33 Relationships with related parties

Snam’s related parties are associates and companies under joint control, as well as subsidiaries outside the group’s scope of consolidation, and other companies owned or controlled by the State, particularly by group companies eni, Enel and CDP. Transactions with these entities relate to the exchange of assets and the provision of regulated services within the gas sector and, in the case of CDP, the provision of financial resources. Members of the Board of Directors, Statutory Auditors and Snam Group managers with strategic responsibilities, and their families, are also regarded as related parties.

Transactions between Snam and related parties are part of ordinary business operations and are generally settled under market conditions, i.e. the conditions that would be applied between two independent parties. All the transactions carried out were in the interest of the companies of the Snam Group.

Pursuant to the provisions of the relevant legislation, Snam has adopted internal procedures to ensure that transactions carried out by the Company or its subsidiaries with related parties are transparent and correct in their substance and procedure.

Directors and auditors declare any interests they may have affecting the Company and the group every six months, and/or when changes in said interests occur; they also inform the Chief Executive Officer (or the Chairman, in the case of the Chief Executive Officer), who in turns informs the other directors and the Board of Statutory Auditors, of individual transactions that the Company intends to carry out and in which they have an interest.

Snam is not subject to management and coordination. Snam manages and coordinates its subsidiaries, pursuant to Article 2497 et seq. of the Italian Civil Code.

In terms of related-party transactions carried out during the course of 2014, the following should be pointed out pursuant to the disclosure obligations set forth under Consob Regulation No. 17221 of 12 March 2010:

• the acquisition from Cassa Depositi e Prestiti of the equity investment it held in Trans Austria Gasleitung GmbH (TAG), corresponding to 84.47% of the share capital⁶²;
• the transfer to and assumption by Snam of two EIB loans previously brokered by Cassa Depositi e Prestiti and relating to investments in infrastructure in the Po Valley, worth €300 million and €100 million respectively;
• the agreement on 19 September 2014, between Snam Rete Gas S.p.A. and eni S.p.A., of natural gas transportation capacity commitments on the natural gas pipeline network of Snam Rete Gas S.p.A. in favour of eni S.p.A. for the 2014-2015 thermal year (1 October 2014 – 30 September 2015). These commitments were assumed in accordance with the procedures defined in the Snam Rete Gas S.p.A. Network Code, which was approved by the Authority with Resolution No. 75/2003, as subsequently amended. As in the case of contractual agreements, the finalisation of these commitments entails the calculation of a fee for services rendered by applying the natural gas transportation and dispatching tariffs approved by the Electricity, Gas and Water Authority Resolution. The fee for the 2014-2015 thermal year is estimated at around €371 million.

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

The amounts involved in commercial, financial and other transactions with related parties are shown below for the 2013 and 2014 financial years. The nature of the most significant transactions is also stated.

Commercial and other transactions

Commercial and other transactions can be broken down as follows:

Companies under joint control and associates

Transactions with TAG, which are governed by the Service Balance Agreement, concern the sale and purchase of gas with a view to ensuring the daily balance between the quantities metered and the quantities expected at the Tarvisio entry point.

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

Companies owned or controlled by the State

Transactions with state-owned or controlled companies relate mainly to the eni Group and the Enel Group and concern natural gas transportation, regasification, distribution and storage services, which are settled on the basis of tariffs set by the Authority.

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

As at 31 December 2014, there were liabilities with eni arising from price adjustment mechanisms, as established by the contract for the purchase of Italgas and Stogit from eni signed on 30 June 2009, and assets posted in reference to transactions arising from the national tax consolidation scheme in force until 31 July 2012.

Financial transactions

Financial transactions can be broken down as follows:

Companies under joint control

Transactions with TAG GmbH refer to the granting of a short-term revolving credit line by Snam S.p.A. to TAG, pursuant to the contractual agreements relating to the acquisition from CDP Gas S.r.l.⁶³ of its equity investment in TAG.

Transactions with Gasbridge 1 B.V. and Gasbridge 2 B.V. refer to financing received and repayable on demand.

Transactions with directors, statutory auditors and key managers, with reference in particular to their remuneration, are described in Note 26 – “Operating costs”.

Companies owned or controlled by the State

Consolidating company

Following notification by Cassa Depositi e Prestiti on 25 and 31 March 2015 that, pursuant to international accounting standard IFRS 10 – “Consolidated Financial Statements”, it would fully consolidate Snam S.p.A. as of the financial statements as at 31 December 2014, transactions with the Cassa Depositi e Prestiti Group concern financial expense relating to term loans originally entered into with CDP and involving EIB funding, which were transferred to and assumed by Snam directly with the EIB, with effect from 20 March 2014.

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 the balance sheet and income statement 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: