36 Related party transactions

On 15 October 2012, as previously described, eni completed the sale to CDP of 30% minus one share of Snam’s voting capital, entailing its loss of control over Snam and CDP’s entry as a Snam shareholder.

Due to this operation, Snam’s related parties include, as well as the group’s associates and companies under joint control, the direct or indirect subsidiaries of the Ministry of Economy and Finance, particularly the companies of the eni Group and Enel and CDP. Transactions with these parties relate to the exchange of goods and provision of regulated services in the gas sector and, in relation to CDP, the supply of financial resources.

In accordance with the disclosure requirements introduced by Consob Regulation 17221 of 12 March 2010, the following related-party transactions were conducted in 2012:

• On 22 March 2012, two contracts were signed between Stogit S.p.A. and Saipem S.p.A. to provide retail engineering services for the new gas storage centre in Bordolano (for an estimated sum of approximately €27 million) and the centres at Fiume Treste, Minerbio and Cortemaggiore (for an estimated sum of approximately €11 million);
• On 14 May 2012, a contract was signed between eni and Stogit to create new storage capacity for 4 billion SCM of natural gas by 31 August 2015 in relation to the implementation of measures set out in Legislative Decree 130/2010;
• On 24 April 2012, a memorandum of understanding was signed between Italgas S.p.A. and AcegasAps S.p.A. to create a joint venture to develop gas distribution activities in the provinces of Padua, Pordenone, Trieste and Gorizia (the transaction specifically relates to the acquisition from eni by Italgas of 50% of the share capital of Isontina Reti Gas for €8.7 million);
• Extension from 30 March to 30 June of a short-term loan of €500 million contracted with eni, on the existing terms (spread of 310 bps);
• On 14 September 2012, a loan agreement funded by the European Investment Bank (EIB) was signed between Cassa Depositi e Prestiti S.p.A. (as the financial institution) and Snam, for a maximum of €300 million, with repayments in 30 half-year instalments of equal amounts, to be paid in advance from 20 March 2018 to 20 September 2032;
• On 18 September 2012, the “Acknowledgement Agreement for the Termination of Financial Agreements” was signed between Snam and eni S.p.A. The agreement governs the termination: (i) of agreements on centralised cash management; (ii) medium-to-long-term loans; and (iii) interest rate risk hedging derivatives, with agreement on the relative terms and procedures, including for the purposes of debt repayment. The Agreement, also signed by Snam on behalf of the subsidiaries, which are governed by it according to their areas of activity, has no novative or settlement effect in respect of the binding relationships deriving from the financial agreements;
• On 25 September 2012,
  • Snam Rete Gas S.p.A. and
  • eni S.p.A. and Snam Rete Gas S.p.A. and Enel Trade S.p.A.

  established commitments for natural gas transportation capacity on the Snam Rete Gas pipeline network for thermal year 2012-2013 (from 1 October 2012 to 30 September 2013) and for the thermal years between 2014-2015 and 2018-2019 (from 1 October 2014 to 30 September 2019). According to the contractual agreements, the finalisation of these commitments entails the calculation of a fee for services rendered by applying, for each thermal year, the natural gas transportation and dispatching tariffs approved by the Electricity and Gas Authority Resolution. These fees are estimated at approximately €734 million and €212 million respectively for eni S.p.A. and Enel Trade S.p.A.;

