7 Trade and other receivables

Trade and other receivables of €2,048 million (€1,545 million at 31 December 2011) comprise:

These are reported net of the provision for impairment losses of €48 million (€39 million at 31 December 2011). The activity in the provision for impairment losses on receivables during the year is shown below:

The provision for the period of €14 million refers mainly to the natural gas transportation (€10 million) and distribution (€3 million) business segments.

Trade receivables of €1,921 million (€1,367 million at 31 December 2011) mainly refer to the natural gas transportation (€862 million), storage (€676 million) and distribution (€359 million) business segments.

Transportation trade receivables (€862 million) include receivables from natural gas balancing services (€430 million), operational since 1 December 2011 in application of Resolution ARG/gas 45/11 of the Electricity and Gas Authority. In accordance with this Resolution, the country’s largest natural gas transporter (Snam Rete Gas), in its capacity as Balancing Supervisor, must procure 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 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”). Snam Rete Gas, in its capacity as Balancing Supervisor, issued invoices for more than €2 billion in 2012 and received invoices for the same amount from users of the balancing service.

The regulations contain specific clauses guaranteeing the neutrality of the Balancing Supervisor, and they identify the Electricity Equalisation Fund as the entity ultimately responsible for paying to the Balancing Supervisor (i.e. Snam Rete Gas) any sums not collected from users. Specifically, 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 given¹⁰.

In light of the fact that the regional administrative court of Lombardy provisionally voided this system of guarantees for the period between 1 December 2011 and 31 May 2012¹¹, some users sold huge quantities of gas and obtained their supplies from the balancing market, failing to pay due amounts and therefore building up a significant debt to Snam Rete Gas which reached around €400 million during the year.

With Resolution 282/2012/R/gas, published on 6 July 2012, the Authority began an explorative investigation into the methods of provision of the balancing service between 1 December 2011 and 31 May 2012, due for completion within 120 days of the start of the investigation. With Resolution 444/2012/R/gas, the Authority extended this period to 23 October 2012 and extended the investigation by 60 days.

With Resolution 351/2012/R/gas of 3 August 2012, the Electricity and Gas Authority changed the rules on the repayment terms established in Resolution ARG/gas 155/11. Specifically, Resolution 351/2012/R/gas defined the methods for recovering receivables pertaining to the balancing system in the period 1 December 2011 - 31 May 2012, ordering payment in instalments over a minimum of 36 months and with a maximum monthly payment of €6 million, providing also for recognition of the interest accrued in favour of Snam Rete Gas, for which settlement will occur after the nominal amount of the receivables has been paid. In 2012, the Electricity Equalisation Fund paid Snam Rete Gas a total of €13 million. Snam Rete Gas has initiated all actions necessary for the recovery of receivables relating to income statement items pertaining to the balancing system. The Company has also initiated legal proceedings to recover receivables from users in arrears after having terminated the relevant transportation contracts due to non-payment.

Storage trade receivables (€676 million) mainly relate to fees charged to users for strategic gas withdrawn and not replenished by those users according to the terms of the Storage Code. In accordance with current regulations, these fees will be paid to the Electricity Equalisation Fund. Under the previous regulatory regime in force before the current balancing regulations, some storage service users withdrew strategic gas without replenishing it or paying the fees set by the Authority, thereby building up a significant debt to Snam. In light of the current regulatory framework (Resolution ARG/gas 119/10, Article 10, paragraph 5 in Annex A), which leaves the storage company in a neutral position with regard to the effects of the withdrawal of strategic gas by users in terms of fees for the use of strategic gas not replenished, a liability of the same amount was recognised¹².

The following transactions were carried out in 2012: (i) the sale on a non-recourse, non-notification basis of transportation trade receivables, including amounts not due, in the nominal amount of €117 million with an increase of cash and cash equivalents in the same amount. Pursuant to contractual provisions, Snam manages the receipt of sold receivables and, within the limits of said receivables, transfers the sums received to the factoring company; (ii) the sale on a non-recourse notification basis of the receivable from the Electricity Equalisation Fund arising from coverage of user balancing service costs, pursuant to Resolution 351/2012/R/gas, for a nominal amount of €300 million, which refers only to the principal, with an increase of €270 million in cash and cash equivalents.

Trade receivables include the present value of overdue receivables and related interest pertaining to the balancing service (€88 million), which is covered, as explained above, by the Electricity Equalisation Fund. In light of the repayment schedule pursuant to Resolution 351/2012/R/gas of the Electricity and Gas Authority, this amount is payable beyond the next financial year.

Other receivables of €125 million (€176 million at 31 December 2011) comprise:

Receivables from investment/divestment activities (€20 million) relate to public and private grants for investment (€13 million) and to the sale of property, plant and equipment and intangible assets (€7 million).

IRES receivables for the national tax consolidation scheme (€25 million) refer to receivables from former ultimate parent eni pertaining to an IRES refund application arising from the partial deduction of IRAP relating to tax periods between 2004 and 2007 (pursuant to Article 6 of Decree-Law 185 of 28 November 2008, converted into law by Law 2 of 28 January 2009) and to tax periods between 2007 and 2011 (pursuant to Decree-Law 201/2011).

Receivables from the Electricity Equalisation Fund (€34 million) refer mainly to additional tariff components from the distribution business segment.

The fair value measurement of trade and other receivables has no significant effect, except for the remaining receivable from the Electricity Equalisation Fund that has not been subject to factoring, for which the fair value measurement had an effect of €3 million.

All receivables are in euros. Receivables from related parties are described in Note 36, “Related-party transactions”. Information on credit risk can be found in Note 28 “Guarantees, commitments and risks – Financial risk management – Credit risk”.