9. Unbundling model
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 equity investment in Snam in light of its status as a producer and seller of energy.
Specifically, the Prime Ministerial Decree stipulated that Eni must 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 equity investment of no less than 25.1% of Snam. The Decree also stipulated that Eni, following the sale of at least 25.1% of Snam’s share capital to CDP, must sell its residual equity investment 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. (then 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 an equity investment of 8.25% 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 Snam57.
To that end, Article 2 of the Prime Ministerial Decree of 25 May 2012 stipulates 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 that 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 boards of directors and watch structures 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 versa58.
As indicated in Section II, Paragraph 2 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.
Resolution C11695 of 8 August 2012
The sale by Eni to CDP RETI of 30% less one share of the voting capital of Snam was carried out in compliance with Italian Competition Authority Resolution C11695 of 8 August 2012.
In accordance with this resolution, on 21 June 2013 the Shareholders’ Meeting of Italgas amended the company’s Bylaws59, stipulating that:
- the Board of Directors must be composed of five members, two of whom (who shall not occupy the office of Chairman or CEO 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.
Recertification of Snam Rete Gas
On 4 October 2012, the AEEGSI completed the process of certifying Snam Rete Gas as an Independent Transmission Operator (ITO) by issuing Resolution 403/2012/R/gas. This process was carried out in accordance with Legislative Decree No. 93 of 1 June 2011, which transposed Directive 2009/73/EC into Italian legislation, stipulating that the biggest transportation operator must comply with the ITO rules. According to the rules of the ITO model, the AEEGSI 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 Operator is approved and designated as a “Transportation System 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 the legislative changes and Eni’s consequent loss of control over Snam, on 14 December 2012 Snam Rete Gas filed an application to be recertified as a Transmission System Operator under ownership unbundling. Following the opinion of the European Commission, on 14 November 2013 the AEEGSI adopted Resolution 515/2013/R/gas on the definitive certification of Snam Rete Gas as a natural gas Transmission Operator under ownership unbundling. With this decision, the AEEGSI certified the compliance of Snam Rete Gas (and of the entire Snam Group) with the ownership unbundling model. The Authority’s resolution points out, inter alia, the non-existence of legal and factual elements that could put the autonomy of Snam and Snam Rete Gas in doubt, given (i) the Italian regulatory framework (in particular, Legislative Decree No. 93 of 1 June 2011 and the Prime Ministerial Decree of 25 May 2012); (ii) the fact that the lack of management and coordination activities exercised by Cassa Depositi e Prestiti over Snam inhibits CDP’s power to influence Snam’s managerial and strategic choices; and (iii) the fact that the regulatory provisions and the oversight of the Authority prevent Snam Rete Gas from carrying out discriminatory conduct.
Lastly, in light of the sale of shares in CDP RETI by CDP S.p.A., with Resolution 20/2015/R/COM of 29 January 2015, the AEEGSI launched a procedure aimed at confirming the fulfilment of the requirements set forth by the Authority for adopting the certification decision, with reference in particular to the shareholder structure and ownership chain of Snam Rete Gas.
57 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.
58 The Snam Bylaws expressly stipulate that directors (Article 13), general managers and the Executive Responsible for preparing corporate accounting document (Article 16) and statutory auditors (Article 20) are forbidden from holding positions on the board of directors or watch structure or managerial roles at Eni and its subsidiaries, and from entering into any direct or indirect relationship of a professional or financial nature with said companies.
59 Pursuant to Article 38 of the Resolution, CDP was to ensure that: (i) the Italgas Bylaws would be amended to set the number of members of the company’s Board of Directors at five (two of whom must not hold the position of Chairman or CEO and must meet the independence requirements pursuant to the Code of Corporate Governance for Listed Companies); and (ii) the Italgas Bylaws would be amended to stipulate that resolutions to be passed by the Italgas Board (consisting of five members) relating to identifying natural gas distribution tenders in which to participate, and in relation to formulating the technical and financial bids for these tenders, must be approved only with a favourable vote from four fifths of the directors in office.