• On 11 October 2012, a deed of assumption and succession was signed between Snam, eni S.p.A. and the European Investment Bank (EIB) (Deed of Assumption and Succession) with the aim of full, unconditional and irrevocable assumption by Snam of eni S.p.A.’s account payable to the EIB, relating to:
  • a loan for a maximum of €185 million dating from 1 December 2005, between eni S.p.A. and the EIB, as a financing institution, to enable eni S.p.A., via Italgas, to implement an investment programme to restore, broaden and extend its Italian distribution network;
  • a loan for a maximum of €300 million, dating from 15 December 2009, between eni S.p.A. and the EIB, as the financing institution, to enable eni S.p.A., via Snam (formerly Snam Rete Gas), to build two gas pipelines in the Puglia region, and to modify a compression station in the Campania region;
  • Snam’s succession to all the rights and obligations held by eni S.p.A. deriving from these loans;
• On 11 October 2012, an agreement for the transfer of loan agreements funded by the EIB was signed between Snam and eni S.p.A. (Agreement for the Transfer of Loan Agreements), governing:
  • the transfer by eni S.p.A. to Snam of the agreement concluded on 5 December 2005 between eni S.p.A. and Italgas, relating to a loan to Italgas for a maximum amount of €185 million, using the proceeds of the EIB loan for this purpose, pursuant to the Deed of Assumption and Succession;
  • the transfer by eni S.p.A. to Snam of the agreement concluded on 18 December 2009 between eni S.p.A. and Snam (formerly Snam Rete Gas), relating to a loan to Snam (formerly Snam Rete Gas) for a maximum amount of €300 million, using the proceeds of the EIB loan for this purpose, pursuant to the Deed of Assumption and Succession. This agreement was transferred from Snam to the current Snam Rete Gas on 21 December 2011.

Under Article 13 of the aforementioned Consob Regulation, these agreements are classed as ordinary transactions concluded under market-equivalent or standard conditions since, pursuant to Article 3 of the Procedure: (i) they fall within the scope of normal business operations and the associated financial activities; and (ii) the terms are similar to those usually practised with non-related parties for transactions of an equivalent nature, size and risk.

The amounts of related-party transactions of a commercial and financial nature for the 2011 and 2012 financial years are reported below. The nature of the most significant transactions is also stated.

COMMERCIAL AND OTHER TRANSACTIONS

Commercial transactions

Entities under joint control and associates

Transactions with entities under joint control and associates relate to the provision of IT services governed by contracts entered into under normal market conditions.

State-owned or -controlled companies

Transactions with state-owned or -controlled companies mainly relate to the eni Group and concern the provision of regulated gas services for transportation, regasification, distribution and storage, on the basis of tariffs established by the Electricity and Gas Authority.

The most significant commercial transactions with the eni Group include: (i) the planning and supervision of works to build natural gas transportation infrastructure, governed by contracts entered into under normal market conditions; (ii) the provision of electricity used to carry out natural gas activities used to build storage infrastructure, governed by contracts entered into under normal market conditions; and (iii) the provision of consultancy and technical and operational assistance services relating to storage reservoirs. These transactions are governed by service agreements on the basis of the costs incurred.

Other transactions

CAs established by the contract for the purchase of Italgas and Stogit from eni, signed on 30 June 2009, the price determined for the acquisition of the two companies is subject to adjustment mechanisms, to be applied if necessary after the date of execution of the contract, based on commitments assumed when the acquisition was finalised³³.

In 2012, eni S.p.A. paid Snam the amount of €44 million as final settlement of the asset adjustments in its favour. This constitutes compensation for allocations to the provision for environmental risks and charges relating to circumstances existing before the contract completion date.

Transactions with state-owned or -controlled companies relate mainly to the Enel Group and concern natural gas transportation, regasification, distribution and storage services. These transactions are governed on the basis of tariffs established by the Electricity and Gas Authority.

FINANCIAL TRANSACTIONS

State-owned or -controlled companies

Transactions with Cassa Depositi e Prestiti relate to the granting of loans to cover long-term financial requirements. These transactions are governed by contracts entered into under normal market conditions.

For transactions with directors, auditors and key managers, please refer to the section on remuneration in Note 30 “Operating costs”.

Impact of related-party transactions or positions on the balance sheet, income statement and statement of cash flows

The impact of related-party transactions or positions on balance sheet items is summarised in the following table:

The impact of related-party transactions or positions on income statement items is summarised in the following table:

Transactions with related parties are generally governed on the basis of market conditions, i.e. the conditions which would be applied between two independent parties.

The principal cash flows with related parties are shown in the following table.

The effect of cash flows with related parties is shown in the following table: