August 2012
The sale by Eni to CDP Reti S.r.l. of 30% less one share of the voting capital of Snam was made in compliance with Order C11695 of 8 August 2012 issued by the Antitrust Authority.
In compliance with such order, on 21 June 2013, the Italgas Shareholders’ Meeting amended its Bylaws41, stating that:
- the Board of Directors must be composed of five members, two of whom (who shall not occupy the office of Chairman or Chief Executive Officer of the Company, and shall not be given operational powers) must meet the independence criteria set out in the Code of Corporate Governance;
- resolutions relating to the identification of natural gas distribution tenders in which to participate and the formulation of technical and financial bids for these tenders must be approved by four fifths of sitting directors.
The same Shareholders’ Meeting consequently added to the composition of the Board of Directors by appointing two members who met the independence criteria set out in the Code of Corporate Governance.
Recertification of Snam Rete Gas
On 4 October 2012, the Electricity and Gas Authority completed the process of certifying Snam Rete Gas as an Independent Transmission Operator (ITO) by issuing Resolution 403/2012/R/gas. This process was begun in accordance with Legislative Decree No. 93 of 1 June 2011, which transposed Directive 2009/73/EC and states that the biggest transportation operator must comply with the ITO rules. According to the rules of the ITO model, the Electricity and Gas Authority must certify that the ITO complies with the Decree’s requirements for qualifying the separation of the ITO from the vertically integrated undertaking (Eni). Once certification is obtained, the ITO is approved and designated as a “Transmission Operator” by the Ministry of Economic Development. This designation is communicated to the European Commission and published in the Official Gazette of the European Union.
As a result of Eni’s loss of control over Snam, on 14 December 2012 Snam Rete Gas filed an application to be recertified as a Transmission Operator under ownership unbundling. Following the opinion of the European Commission, on 14 November 2013 the Electricity and Gas Authority adopted Resolution 515/2013/R/gas on the definitive certification of Snam Rete Gas as a natural gas Transmission Operator under ownership unbundling. This decision by the Authority certified Snam Rete Gas’s (and the entire Snam Group) compliance with the ownership unbundling model. The Electricity and Gas Authority highlights in the Resolution, inter alia, the lack of factual or legal elements that may jeopardize the independence of Snam and Snam Rete Gas, taking into account (i) the Italian legislative framework (in particular Legislative Decree 93/2011 and DPCM 25 May 2012); (ii) the lack of direction and coordination activity by CDP over Snam, does not allow CDP to influence the strategic and management choices of Snam and (iii) the Regulatory framework and the supervisory activity of the Electricity and Gas Authority do not permit Snam Rete Gas to put in place discriminatory behaviour.
40 Article 5, paragraph 8 of Legislative Decree 269/2003 provided for the creation of a system of organisational and accounting separation between activities of general economic interest and the activities performed by CDP.
41 Pursuant to Article 38 of the Order, CDP had to ensure that: (i) the Italgas Bylaws were amended in order to set the number of Italgas board members at five (two of whom must be neither the Chairman nor the Chief Executive Officer and must fulfil the independence requirements set forth in the Code of Corporate Governance); (ii) the Italgas Bylaws were amended in order to state that the resolutions of the five-strong Italgas board concerning the identification of natural gas distribution tenders in which to participate, and the formulation of the technical and financial bids for these tenders, can be approved only by a four-fifths majority of the directors in office.