On 11 July 2014 the Court of Palermo served the measure for asset protection on the subsidiary Italgas by court-appointed administration, pursuant to Article 34(2) of Legislative Decree 159/2011 (Code of Anti-Mafia Laws and Prevention Measures, as well as New Provisions Concerning Anti-Mafia Documentation, in accordance with Articles 1 and 2 of Law no. 136 of 13 August 2010). Pursuant to the law, the measure is intended to protect the assets of Italgas from any infiltration and/or collusion.
Accordingly, the powers to manage Italgas’ assets and economic and business activities were conferred upon an administrative board composed of four members1, appointed by the Court. For six months, the appointed directors will individually exercise all powers concerning acts of ordinary administration, according to the organizational model and the allocation of duties that they will promptly submit for approval to the delegated judge. They will also exercise all powers concerning acts of extraordinary administration, which are also subject to the authorization of the delegated judge. Italgas’ Board of Directors has been suspended for the duration of the measure.
Snam retains full ownership of the entire share capital of Italgas with the associated rights. The measure is temporary and has a maximum fixed duration of 6 months, and may be extended for an additional 6 months at most, pursuant to Legislative Decree 159/2011. It is worth mentioning that the purpose of the court-appointed administration is to preserve the company’s assets and economic activity with a view to ensuring business continuity, “and also to increase profitability, if possible”2.
The measure served on Italgas is intended to verify the persistence and magnitude of a set of evidence concerning contractual relationships with specific suppliers. To this end, based on the information currently available, we stress that Italgas S.p.A.’s relationship with these suppliers began in the first half of 2009 and has a limited dimension. Currently, their cumulative value does not exceed 1% of the Italgas S.p.A.’s overall spending on third party suppliers in the same period.
Snam is actively cooperating with the court-appointed administration of Italgas in order to preserve its business continuity, consistent with the Group’s strategic guidelines.
Based on the current available information, the potential impact of the measure on consolidated Shareholders’ equity and consolidated net financial position as well as on the business continuity of Snam and the Group as a whole is considered not to be significant, also with respect to the covenants relating to part of the debt.
For the purposes of the accounting treatment of the 2014 Interim Financial Report, it is important to note that the measure was served on Italgas on 11 July 2014, after the end of the first half of the year and before approval of the Interim Financial Report as of 30 June 2014. As a result, Snam exercised control over Italgas S.p.A. for the entire first half of 2014. Furthermore, the administrative board authorized the transmission of Italgas’ Interim Financial Report as of 30 June 2014 to Snam, to allow for the consolidation of its accounts, accompanied by the pertinent representation of the Management, as provided for in the existing Group procedures following the prior examination by the Board of Statutory Auditors of Italgas S.p.A.. Thus Snam, by virtue of the control it exercised over Italgas S.p.A. for the entire first half of 2014 and its full access to the company’s flow of information as of 30 June 2014, maintained the procedures for Italgas’ consolidation within the Group, in accordance with the provisions of the international accounting principle IFRS 10 “Consolidated Financial Statements”.
The above information, as well as the additional indications concerning the potential effects of the measure, with specific reference to the contractual protection clauses contained in the loan agreements3, is provided also at Consob’s request. We note that Consob informed the company that in-depth inquiries are underway concerning the repercussions that the Italgas matter may have on the procedures for entering the subsidiary in the accounts pertaining to the period during which the preventive measure is in effect.