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.
Criminal cases
Italgas S.p.A. - Judiciary investigations into gas metering
In May 2007 Italgas received notice of a local search and seizure proceeding within the framework of case no 11183/06 RGNR brought by the public prosecutor of the Milan district court. The document was also served upon the Chairman of the Company. The charge alleged unlawful conduct starting in 2003 relating to the use of gas metering equipment, the payment of excise duties, the billing of customers and relations with the supervisory authority.
The charges relate, inter alia, to offences established in Legislative Decree 231 of 8 June 2001, which provides for administrative liability of a company for crimes committed by its employees in the interest or to the advantage of the company itself.
In December 2010 a notice of conclusion of preliminary investigations was received relating only to the specific matter of using Venturi-type metering equipment installed in various Milan municipalities, at the connection stations between the national natural gas transportation networks and the local natural gas distribution networks. It should be noted that the public prosecutor of Milan presented a request for dismissal (under the scope of case No. 11183/06).
At the same time it was learnt that the Milan public prosecutor had transferred the jurisdiction of the prosecution relating to the metering systems installed in the province of Monza (alleged violation pursuant to Article 472 of the Italian Criminal Code) to the Monza public prosecutor. Lastly, the judge for preliminary investigations at the court of Monza extended the term for the preliminary investigations (criminal case No. 14477/10 RGNR).
On 14 June 2012, following an application filed by the public prosecutor, the judge for preliminary investigations at the Milan district court dismissed the case against the then Chairman of the Company concerning the use of Venturi-type metering equipment installed in various Milan municipalities, whilst at the same time providing for the documents to be sent to the Prefecture of Milan, which is responsible for issuing administrative fines. The judge for preliminary investigations also provided for the aforementioned metering lines to be released from sequestration.
The Company is cooperating with the appropriate authorities in this investigation.
Snam Rete Gas S.p.A. - Judiciary investigations into gas metering
The public prosecutor at the Milan district court has commenced a criminal case on the issue of gas metering and the legitimacy and reliability of what are referred to as the Venturi meters. This has involved several companies in the gas sector.
Snam Rete Gas and some of its executives are also involved in the case and the Mazara del Vallo metering system has been placed under precautionary seizure; the Company is under investigation pursuant to Articles 24 and 25-ter of Legislative Decree 231/2001.
In November 2009, notice of conclusion of preliminary investigations was received, within the context of the aforementioned broader criminal case relating to the gas metering system, concerning a matter pertaining particularly to tax issues deemed of a criminal nature.
Some executives and department heads (including some no longer employed by the Company) are under investigation with regard to various matters.
The period under investigation is a time span that, in total, covers the years from 2003 to 2007, relating 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 31 May 2011 the public prosecutor at the Milan district court put forward a request for dismissal pursuant to Article 425 of the Italian Code of Criminal Procedure in relation to indictment No. 6 of the request to trial.
The document refers specifically to disputed offences under Articles 472 and 110 of the Italian Criminal Code in respect of some Snam executives and the request for dismissal in respect of the CEO.
On 5 October 2011 the public prosecutor of Milan presented a further request to the preliminary hearing judge not to proceed, with regard to the CEO, with reference to the disputed violation of the provisions in Article 2638, paragraph 2 of the Italian Civil Code, restricted to the failed notification of the Electricity and Gas Authority as per Resolution 137/02, Article 7, paragraph 4, letter b.
At the outcome of the preliminary hearing held on 24 January 2012, the preliminary hearing judge did not find the existence of facts to support the case and acquitted all of the Snam S.p.A. and Snam Rete Gas S.p.A. (or former Snam Rete Gas S.p.A.) employees/managers on all the counts which were the subject of this dispute.
The assistant public prosecutor has filed a cassation appeal with the Milan district court. The appeal relates to only some of the acquitted defendants.
On 11 February 2013, the court of cassation partially annulled the disputed sentence, limiting it to violation of Article 40, paragraph 1, letter b) of Legislative Decree 504/95. Another preliminary hearing must therefore take place.
The court also rejected the appeal filed by the public prosecutor. As a result, the supposed violation pursuant to Article 472, paragraphs 1 and 2 and Article 2638, paragraph 1 of the Italian Civil Code (and therefore the supposed violation pursuant to Legislative Decree 23/2001) is also nullified.
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). Specifically, 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 ten 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 Massa district court, who has also appointed a court expert witness. Snam Rete Gas has appointed its own party expert witnesses.
The findings of the court expert witness were filed on 29 November 2012.
It should also be pointed out that, obviously without prejudice to the ascertainment of liability, Snam Rete Gas has already taken action to satisfy, via its insurance company, the initial demands made by the Municipal Council in question and the private parties involved.
Snam Rete Gas S.p.A. – Criminal proceeding No. 7448/11R.G.R.N.
The judge for preliminary investigations at the Florence district court has set a date of 4 July 2012 for the preliminary hearing in relation to the proceeding pursuant to Article 589 of the Italian Criminal Code in connection with the death of a farmer on his property in Lastra a Signa (FI) on 20 July 2008. The preliminary hearing was recently adjourned until 16 April 2013.
Competition Authority
Italgas S.p.A. - Investigation of the gas distribution sector in Italy
The Competition Authority, in its session of 13 October 2010, started an investigation to determine whether Italgas had abused its dominant position by obstructing the Municipalities of Rome and Todi in preparing their calls for tenders for the contracting of gas distribution services.
The decision was taken in light of indications sent to the regulator by two local entities accusing the company, as gas distribution service concessionaire, of having delayed or refused to give the necessary information to the authorities to prepare calls for tenders for contracting the service.
Italgas contested the Competition Authority’s charges, justifying its behaviour, both with regard to the delay and the refusal to send certain data and information, and with reference to the existence of a plan to shut out its competitors.
Through measures taken on 14 December 2011, the Competition Authority imposed a penalty on Italgas of approximately €5 million, for having conducted supposedly abusive practices in the context of tenders for the allocation of the gas distribution services held by the Municipality of Rome and the Municipality of Todi. The Company had made sufficient provisions for risks.
Italgas paid the fine in accordance with the law and filed an appeal with the administrative courts; the merit hearing has been scheduled for 20 February 2013.
Furthermore, in compliance with Competition Authority measures, on 16 March 2012 the Company provided the Municipality of Todi with data relating to private contributions received. Italgas subsequently wrote to the Competition Authority providing proof that it had fulfilled this obligation.
Electricity and Gas Authority
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 and Gas Authority, following a report from a natural gas distribution company, 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 systems owned by the distributor.
On 14 December 2011, Snam Rete Gas sent the required documents to the Authority.
On 3 May 2012, the additional documentation requested was provided, and subsequent to its receipt the Electricity and Gas Authority, with Resolution 431/2012/S/gas, launched enforcement proceedings against the aforementioned distribution company to ascertain violations in relation to natural gas metering, and also provided the meeting with investigation procedure VIS 97/11.
As part of the latter procedure, Snam Rete Gas S.p.A. presented a commitment proposal in relation to the disputed behaviour.
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 initiated by Resolution VIS 85/09, the Electricity and Gas Authority, by 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.
Specifically, the Authority saw fit to penalise temporary interruption, in limited cases, of the mechanical and chemical reading of the HHV, even though Snam had replaced readings with manual samplings. The Authority 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 in order to improve the measurement service and to avoid similar negative reflections on its operations in the future.
In conjunction with payment of the fine, subject to an appeal, Snam has urged the competent court to review the measure in protection of its corporate interests.
A date is yet to be set for a merit hearing before the regional administrative court of Lombardy.
Snam Rete Gas S.p.A. – Fact-finding investigation into gas balancing service procedures
With Resolution 282/2012/R/gas, published on 6 July 2012, the Authority launched a fact-finding investigation into procedures for provision of the gas balancing service for the period 1 December 2011 - 31 March 2012, to be completed within 120 days of the start date. With Resolution 444/2012/R/gas, the Authority then extended this period until 23 October 2012, increasing the duration of the investigation by 60 days.
Italgas S.p.A. - Investigation into breaches with regard to information flows relating to gas metering data
With Resolution VIS 73/11 published on 18 July 2011 and notified to Italgas on 16 September 2011, the Electricity and Gas Authority commenced proceedings against three distribution companies, including Italgas, to investigate an alleged breach of provisions on information flows caused by attempts to collect metering data in the sellers’ favour, impose the relevant fines and adopt the necessary prescriptive actions.
At 20 December 2012, the report on findings relating to this procedure, indicating that the Company had not provided metering data to all sellers for the requisite time period, was issued to Italgas S.p.A. In particular, according to the Authority, Italgas S.p.A. did not conform to standards aimed at guaranteeing a significant interest, including the standard for the ordered and efficient performance of sellers’ activity, thus causing prejudice to timely and definite billing of end customers.
To date the disputed violation has not fully ceased. Italgas filed a defence brief on 16 January 2013 as a result of the report.
The Company has made sufficient provisions for risks.
Italgas S.p.A. - Investigation into gas distribution service quality violations
On 18 September 2009, the Electricity and Gas Authority, by Resolution VIS 92/09, started a formal investigation for the issuance of an administrative fine for violations of gas distribution service quality.
With respect to these proceedings, it is necessary to note that: (i) they derived from a report by the Electricity and Gas Authority on absolution of the obligation, imposed on distributors which operate cast-iron pipe networks with fittings of hemp and lead (not yet reconditioned), to replace, recondition or decommission them by 31 December 2008, to a minimum extent of 30%; and (ii) this investigation had the purpose of determining whether there was violation of Article 2, paragraph 1 and Article 11, paragraph 7 of the Authority’s consolidated act of measures on the quality of gas distribution, metering and sale services (Resolution 168/2004) and of issuing an administrative fine pursuant to Article 2, paragraph 20, letter c) of Law 481/95.
The investigation found that Italgas had complied with its replacement obligation across Italy, but that the Company was responsible for failing to comply with said obligation in relation only to the distribution network in Venice. An administrative fine of €51,000 was handed down.
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 promptly to the regional administrative court of Lombardy. A date is yet to be set for the merit hearing.
Italgas S.p.A. - Gas distribution service quality violations
On 9 February 2012, the Electricity and Gas Authority, with Resolution 33/2012/S/gas, provided for the “Launch of four sanction proceedings for the issuance of administrative fines in relation to gas distribution service quality” to ascertain violation of Article 2, paragraphs 1, and Article 12, paragraph 7, letter 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, letter b). The time period for the investigation is 120 days from the notification date.
Tax cases
Stoccaggi Gas Italia S.p.A. – Registration tax
On 30 November 2012, the Italian Revenue Service (Milan Provincial Division II) issued the Company with a notice of assessment for the price adjustment of the sale by Saipem Energy Services S.p.A. to Stogit of its plant maintenance business unit. The sale price established is higher than the declared value, due to a higher goodwill calculation, resulting in a claim for a higher registration tax of approximately €88,000, plus penalties and interest.
The Company filed a tax settlement proposal, pursuant to Article 12 of Legislative Decree 218/1997, to verify the existence of the prerequisites to define the matter under dispute.
The Company has made a provision for risk.
Italgas S.p.A. – Direct and indirect taxes
On 6 September 2012, officials from the Italian Revenue Service (Piedmont Regional Division, Control and Collection Department, Major Contributors Office) entered Italgas’ registered office at Largo Regio Parco 9, Turin, to begin a general audit of the 2009 tax year. The audit was completed on 7 December 2012 with the issue of a report on their findings, which resulted in: (i) higher IRES taxable income, entailing increased tax of approximately €911,000, plus interest and penalties; (ii) higher IRAP taxable income entailing increased tax of approximately €132,000, plus interest and penalties; and (iii) higher VAT taxable income, entailing increased tax of approximately €13,000, plus interest and sanctions.
The Company, which is preparing defence briefs to contest the Italian Revenue Service’s claims, has made a provision for risk.
Environmental regulations
The risks related to the impact of the activities of Snam on the environment, on health and on safety are described in the “Operational risk” 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 even 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 difficulty in determining the possible consequences, also with respect to other parties’ liability and any possible insurance compensation.
