14. Investments valued using the equity method

Investments valued using the equity method, amounting to €1,372 million (€1,402 million at 31 December 2014) break down as follows:

Acquisitions and subscriptions (€144 million) relate to: (i) the acquisition by Snam S.p.A. of 20% of the share capital of Trans Adriatic Pipeline A.G.(TAP) for a contractual amount of €130 million²⁶; (ii) the adjustment for cash of the consideration for the acquisition, completed in December 2014, by CDP Gas of an equity investment in Trans Austria Gasleitung GmbH – TAG (€14 million) to take account of changes in the contractual parameters between the reference date and the acquisition completion date.

Capital gains arising from valuation using the equity method (€126 million) refer to TAG (€73 million), TIGF (€23 million), Toscana Energia S.p.A. (€20 million) and Gasbridge 1 B.V. and Gasbridge 2 B.V. (€10 million in total).

Sales and repayments (€147 million) mainly relate to the distribution of an extraordinary dividend, by way of repayment of capital by TIGF Holding S.A.S. (€61 million), and the effects of the entry of a new shareholder into the capital of TIGF Holding S.A.S. (€84 million).

The decrease owing to dividends (€141 million) relates to dividends distributed by TAG (€77 million), TIGF (€37 million), Toscana Energia S.p.A. (€16 million) and Gasbridge 1 B.V. and Gasbridge 2 B.V. (€11 million in total).

Other changes (-€19 million) relate essentially to: (i) the exclusion from valuation using the equity method and inclusion in the scope of consolidation of Acam Gas (-€50 million) from the date of acquisition of control (1 April 2015); and (ii) the effects, recognised in shareholders’ equity, of the entry of a new shareholder into the capital of TIGF Holding S.A.S. (+€28 million).

Equity investments are not collateralised.

With regard to the recoverable value of equity investments, for companies operating exclusively in regulated businesses, recoverable value is calculated using the adjusted RAB value of the net financial position.

For investments in companies operating exclusively or partly in significant non-regulated activities, the recoverable value of equity investments is based on generally accepted company valuation methods such as the discounted cash flow (DCF) method, discounted dividend model (DDM), simple equity method, income-based method, and combined equity and income-based method, or on the fair-value measurement of the equity investment according to recent market transactions. Specifically, the DCF method provides for the discounting of future cash flows generated by the CGUs, using a rate determined according to the weighted average cost of capital (WACC) of the individual CGU. Under the DDM model, estimated future dividends payable to shareholders are discounted, based on a rate determined according to the cost of equity, which takes account of the riskiness of the activity in question and the risk premium. Cash flows are estimated based on an explicit period of five years (or less), in accordance with plans approved by the relative boards and taking account of a terminal value (TV) determined using, for each particular case, market multiples or the equity RAB at the relevant date.

For all equity investments, the recoverable value thus estimated is greater than the book value.

Consolidated companies, joint ventures, associates and other significant equity investments are indicated separately in the appendix “Significant shareholdings, associates and equity investments of Snam S.p.A. at 31 December 2015”, which is an integral part of these Notes.

Other information on equity investments

In accordance with the provisions of IFRS 12 – “Disclosure of interests in other entities”, the economic and financial data for joint ventures and associates are provided below.

Investments in joint ventures

The IFRS-compliant economic and financial data for each significant joint venture²⁷ are reported below:

Information on Investments in joint ventures

TIGF Holding S.A.S.

TIGF Holding S.A.S. is a company operating under French law, which, through TIGF Investissements S.A.S. (a wholly owned subsidiary of TIGF Holding), controls 100% of TIGFS.A.

TIGF S.A. (Transport et Infrastructures Gaz France) operates in the transportation and storage of natural gas in south-west France. Natural gas transportation in France is a regulated activity.

At 31 December 2015, TIGF Holding S.A.S. had the following shareholders: Snam S.p.A. (40.5%), Singapore sovereign wealth fund GIC (31.5%), EDF (18%, through a fund dedicated to liabilities arising from the disposal of nuclear assets) and Crédit Agricole Assurances (10%, through Prévoyance Dialogue, a company owned by Crédit Agricole).

TIGF Holding S.A.S.’s consolidated financial statements include TIGF Investissements S.A.S. and TIGF S.A.

The corporate governance rules stipulate that decisions on significant activities must be taken with the unanimous consent of shareholders Snam and GIC.

Trans Austria Gasleitung GmbH (TAG)

Trans Austria Gasleitung GmbH (TAG) is a company operating under Austrian law that is active in the natural gas transportation segment, and it owns the gas pipeline that links the Slovakian-Austrian border to the Tarvisio entry point.

Natural gas transportation in Austria is a regulated activity.

As at 31 December 2015, Snam S.p.A. holds 84.47% of the share capital, entitling it to 89.22% of the economic rights. The remainder of the share capital is held by Gas Connect Austria GmbH (GCA).

The contractual agreements drawn up between Snam, TAG and (GCA) also stipulate that if TAG is not capable of self-financing, the other companies must finance it according to the equity investment held by each shareholder.

The corporate governance rules stipulate that decisions on significant activities must be taken with the unanimous consent of shareholders Snam and GCA.

Toscana Energia S.p.A.

Toscana Energia S.p.A. operates in the natural gas distribution segment in Tuscany.

Natural gas distribution is a regulated activity.

The share capital of Toscana Energia S.p.A. is held by Italgas S.p.A. (48.08%), the Municipality of Florence (20.61%), Publiservizi S.p.A. (10.38%)²⁸, other local public entities²⁹ (20.26%) and banking institutions (0.67%).

The corporate governance rules stipulate that decisions on significant activities must be taken with the unanimous consent of the private (Italgas) and public (municipalities) shareholders.

Toscana Energia S.p.A.’s consolidated financial statements include Toscana Energia S.p.A. and Toscana Energia Green S.p.A.

Gasbridge 1 B.V. and Gasbridge 2 B.V.

Gasbridge 1 B.V. and Gasbridge 2 B.V. are two companies operating under Dutch law that are equal-stake joint ventures of Snam S.p.A. and Fluxys Europe B.V.

The two companies hold equal shares in the following equity investments:

• 31.5% of Interconnector UK Ltd, a subsidiary of Fluxys;
• 51% of Interconnector Zeebrugge Terminal SCRL;
• 10% of Huberator SA, a subsidiary of Fluxys.

The corporate governance rules stipulate that decisions on significant activities must be taken with the unanimous consent of the two shareholders Snam S.p.A. and Fluxys Europe B.V.

The book value of the equity investments in all equity-accounted joint ventures not deemed to be significant is €2 million. The 2015 profit of all equity-accounted joint ventures individually not deemed to be significant is less than €1 million in total.

Significant restrictions

Pursuant to the provisions of IFRS 12, the major significant restrictions on investee companies’ ability to transfer funds to Snam in the form of dividends, loan repayments or advances appear below.

TIGF Investissement S.A.S.

The payment of interest on the residual nominal amount of the €670 million convertible bond (of which Snam has subscribed €272 million) may be deferred at the discretion of the issuer TIGF Investissement. The bond debt is subordinate to the outstanding bank loans.

Investments in associates

The IFRS-compliant economic and financial data for each significant associate³⁰ are reported below:

Since Italgas acquired control of it on 1 April 2015, Acam Gas was fully consolidated as at 31 December 2015. The balance sheet values for the period under comparison are shown below:

INFORMATION ON INVESTMENTS IN ASSOCIATES

Trans Adriatic Pipeline A.G.(TAP)

Trans Adriatic Pipeline A.G.(TAP) is a Swiss company formed to design, develop and build a new gas pipeline, currently under construction, which will extend from the Greek-Turkish border to Italy (at the new entry point in San Foca-Melendugno), crossing Greece and Albania.

At 31 December 2015, TAP A.G.had the following shareholders: Snam S.p.A. (20%), Socar (20% through AzTAP GmbH), BP (20% through BP Gas Marketing Ltd), Fluxys (19% through Fluxys Europe B.V.), Enagas (16% through Enagás Internacional S.L.U.) and Axpo (5% through Axpo Trading A.G.).

The contractual agreements drawn up between Snam and the other shareholders of TAP also stipulate that if TAP is not capable of self-financing, the other companies must finance it according to the equity investment held by each shareholder.

Under current corporate governance rules, none of TAP’s shareholders is able to exercise control over the company, including in a joint capacity.