Natural gas distribution

Results

Total revenue in the first half of 2014 was €502 million, down by €9 million (1.8%) on the same period of 2013. It comprised regulated (€489 million; -1.8%) and non-regulated (€13 million; unchanged compared with the same period in 2013) revenue.

Regulated revenue in the first half of 2014 (€489 million) comprised €469 million in fees for the natural gas transmission service (-€5 million), €14 million in fees for related technical services and €6 million in income from the management of energy efficiency certificates. The reduction in transmission revenue was due essentially to changes in the tariff criteria¹⁴ applicable to the new regulatory period (1 January 2014 – 31 December 2019).

EBIT totalled €257 million in the first half of 2014, up by €5 million (2.0%) compared with the same period of 2013.

This increase was attributable mainly to lower operating costs (+€18 million), primarily as a result of the management of energy efficiency certificates, partly offset by lower regulated revenue (-€9 million), owing essentially to lower capital gains on distribution concessions (-€6 million) and to lower natural gas transmission revenue (-€5 million), and by greater depreciation and amortisation charges (-€4 million).

Operating review

Technical investments in the first half of 2014 totalled €152 million, an increase of €9 million compared with the same period in 2013 (€143 million).

Investments in distribution (€109 million) mainly involved development projects (extensions and new networks) and the renovation of old sections of pipes, including the replacement of cast-iron pipes.

Investments in metering (€31 million) primarily concerned the meter replacement programme and the remote meter-reading project.

Other investments (€12 million) mainly concerned investments in IT, property and vehicles.

Distribution network

At 30 June 2014, the gas distribution network covered 53,308 km, an increase of 315 km compared with 31 December 2013 (52,993 km).

Gas distribution

In the first half of 2014, 3,521 million cubic metres of gas were distributed, a decrease of 959 million cubic metres, or 21.4%, compared with the first half of 2013, due mainly to weather conditions.

At 30 June 2014, Snam had concessions for gas distribution services in 1,435 municipalities (the same as at 31 December 2013), of which 1,345 were in operation and 90 had to complete and/or create the networks. It had 5.911 million active meters at gas redelivery points to end users (households, businesses, etc.), compared with 5.915 million at 30 June 2013.

Business developments

Demerger of AES Torino

With regard to AES Torino S.p.A., on the occurrence of the conditions precedent for execution of the demerger plan approved by the Shareholders’ Meeting of AES on 18 April 2014, on 25 June 2014 the deed of demerger for the district heating business unit of the company was drawn up, with effect from 1 July 2014.

As of this date, Italgas owns 100% of the company, which operates exclusively in the natural gas distribution sector, thus completing withdrawal from district heating, which is regarded as non-strategic, with the option of autonomously defining the tendering strategy for the award of the natural gas distribution service for the “Torino 1 – Città di Torino” regional level.

As a result of the demerger, the company’s share capital decreased from €110,500,000 to €54,150,000 (54,150,000 shares with a par value of €1).

Acam Gas S.p.A. – Invitation to tender for the sale of the equity investment held by majority shareholder Acam S.p.A., with right of first refusal in favour of Italgas

ACAM S.p.A., which holds 51% of the capital of Acam Gas S.p.A., published the invitation to tender for 50.01% of the share capital of Acam Gas S.p.A. The company (51% Acam and 49% Italgas) was founded in 2004 after the respective gas distribution business units of Acam S.p.A. and Italgas S.p.A. in the municipalities in the province of La Spezia were transferred to it. Acam Gas currently distributes gas in 29 municipalities in the province of La Spezia, serving approximately 111,000 active redelivery points.

The company’s current corporate governance rules state in the Bylaws that Italgas has the right of first refusal to purchase the 50.01% di Acam Gas put up for sale by shareholder ACAM S.p.A. The shareholders’ agreements also provide for the right of joint sale of the portion of the capital held by Italgas subject to certain terms.

Metano Arcore tender awarded

On 24 May 2014, the municipal authorities of Arcore published a public auction notice for the sale of the entire equity investment held in Metano Arcore S.p.A. (50% of the share capital) for a base auction price of €2.3 million. According to the auction procedure, bids must be submitted by 26 June and opened in open session on 27 June 2014. On 21 July the municipal authorities of Arcore announced to Italgas the final award of its portion of the capital. As set out in the auction sale will take effect from the signing of the deed.

Isontina Reti Gas S.p.A. and framework agreement with Acegas-Aps S.p.A.

On 17 April 2013, the Competition Authority blocked the acquisition of 50% of the equity of Isontina Reti Gas S.p.A. by Italgas and the subsequent transfer to said company of some business units of Italgas and Acegas-Aps, on the grounds that it would give Isontina Reti Gas a dominant position that would eliminate or considerably reduce in the long term competition on the market for future tenders for the natural gas distribution concessions in the regions of Gorizia, Trieste, Pordenone and Padua 1.

On 13 June 2013, Italgas filed an appeal against this ruling at the Regional Administrative Court of Lazio. On 20 March 2014, the Regional Administrative Court of Lazio handed down a ruling that accepted the appeal presented by Italgas, thereby annulling the contested measure. Specifically, the ruling raised the legitimacy of the strategy of rationalising concessions, pointing out that the operation did not alter existing competitive dynamics.

The Competition Authority filed an appeal with the Council of State (notified on 16 June 2014) against the judgment of first instance.

Regulation

Resolution 310/2014/R/gas – “Provisions for determining the reimbursement amount for natural gas distribution networks”.

With this resolution, published on 27 June 2014, the Authority approved measures to determine the reimbursement amount for gas distribution networks, implementing the provisions of Article 1, paragraph 16 of Decree-Law 145 of 23 December 2013, converted, with amendments, by Law 9 of 21 February 2014.

This provision stipulates that the awarding local authority shall send documentation containing detailed calculations for the reimbursement amount to the Authority for approval, if the amount is more than 10% higher than the regulatory asset base (RAB) for the area.

The Authority carries out the verifications pursuant to Article 1, paragraph 16 of Decree-Law 145/2013 within 90 days of the date of receipt of the documentation by the Contracting Stations, ensuring priority according to the schedule provided for the publication of invitations to tender.

Other information

Measure of judicial administration – Court of Palermo

On 11 July 2014 the Court of Palermo served the measure for asset protection by court-appointed administration on the subsidiary Italgas, 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 law, the measure is intended to protect the assets of Italgas from any infiltration and/or collusion. For more details, please see the “Highlights – Introduction” section in this report.