Disputes and other measures
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.
Snam Rete Gas S.p.A. – Judiciary investigations into gas metering
In 2006, the public prosecutor at the Court of Milan opened a criminal case on the issue of gas metering and the legitimacy and reliability of what are known 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 Court of Milan 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 adjournment) the sentence applied only to the violation of Article 40, paragraph 1, letter b) of Legislative Decree No. 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 No. 231/2001, no longer applied.
Following the adjournment 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 No. 504/95, the preliminary hearing judge ordered committal to trial only for 2006 and 2007. The hearing was scheduled to begin on 18 April 2014. At the hearing held on 27th March 2015, the Court of Milan discharged the indicted persons of the alleged offences because the fact did not occur and it does not constitute a crime pursuant to Article 530 of the Italian Code of Criminal Procedure.
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’s expert witness report was filed 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.
In March and April, the public prosecutor served notification of the conclusion of the preliminary investigations involving a number of executives and managers.
After some postponements, the preliminary hearing occurred on 19th March 2015, which resulted in a committal to trial of all the indicted persons. Next hearing is scheduled for 23rd June 2015.
Snam Rete Gas S.p.A. – Pineto incident
The Teramo public prosecutor opened an investigation into the event that occurred on 6 March 2015 near the town of Pineto, involving a gas leak on a section of piping. The causes of the gas leak and fire are currently being investigated. The infrastructure was quickly made safe, stopping the gas leak and facilitating the firefighting operations.
Snam Rete Gas is actively cooperating with the competent authorities.
Italgas S.p.A. – Isontina Reti Gas S.p.A. and framework agreement with Acegas-Aps S.p.A.
On 17 April 2013, the Competition Authority blocked the acquisition of 50% of the capital of Isontina Reti Gas S.p.A. by Italgas and the subsequent transfer to said company of some business units of Italgas and Acegas-Aps, on the grounds that it would give Isontina Reti Gas a dominant position that would eliminate or considerably reduce, in the long term, competition on the market for future tenders for natural gas distribution concessions in the regions of Gorizia, Trieste, Pordenone and Padua 1.
Italgas filed an appeal against the measure with the Regional Administrative Court of Lazio. On 20 March 2014, the Court upheld the appeal presented by Italgas, thereby annulling the contested measure. With a ruling of 26 January 2015, the Council of State subsequently supported the substance of the AGCM’s measure.
Electricity, Gas and Water Authority (AEEGSI)
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, Gas and Water Authority (AEEGSI) 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 plants.
Through its subsequent Resolution 431/2012/S/gas of 25 October 2012, the AEEGSI 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 plants in question. The AEEGSI 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 AEEGSI, 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 AEEGSI saw fit to penalise temporary interruption, in limited cases, of the mechanical and chemical reading of the HHV. The AEEGSI 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 Rete Gas to improve the measurement service and to avoid similar negative reflections on its operations in the future.
As well as paying the fine, Snam Rete Gas has appealed to the courts to have the order reviewed. The merit hearing is due to be held on 28 May 2015 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 AEEGSI 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 AEEGSI extended the period under review for the exploratory investigation up to 23 October 2012. Through Resolution 351/2012/R/gas, the Authority also identified measures for managing the costs declared by Snam Rete Gas S.p.A., 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 AEEGSI 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 S.p.A. with regard to “fully outstanding receivables” and to monitor the situation going forward.
The results of the investigation were notified on 6 August 2014, with the finding that there were no grounds for recognition of the disputed charges. The Company requested permission to take part in the hearing before the bench prior to the issuance of the final measure. The date of the hearing has yet to be announced.
The Company has made an allocation to the provision for risks and charges.
Snam Rete Gas S.p.A. – Resolution 9/2014/S/gas – Launch of punitive proceedings against Snam Rete Gas S.p.A. for non-compliance with Resolution 292/2013/R/gas
With Resolution No. 9/2014/S/gas, published on 27 January 2014, the Electricity, Gas and Water Authority provided for the launch of punitive proceedings against Snam Rete Gas S.p.A. for non-compliance with Resolution 292/2013/R/gas. The proceedings aim to ascertain whether or not delays exist in provisions relating to the enactment of amendments to the Network Code established with Resolution 292/2013/R/gas, with regard to settlement or determination of the relative physical and financial items of the balancing of the gas system. Snam Rete Gas will cooperate fully and provide all the elements required to demonstrate the legitimacy of its operations.
Italgas S.p.A. – Investigation into breaches regarding gas distribution service quality
On 18 September 2009, by way of Resolution VIS 92/09, the AEEGSI 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), consisted in the failure to replace, renew or decommission a minimum of 30% of said networks by 31 December 2008.
On completion of the investigation, AEEGSI Resolution VIS 41/11, published on 24 March 2011: (i) confirmed that Italgas had complied with its replacement obligation across Italy; and (ii) found that the Company was liable 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. The merit hearing is due to be held on 28 May 2015.
Italgas S.p.A. – Gas distribution service quality violations
With Resolution 33/2012/S/gas of 9 February 2012, the Electricity, Gas and Water Authority ordered the “Launch of four punitive proceedings for the imposition of pecuniary administrative sanctions, in relation to gas distribution service quality” to determine whether there had been any violation of Article 2, paragraph 1 and Article 12, paragraph 7.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 failed to comply with the obligation to recondition or replace, by 31 December 2010, at least 50% of the cast-iron pipes with fittings of hemp and lead in operation as at 31 December 2003, set out in the aforementioned Article 12, paragraph 7.b).
A communication from the AEEGSI on the results of the investigation is pending.
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 figure of approximately €88,000 in registration tax, plus fines and interest.
Pursuant to Article 12 of Legislative Decree No. 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 therefore submitted a joint appeal with Saipem S.p.A. to the Milan provincial tax commission, opposing the Milan branch of the Revenue Agency.
On 18 September 2014, the appeal was processed by the Milan provincial tax commission, which issued a ruling upholding the appeal on 2 October 2014.
The deadline is pending for an appeal against the ruling by the Revenue Agency.
The company has made an allocation to the provision for risks and charges.
Stoccaggi gas Italia S.p.A. – Payment notice for registration tax
On 4 March 2015, the Revenue Agency issued Stogit with a payment notice requesting payment of the total sum of approximately €2.7 million in tax, relating mainly to registration tax for legal deeds.
Investigations are currently under way with a view to contesting the notice.
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.
In December 2014, tax assessments concerning IRES, IRAP and VAT were issued, and the Company responded by submitting a tax settlement proposal.
The Company has made an allocation to the provision for risks and charges.
Judicial administration of subsidiary Italgas – Court of Palermo
On 11 July 2014, the Court of Palermo notified subsidiary Italgas of a preventative measure of judicial administration, pursuant to Article 34, paragraph 2 of Legislative Decree 159/2011 (“Anti-mafia code and prevention measures, as well as new measures relating to anti-mafia documentation in accordance with Articles 1 and 2 of Law No. 136 of 13 August 2010”). Pursuant to the law, this measure protects the capital structure of Italgas from infiltration and/or collusion.
This is a temporary measure with a fixed maximum duration, which in this case is six months and may be extended by no more than six months pursuant to Legislative Decree 159/2011. As a result, the powers of administration for the economic and business activities and assets of Italgas have been assigned to a collective administrative body comprising four court-appointed members. Italgas’s Board of Directors is suspended for the duration of the measure. Snam retains full ownership of the entire share capital of Italgas and all related rights.
For the purposes of the accounting principles adopted when drawing up the 2014 Half-Year Report, it should be pointed out that Italgas had been notified of the measure on 11 July 2014, after the end of the first half of the year and prior to approval of the Report. Furthermore, for the purposes of the Group’s consolidated financial statements, the collective administrative body had authorised the transmission to Snam of the Italgas Half-Year Report at 30 June 2014, together with the relevant management certifications involved in the Group procedures in place and subject to prior examination by Italgas’s Board of Statutory Auditors. Therefore, in light of the control it exercised over Italgas for the entire first half of 2014 and the full availability of the Company’s information flows as at 30 June 2014, in accordance with the provisions of IFRS 10 – “Consolidated Financial Statements”, Snam had retained the procedures used for consolidating the subsidiary within the Group.
At the same time, Consob had informed the Company that it was investigating the possible effects of the Italgas matter on the accounting methods used in relation to the subsidiary in the reports pertaining to the period of the preventative measure.
Subsequently, with an order issued on 2 October 2014, the presiding judge gave a clearer definition of the scope of the judicial administration and the activities of the administrative body (hereinafter referred to as the “Order”). The Order specifies that the objectives of the judicial administration measure of which Italgas was notified are primarily related to inspection and focus on activities that may reveal whether there are indications of potential infiltration, with a view to taking the necessary steps. Based on this purpose and taking into account, in the case in question, that no action is being taken on the block of shares of the subsidiary and the fact that the preventative measure is a short-term, temporary measure, the Order states that there are no legal, operational or procedural grounds to call into question the parent company’s powers, compliance with the Group’s objectives and strategies, or observance of corporate procedures.
Confirming this, with regard to the activities of the administrative body, the Order also states that, without prejudice to compliance with the provisions of law, this more clearly defined scope and the specific instructions given to the judicial administrators are based on the following principles and activities:
- The continuation by Italgas along the strategic lines defined in its previously adopted Business Plan and Budget, which, in line with the Snam Group’s sustainability, confirm Italgas’s position as a leading operator in the Italian natural gas distribution industry;
- The maintenance of the cash pooling services performed by Snam to cover Italgas’s financial requirements by accessing the financial markets, in line with the objectives approved in the Business Plan;
- The maintenance of the services provided centrally by the Snam Group for Italgas, in line with and without prejudice to the contracts in place and the powers granted (with the sole exception of limitations to some powers of attorney that have already been provided for);
- The maintenance of Italgas within the scope of consolidation of the Snam Group for the purposes of the national tax consolidation scheme, since the conditions provided for by the relevant regulations have been fulfilled;
- The availability to Snam of Italgas’s information flows for the purposes of drawing up periodic Group consolidated financial disclosures, including a statement from Italgas’s management to Snam and to the independent auditors, in continuation of current procedures (in order to avoid comments from the independent auditors);
- The sharing and continuation by Italgas of obligations relating to Snam’s reporting control system pursuant to Law 262/2005 (in line with the steps already taken to maintain the Corporate Reporting Control System);
- Continuity in relations between the control bodies of Snam and Italgas: continuity in carrying out the duties and meetings of the control and supervisory bodies of Italgas, without prejudice to any appropriate and necessary involvement with the judicial administration body in relation to the requirements of the preventative measure;
- Continuity in executing the Group’s Annual Audit Schedule, which consists of the steps taken by the Group Internal Audit department in relation to Italgas’s activities (as already carried out pursuant to the strategy of not introducing any amendments or delays to the annual schedule);
- Continuity in relation to the body of Group procedures adopted by Italgas and the related interaction with Snam’s departments and management (including the “Extraordinary Transactions” procedure).
In light of the above, and in view of the scope of the judicial administration, the Order concluded that there were no obstacles to the consolidation of the Italgas S.p.A. financial statements within the Snam Group, without prejudice to the subsidiary retaining full independence and responsibility with regard to the adoption of decisions under its sole competency.
Snam has continued to work closely with the judicial authorities and the administrative body. Within this context, and partly in the interests of Italgas, Snam has appointed a leading specialised international company to conduct a thorough independent investigation aimed at:
- reconstructing the circumstantial framework outlined in the Decree, particularly with regard to Italgas’s relations with the counterparties mentioned in the Decree and to the control system in force at the time;
- assessing the overall stability of the current risk management and internal control system, particularly with regard to the risk of infiltration and facilitation of organised crime in tenders.
Following its technical work pertaining to accounts and records and to the internal control system, the appointed company drew the following conclusions, in summary: (i) the supply relations with the counterparties mentioned in the Decree accounted for less than 1% of Italgas’s total cumulative expenditure (and 0.16% of the Snam Group’s total expenditure) between 2009 and 2014; and (ii) the current risk management and internal control system appears to be effective and suitable for the purpose of identifying, preventing or minimising the corporate operational risk of infiltration/facilitation of organised crime in business and economic activities. The findings of the thorough independent investigation have been submitted to the judicial authorities.
For the purposes of the Interim Directors’ Report at 30 September 2014, and taking into account the considerations set out in the Order, Italgas S.p.A. remained within the Group’s scope of consolidation.
At the end of the six-month period, the court extended the preventative measure for an additional six months, as provided for by Legislative Decree 159/2011. At the same time, the Court ordered the administrative body to draw up a programme of measures aimed at concluding the activities, including in relation to the findings of said body. On 8 January 2015, the presiding judge issued an order confirming authorisation for Italgas to be included in the Group’s consolidated financial statements at 31 December 2014, and ruled that the programme of measures should be drawn up taking into account Snam’s proposals and the staging of a technical round table. Snam is continuing to work closely with the judicial authorities and the administrative body in the hope of securing a swift conclusion to the proceeding.
With regard to the identification of the scope of consolidation for the purpose of the 2014 Annual Report, Snam obtained two opinions from leading independent experts, which confirmed that Italgas should be included in the Group’s scope of consolidation.
Based on the above considerations, and taking into account the opinions obtained, the fact that the events of recent months confirm the continuity of Snam’s single management structure and the full availability of Italgas’s information flow regarding the 2014 separate financial statements, which were approved by the judicial authorities, supported by accompanying statements and subject to prior assessment by Italgas’s Board of Statutory Auditors, Snam opted to keep Italgas and its subsidiaries within the Group’s scope of consolidation, in line with the accounting principles adopted for the financial documents published in 2014.
The Company has kept Consob informed of the progress of the measure and subsequent orders, as well as giving it advance notice of the accounting principles adopted.
Recovering receivables from certain users of the transportation and balancing 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.
a) Unpaid receivables relating to the period from 1 December 2011 to 23 October 2012
The initial regulation laid down by the 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 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 given49.
Through its subsequent Resolution 351/2012/R/gas50, the 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 by Resolution 444/2012/R/gas, the Authority opened an exploratory investigation into balancing service provision methods for the period 1 December 2011 – 23 October 201251. The investigation was closed by Resolution 144/2013/E/gas of 5 April 2013, when the 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; and (ii) opened six proceedings aimed at establishing whether there have been violations regarding the natural gas balancing service52.
With reference to the period under investigation, Snam Rete Gas, having terminated the transportation contracts of the six users involved in the aforementioned proceedings since they either defaulted on payments or failed 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.
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.
- it was not possible to pursue the appropriate executive actions against two users because they were involved in bankruptcy procedures in which Snam Rete Gas immediately participated (at the time of writing, one user has been declared bankrupt53 and the other has been admitted to proceedings for an arrangement with creditors which are still under way54);
- 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. The user, which was initially admitted to proceedings for an arrangement with creditors, was subsequently declared bankrupt55;
- a fourth user, in relation to which the executive actions proved fruitless, was recently declared bankrupt56;
- Snam Rete Gas has also agreed repayment plans with two defaulting users for the full recovery of the receivables owed to it. In addition, one of the users stopped making the agreed repayments after its shareholders authorised the Company’s directors to file for an arrangement with creditors, to which the user was subsequently admitted57;
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, three users have submitted counterclaims requesting that Snam Rete Gas be ordered to compensate them for alleged damage suffered. In relation to one user, the opposition proceedings brought were declared to have been annulled, as a result of which the counterclaims were withdrawn and the injunctions were made absolute.
b) Unpaid receivables after 23 October 2012
Two additional transportation contracts were terminated in 2013. In relation to one user, the Court of Milan issued a provisional executive injunction ordering the user to pay Snam Rete Gas a total of around €14 million, plus interest and expenses, in relation to the balancing service. The executive procedures initiated resulted in the recovery of around €500 thousand. The user appealed against the injunction, submitting a counterclaim requesting compensation for alleged damage suffered.
Two provisional executive injunctions were issued in relation to a second user. The first concerned the balancing service, for a sum of around €700 thousand, while the other related to the transportation service, for approximately €4.5 million. As a result, proceedings were launched to implement the injunctions, in response to which the user appealed but did not bring a counterclaim.
In 2014, another transportation contract was terminated in relation to a user that had failed to pay outstanding balancing service invoices in the amount of around €75 thousand and transportation service invoices worth approximately €180 thousand. As a result, Snam Rete Gas initiated debt recovery measures, having recently obtained two provisional executive injunctions.
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 by three users, 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 against one user, 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 amount 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.
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. The three suits were subsequently combined.
In September 2012, the Court of Asti admitted three users to proceedings for an arrangement with creditors, including the user involved in the aforementioned combined proceedings.
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 arrangement with creditors 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.
Owing to the declaration of bankruptcy brought about by the ruling of 18 November 2013 of the Court of Asti, the aforementioned combined proceedings pending against the first of the aforementioned three users was declared suspended. Stogit therefore initiated proceedings to prove the receivable was owed to it. On 18 March 2014, an executive order was issued including Stogit on the list of creditors and acknowledging its declared receivable in full.
The second of the three users that owed money to Stogit was declared bankrupt by the Court of Asti with a ruling of 22 November 2013. Following an examination of the list of creditors, the receivable was admitted in full.
However, the procedure for an arrangement with creditors is continuing with regard to the third user, which was approved by way of an order issued by the Court of Asti on 2 July 2014. An appeal against the approval decree filed by one of the creditors is pending before the Court of Appeal of Turin.
Withdrawals made from strategic storage by a user, 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 against one user pursuant to Article 186-ter.
At present, following the partial restitution of gas in the wake of legal action brought, 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. Following an examination of the opposing requests and demands, the order containing the injunction pursuant to Article 186-ter of the Italian Code of Civil Procedure requested by Stogit was issued on 14 June 2014. With the same order, after the opposing investigation requests were rejected, the suit was adjourned for a final hearing on 12 October 2016.
Having obtained a provisional executive payment injunction pursuant to Article 186-ter, in September 2014, having identified the two main credit institutions of reference for the debtor, Stogit brought asset seizure proceedings.
Withdrawals made from strategic storage by a user, 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.
Pending the proceedings, the Court of Rome declared the user bankrupt on 30 October 2014. As a result, the Civil Court of Milan declared a suspension of the legal action originally brought. On 6 February 2015, the Company filed a request for proof of bankruptcy.
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.
Emissions trading verification
On 3, 6 and 9 February 2015, the National Committee for the Management of Directive 2003/87/EC and for Support in the Management of Kyoto Protocol Projects (the “Committee”) issued Snam Rete Gas S.p.A., Stogit S.p.A. and GNL Italia S.p.A. with seven notifications of investigation concerning: (i) the violation of Article 25 of Legislative Decree No. 30 of 13 March 2013 resulting from the failure to submit, within the relevant deadline, notification of the partial termination of the activities of certain plants authorised for emissions; and (ii) the improper allocation of emissions quotas.
The companies in question are subject to the “Emissions Trading” regulations58, which stipulate that all facilities must have a dedicated authorisation to emit CO2 into the atmosphere, and must hold a number of allowances (one allowance corresponds to 1 tonne of CO2) at least equal to the number of tonnes of CO2 emitted during the course of the previous calendar year, as certified by an external body. The allowances are assigned free of charge every year by the Ministry of the Environment and Protection of Land and Sea for each plant. Each plant must then return the allowances issued in the previous year to the Ministry by 30 April of each year.
The notification of the partial termination of the activities of the plant should have been sent by 31 January 2013 (pursuant to Resolution No. 47/2012 adopted by the Ministry of the Environment and Protection of Land and Sea on 28 December 2012), which deadline was subsequently extended until 14 February 2013 with Resolution No. 1/2013, adopted by the Ministry on 16 January 2013.
These resolutions did not provide for the imposition of any sanction for late notification, failure to make the relevant notification and/or incorrect sending of the notification. The introduction of dedicated sanctions was provided for only with the adoption of Legislative Decree No. 30 of 13 March 2013.
On 27 March 2015, following the timely filing of the brief requesting to dismiss the proceedings, the Committee set aside all seven reports previously served on the companies.
The risks related to the impact of the Company’s activities on the environment, on health and on safety are described in the “” 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 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.
The greenhouse gas emission authorisation system, which was previously regulated by Legislative Decree No. 216/2006, was updated and amended by Legislative Decree No. 30 of 13 March 2013, effective from 5 April 2013, concurrent with the end of the second regulatory period (2008-2012) and the start of the third regulatory period (2013-2020).
The main aim of Legislative Decree No. 30 of 13 March 2013 was to update laws on greenhouse gas emission authorisations and to continually reduce free emission allowances. The allocation of free greenhouse gas emission allowances for 2013-2020 is regulated by Article 10-bis of Directive 2009/29/EC, which was approved through Decision 2011/278/EC. The allowances allocated to each plant, which under the new rules will be gradually smaller and not constant as in the previous period, are listed in Resolution 29/2013, which was approved on 20 December 2013 by the National Committee for the Management of Directive 2003/87/EC and for Support in the Management of Kyoto Protocol Projects.
The Snam Group expects to be allocated a total of approximately 3.8 million tonnes of CO2 in the third regulatory period, of which 2.62 million tonnes is for Snam Rete Gas, 0.25 million tonnes for GNL Italia and 0.94 million tonnes for Stogit. The amount allocated in the final year of the period is expected to be around 70% less than the first year’s allowance.
The most significant changes introduced by Article 25 of Legislative Decree 30 of 13 March 2013 include the introduction of the principle of partial asset transfers: this means that the allocation of free emission allowances will depend on the actual level of plant operation; this is supplementary to the previous legislation’s free emission allowance allocation criterion based on installed capacity (i.e. the number of machines installed). Due to the application of this principle and the activities carried out by the group’s plants in 2014, emissions allowances were reduced to around 1.9 million tonnes of carbon dioxide.
In 2014, carbon dioxide emissions from Snam Group facilities were, overall, higher than the emission permits allocated. Some 0.4 million tonnes of carbon dioxide was emitted into the atmosphere, whereas about 0.33 million emission permits are being allocated, including permits for new plants. This results in a deficit of 0.067 million tonnes. This deficit was offset by the allowances already present on the books of individual plants, which have been accumulated thanks to a surplus in previous years.
49 To be presented to the Electricity Equalisation Fund four months after the due date of unpaid invoices.
50 The aforementioned resolution was annulled with Ruling No. 1587/2014 of the Regional Administrative Court of Milan, in relation to the obligation for users to pay the CVBL fee in the amount of €0.001/SCM with effect from 1 October 2012. Moreover, with the subsequent Resolution 372/2014/R/gas, the coefficient was adjusted in the same amount of €0.001/SCM.
51 The period covered by the exploratory investigation was initially limited to 1 December 2011 – 31 May 2012 and subsequently extended until 23 October 2012 by Resolution 444/2012/R/gas.
52 As at 31 December 2014, four of the aforementioned proceedings had been concluded through the approval of Resolutions 151/2014/S/gas, 188/2014/S/gas, 241/2014/S/gas and 471/2014/S/gas, with which the Authority imposed significant financial penalties on the four users in question.
53 Snam Rete Gas has been included on the list of creditors with regard to the receivables owed to it.
54 The judicial authorities have issued an approval decree.
55 Snam Rete Gas has been included on the list of creditors with regard to the receivables owed to it.
56 Snam Rete Gas has applied for inclusion on the list of creditors with regard to the receivables owed to it.
57 The creditors must also express an opinion on the pre-bankruptcy arrangement plan submitted by the user.
58 This refers to the system for trading greenhouse gas emissions allowances within the EU, introduced pursuant to European Parliament and Council Directive 2003/87/EC of 13 October 2003, as amended by European Parliament and Council Directive 2004/101/EC of 27 October 2004, European Parliament and Council Directive 2008/101/EC of 19 November 2008, European Parliament and Council Regulation (EC) 219/2009 of 11 March 2009, and European Parliament and Council Directive 2009/29/EC of 23 April 2009.